The Wealthy’s Secret to Success
Read below.
Free Cash Flow is King! It should be the objective of any entrepreneur, business professional, or business to create free cash flow. Free cash flow is simply the money a business or person has left over after all bills, taxes, expenses, and capital expenditures are paid. The regular stream of such cash is called flow. All businesses should strive to generate this constant flow. Highly successful companies very often show the signs of having great free cash flow. This is because free cash flow shows you the sustainability of a company if it were ever to hit on hard or dire times. We’ll use a general entrepreneurs usual objective as an example of how a business should focus on creating free cash flow. As an entrepreneur you are charged to generate your own business and maintain your business funds as well. Often times new entrepreneurs don’t understand this concept and only focus on net sales revenue. When building your business it’s important to focus on putting yourself in a position to create free cash flow. You want to keep cost down to a minimum, giving yourself greater opportunity to earn larger profit gains. We've all heard it before, “low start-up, high rewards”. Many times people suggest a company needs a large initial investment to be successful especially with a start-up company. I've heard people say you need X amount of dollars to be successful in starting a business because you need large marketing campaigns to generate business and help generate sales. Let me tell you that is not the sole truth to being successful in business.
Let’s look into this further; an elaborate marketing campaign would cause an entrepreneur to increase their expenses to attempt to create more exposure to generate sales. Those type of expenses then reduces your net income and/or shrinks your profit. After one receives their net income they still have to pay other fees and expenses by the likes of taxes, website maintenance fees, employee’s, etc. So, after one spends money on a big scale marketing campaign to create business, then and only then do you count profits; but you still have to pay the other necessary fixed recurring business expenses. After all of the fixed business expenses are paid whatever is leftover is your free cash flow. This is the point where most entrepreneurs fail, by not putting enough emphasis on creating free cash flow for when their business slows up during off seasons or when it hits tough times like in 2008; they don’t have the free cash flow (excess money) put aside to withstand the storm. Focus on keeping unnecessary business cost to a minimum and creating free cash flow. Free Cash Flow is King!
