Step 3: Manage Cash Flow Strategically
Let me give you a little lesson in cash management. Imagine your business’s cash flow timeline over the course of one month. What’s important about the zero-dollar cash line is that you don’t go past it. So, if at the beginning of the month, you get a bunch of client money in. A little bit later, you pay all your staff. Then you have an invoice for a bunch of supplies. So, you pay the invoice, well look what just happened: you just went past the zero line that I just told you not to go past.
Right after it, you get some more money from your clients towards the end of the month. And look at that—that’s profit. That’s what you’re in for. Except look what just happened: Back here you went bankrupt. What you can do is offset almost any bill against income that you have. So, instead of paying it on the 20th of the month, pay it on the 28th of the month when you expect that other cash flow to come in. That way, instead of the valley of death, you end up going straight from positive cash to positive cash. And bam, you’ve got your profitable business without going into bankruptcy zone.
Step 4: Understand How to Protect Yourself
Make sure that you run it as an independent corporation, not under your own name. There are a bunch of reasons for this. One of them, the most obvious one, is shielding yourself from lawsuits. Your corporation is a separate entity so if it does something wrong, people can come after the company but not after you personally.