BizActually Podcast Ep. 3

Mircea Cornelison00:00

Hello, and welcome to the BizActually Podcast, where we dive into what it's really like behind the scenes to build, manage, and grow a successful small business with real-world examples, cases, and stories. I'm Mircea Cornelison here with my co-host Terry Cornelison who's spent over 40 years building, managing and advising businesses in the U.S. And around the world.

In addition to building several of his own businesses throughout his career, Terry has served as an SBDC Small Business Advisor, MBA instructor at Washington State University and the University of Minnesota Carlson School of Management. As well as leading multiple economic development projects around the world from Moldova to Mongolia.

Today, we're taking a closer look at one of the top reported reasons for small business failure, cash flow problems. What does cash flow even mean? Why is it one of the top reasons that small businesses fail, year after year? Is it really the problem or is it a symptom of something deeper? Most importantly, how can small business owners and startup entrepreneurs overcome cash flow problems, or better yet, avoid them altogether?

You can also find our show notes and transcript of this podcast, plus one of the tools we mention in this episode on our website. Just follow the link in the description or check us out at bizactually.com/podcast/ep3.

Let's talk about some of the reasons why small businesses fail. According to SCORE, I think something like 82% of small businesses fail due to cash flow problems, depending on which study you look at, but it's clear it's massive. A major, major problem for businesses.

First of all what is cash flow? Why is it such a big problem?

Terry Cornelison01:39

Okay. So. Like in your personal life, you either have the money to pay your bills or you don't, you can be on the credit card and you can buy a car. You can buy a house with a down payment and have mortgage payments. And, but you got to keep track of that because if you can't keep up with your payments, they'll take your house away. It's the same way in business, basically, you know, it isn't the cash flow. That really is the problem. It's not paying attention to cash flow. It's not managing, planning, cash flow--that's the real problem.

Mircea Cornelison02:08

And having no tools or dashboards to measure yeah.

Money coming in. So basically everything you do in business, practically speaking is either going to bring in money or it's going to cost money. So money's flowing into and out of your business. That's how it works. That's what's meant, I guess, by the term cash flow?

Terry Cornelison02:26

Right.

Mircea Cornelison02:28

So if you're not measuring this, first of all, you're blind as to what's happening in your business, really. And maybe that's where a lot of businesses are. But just measuring it isn't enough. You measure it so that you can actually make decisions in your business.

Terry Cornelison02:40

Yeah, it's one of the, one of the best tools and the least used tools that I've experienced with all my clients is a cash flow projection, because here's what really happens.

You go into business, you set up your books and, you know, there are certain guidelines that you need to follow for tax purposes, but basically there's generally accepted accounting principles, and every accountant or bookkeeper knows how to set that up for you. And they have QuickBooks and lots of programs, software programs. It's very easy to set up your book so you could, you do have tracked and entered every single expenditure and every single revenue. So you have, you have all the information available. The problem is that most people don't plan. They don't use those tools to plan their cash flow or their expenditures or their revenues.

They look at them after everything has happened. And quite often they don't even look at them on a daily, weekly, monthly basis. They wait until, you know, two or three months or till they can't pay their, you know, their electricity bills.

Mircea Cornelison03:50

That's exactly what happened to me in my first business, right out, right out of college.

I went to LA with my closest friend who started a tech company. And we were just living in the analysis mode. We were, you know, wireframing our idea. I was interviewing industry insiders, potential customers, which is all great essential stuff, but we just ran out of money one day. I mean, I spent the month, the summer before going to LA working in a warehouse, manual labor, day in and day out to make enough capital to go to LA and spend my time working on this business with my friend--we were still in the idea phase. And I think within a month we were at zero, and that was just paying for, you know, gas for the car, some basic rent and like a Chipolte meal or two every single day. And we were not tracking anything. So that was the lesson for me.

Terry Cornelison04:42

Yeah. And, and the thing is that, that's a very simple case that you have, the experience with, but that's probably the predominant case out there--is the people who go into business...

I think it's Gary and Gary Vaynerchuk. Yeah. I heard a podcast of him a while back that was talking about the most important thing that an entrepreneur can learn is patience. In other words, take some time, think things through, do some planning. And then the second thing is to go get some actual experience in the same kind of business you're going to start, because you see things then, and you think about things so that you're better prepared to go into your own business.

So that's one part of managing cash flow--you see, by being in the business or planning for it, whoa, we have to buy certain equipment over here. We have supplies, we've got vendors. And over here, if you're in the business, you know how hard it is to get customers to come in and you know, to have them know how much they buy and how much they're willing to pay for that.

And so that's kind of the equation, like you were saying before, everything you do in business, either brings money in, or it sends money out. So if you do some planning, some thinking and have some experience and have a sense of that before you go into business, then you're ahead of the game.

But the big thing about cash flow is, there are tons of tools and it's very, very easy to do, to be able to plan your cash flow and then keep track of it on a daily, weekly, monthly basis. And if you do that, what was it? 82% of the failures are somehow related to cash flow. So you got a big advantage.

Mircea Cornelison06:17

In fact, with, with our one-on-one coaching clients, at BizActually, it's one of the first things we do is set up either with Excel or Google sheets, an automatic cash flow worksheet with profit & loss and balance sheet built in as well as a few other critical tools.

We actually did this this fall with one of our clients who's in e-commerce building a gym product. He was had no tools for his business set up. He was just sort of marketing and working with the designers and manufacturers and was preparing to purchase his first shipment.

He had none of the stuff tracked, was not able to see anything, with regards to his business model. We set this up, and then all of a sudden we're moving into October, November shipping rates are just doubling and then tripling.

Terry Cornelison06:58

Yeah, he had an excellent model. I mean, we looked at, you know, we took first the numbers he had on his napkin math, and in the notes that he, you know, he had actually he had his receipts from having the whole design process and development and getting a manufacturer, the shipping cost, landed cost, and using influencers, and the shipping to to Amazon and then Amazon's delivery and fulfillment. All those things he had, but they weren't put in any kind of format where he could easily see how profitable is this? Is it profitable? How profitable? When will it be profitable? And will he have the cash available when necessary to pay for the shipments when they arrive? And...

Mircea Cornelison07:39

How to adjust his model when these external circumstances would arise. Like when the manufacturer is now telling you , Hey, by the way, landed cost just doubled, and it's probably gonna double again in a couple of weeks.

Terry Cornelison07:51

Yeah. That's a real case right now with so many businesses out there. Yeah.

Mircea Cornelison07:55

So we just went directly into the spreadsheet, updated our information, looked at the profit margins...

Terry Cornelison08:00

Yeah, the thing is, first we looked, how's it gonna affect your profitability? Are you able, are you going to be able to absorb this? Are you going to have to raise your price. Are you going to have to look at different kinds of marketing channels that don't charge you as high a fees for, you know, for taking care of delivery and, and other, costs that you can have some, some control over. The next thing we did, though, was look at his cash flow.

How's that going to affect his cash flow? Will he have the money because they had planned... These guys had an excellent model and it had plenty of profit built into it, and they had done a lot of, you know, two years of research and planning, because they both have existing businesses. They both have been entrepreneurs for a period of time.

And they are like, Gary Vaynerchuk had suggested, they'd been out there actually learning business.

Mircea Cornelison08:45

Our client and his partner.

Terry Cornelison08:47

Right, right. So they were pretty well prepared, but they still had never used any of these tools, these financial tools to plan and manage their business. It's been afterwards when they get to their accountant to see what it looks like for tax season or at the end of the year, you know, the end of the quarter, things like that.

So it's always, kind of thinking, "Okay. I think we're doing okay," and then at the end, you find out, woah, wait a second. So that's okay. If you're starting the business, running the business, everything's going well. And you know, your, your napkin math, where you said, okay, it's going to cost about this much. I can sell it for this much, and my expenses of operating are going to be this much.

And so you'd make that simple calculation of subtraction and you've got money left over. That's okay. That works. But when things start changing, I mean, for a simple business. But when things start changing and like this, in this case, the, the delivered landed costs because they will be made in China, that product is made in China and it was being shipped by ocean freight.

And now it's not going to happen that way. So that doubled overnight and now, because they had to come by air freight. And now, because everyone else is in the same situation, that's doubling. So now, can you even make a profit on it?

Mircea Cornelison09:57

So, the process was to update these tools that you're using already to measure your business, every aspect of your business-- your sales costs, etc.-- and then use those tools to manipulate your model. Look at other scenarios that might help you increase that bottom line...

Terry Cornelison10:13

Yeah, actually you can use it this, the great thing about these tools. They're, they're the same tools. They're actually, there's five fundamental tools that we use and they cover everything that you need to manage your business from planning it before you ever start all the, all the way through getting funding, whether it's from investors or from a bank or just out of your own funding, whether it's worth it or not. I mean, to make that presentation. Until, you know, all the way through running anything that happens in your business and forever. They're just the kinds of things, the kinds of information that you need to have in order to make better decisions. And really, you know, you ask about, we talked, started like, "What's the main cause for business failure?"

Well, you know, of course they're always somewhat unique, but I think the common cause is management induced failure. And I don't mean it's all poor management decisions. It's not that people don't think well or try to make good decisions, but if you're making decisions based on incomplete information or misinformation, wrong information or you're making decisions after the fact, as opposed to ahead of the, circumstances, then you're not probably going to have anything going in your favor because you don't have the information to make good decisions.

I recall, I was a pilot --well I am a pilot-- but I haven't flown for a couple of years. But in the FAA accident, findings reports, as I recall, and you can Google now, but I believe it's like something where 95 to 99% of all aircraft accidents--that's commercial airliners to military, to private, you know just single engine land airplanes--are management induced.

They're caused by the pilots, pilot error. That's basically in my opinion, the same situation for businesses. So, I mean, here's the example. Most of us, we live a life of a consumer, you know, from early on in our lives and through our childhood and early adulthood. And we're out there, buying a house or buying a car we're buying groceries, you know, we have that perspective from being a consumer. But how many have gotten any kind of understanding anywhere? Unless you grew up in a family where you had a small business, you probably don't have any idea of what it's like to be on the other side, those who are producing and selling and providing the customer service and all those details.

So most people just aren't prepared to go into business. And yet they just get an idea and say, "Hey, I really want to be my own boss. Let me get started." Well, the thing that you said earlier about everything you do in business is either going to cost you money or bring money in. Well, the moment you make that decision to start, then the clock starts ticking because if you've left your job, for example, then you've got all those same... you know, you want to feed your family, you want to have a place to live, you have a car to operate.

Mircea Cornelison13:23

You have a negative cash flow position at that point.

Terry Cornelison13:25

So it's all going out. So in most businesses, it takes a while... there's a learning curve and there's a setting up curve, you know, time period. So it may take three months to a year or in some cases like say, Uber, it may take you-- they've been in business 12 years now and they still haven't made a profit. So if you can do some planning ahead of time and determine, "Okay, I'm going to start a food truck." Food trucks are pretty popular right now because of the COVID pandemic and people, you know, they going be going to a restaurant, but the food truck can come to your neighborhood and you don't really go inside and sit down whatever you can stand outside and place your order and take it home.

So they've been pretty popular, but just think about people who are going into food trucks.. It sounds pretty simple, but if you actually just get a sheet of paper, you don't have to do any research at all. Just think it through on your own. And you start to get a really, really clear picture of what it might be like to actually start that business.

For example, you'll have to have a truck. What kind of truck are you going to get? How big does it need to be? Is it going to be a trailer that you pull that has the kitchen in the trailer? So you'll need a truck and a trailer. Or is it going to be one where you've got the, it's like a truck that's...it's all contained. So you just get in driver's seat drive, then you park it and you're there right. Then, okay. Who's going to be your customers? Are you going to go to affluent neighborhoods or blue collar neighborhoods? Are you going to go downtown to a parking lot where businesses... their employees can come and pick up something at lunch.

Are you going to go to concerts or state fairs or, you know, in the evenings or on the weekends? I mean, those are just some fundamental options out of hundreds of options there. Then you have, start... I mean, that's just the beginning now. Okay. Well, what are you going to need inside that truck?

Imagine yourself in the truck. You've got customers coming up through the window. Well, you probably need to have a menu. Well, what are you going to serve? I don't know. So you've got to think that through. Well, okay, then I'm going to serve maybe a breakfast meal and then a lunch meal and then some something in the evening for these concerts.

All right. So you create a menu for that. Well, where are you going to get that food? Are you just go down the grocery store. Probably not because the margins are too high. You have to pay too much for that food, if you go to the grocery store. So you've got to find other places. Well, okay. What about wholesale foods? Costco, places like that. And that's, that's a good one. But also there's Cisco. There's a number of...

Mircea Cornelison16:03

Business-to-business.

Terry Cornelison16:04

Yeah. Well, there are companies that are designed to do all that for you. They just, they give you a good price, which is much lower than you're going to get at the retail grocery store, but they can supply pretty much all your needs for that restaurant.

And they're pretty competitive. Well, you need to look them up and find out what those numbers are, what, you know, what prices they have and what their delivery schedules are and their minimum orders and all kinds of details. So you're on that side of it, getting the food. Well, okay, you got the food now, the raw ingredients to make the food that's going to be on your menu.

Now, what are you going to do with that food? If you're going to take deliveries twice a week, because that's when Cisco delivers, then can you get everything in those, in those two deliveries? Or are you going to have to fill in between, again, another decision or two or three or four to make there?

Mircea Cornelison16:56

How do you maintain that food? How do you keep it fresh during...

Terry Cornelison16:58

Yeah. What do you do with it? Well, you're going to have to have a refrigerator. Well, how big of a refrigerator are you going to need? Well, okay. Let me think. How many customers am I going to have and what are they going to order?

Mircea Cornelison17:09

Is this refrigerator going to be contained separate from your actual truck? Is it going to be in the truck?

Terry Cornelison17:14

Yeah. Yeah, because you're going to have to have certainly enough for each meal and we're talking about some of these people are talking about going for two hours for breakfast in one neighborhood, then go two hours from lunch in a business neighborhood. And then two hours in the evening for a concert or something.

So you're going to have to have enough ability to keep food fresh, store it in your truck or near your truck, maybe somehow. So what are your options there? Then you're gonna have to...How are you going to cook that? Are you going to cook everything fresh? Somebody comes up and they say, "I'd like a taco." And so then you fry the meat and, and put the cheese, put it all together and cook the the shell. Do all that. Or is it going to be pre cooked and just warm it up there? Those kinds of decisions need to be made as well.

If it's going to be baked goods in the morning, you're going to have cinnamon rolls. Are you gonna make those at two o'clock in the morning so they're really fresh? Or are you going to make them the night before or the week before and freeze them? Okay. So these are just, this is the myriad of decisions, and this is just the beginning--we haven't even gone through maybe a fourth of the decisions or the operations questions that will come up when you go into a simple food truck business.

Because then the next thing that, or at least concurrently you shouldn't be talking about legalities? Do I have to get some kind of FDA or USDA or some kind of government permit? Will someone need to inspect me to make sure that the place is clean and sanitary and safe? And who does that and how do I find those people and what does it cost?

And do I have to have everything set up before they come in or will they give me guidelines that I can follow? And, you know, just lots more to think about and to find out before you start. And then about licenses, are there certain permits? If you're going to go in most communities that lived in the United States, you just don't go park your truck and start selling.

You have to have zoning permits. You have to permission from whoever's property that is. If it's private property, you need to have permission of the person who owns that property. If it's public, you have to have permission of the government agency that owns that property and governs it. So those are decisions.

And if you're going to be in three different places, you're probably going to have three different individuals or government agency to talk to there. Then you're going to have to have your license for your business. And are there any special trainings that you will need to take and certification that you will need to get personally to show that you're a food handler, a safe food handler. And then employees--are you going to do it all yourself?

Maybe you have your family that...that's all you need, is your family. Well, someone has to coordinate, who's going to do what and how are you going to work together as a team? And if you're hiring people from the outside, you're probably going to have to train them and, or train anybody who's working for you, but someone from the outside. You'll have to train them in business itself, in preparation, get them certified. I mean the same thing that you've gone through and make sure they're up to speed on that.

And then inside the food truck, is there enough room for 1, 2, 3, how many people can be in there without bumping each other and you know, tripping over each other? And who's going to place the orders and how many people can you serve?

So if you're making things fresh, you'll have to do some practicing. And okay, how many meals can I make? Let's say that you're going to be in three places, and you're going to be there for two hours. How many meals of the sort you're going to do in each place can you create and deliver in that period of time?

Mircea Cornelison20:50

And this is not to discourage anyone from starting a business.

Terry Cornelison20:53

No, no, no, no, no. Not at all, actually. It's to encourage. Because the way to really prepare for going into business is to do this exercise, which we just talked about.

Just put your mind...and again, you do not have to have done any research at all yet. You definitely want to do a lot of research, but it's the fun kind-- you'll be answering questions that you'll need to know in order to flesh out your business plan or your plan to do business. So it's really, actually, it gets really exciting when you start doing this.

So you just have your pencil in hand or your computer, and you're typing down these thoughts as you walk through this process. The next step is like the napkin math or what we usually start out with our clients is, "All right, so then how many customers do you believe you can, serve?"

Well, we were just getting to that. So you do the math... the math is simply, okay, "How many meals can I cook and what am I going to charge for those? And what is it going to cost me to cook each one of those?" That's the simple math there --if I sell one meal for $7, which includes maybe a drink, a main course item, it could be a sandwich. Let's say it took some bread, took some mayonnaise or some tomatoes and some vegetables or meat or fish or whatever's on that sandwich. And then you have a drink. All right. There's the cost. But wait a second. No.

How am I going to serve that? Well, some people, you just hand it to them wrapped in a plastic wrap or something and a drink cup. Okay. Well, how much is that plastic wrap going to cost? How much is that drink cup going to cost? Oh, hadn't thought about that. Well then if people are going to take it away, maybe they're going to want some little packaging and a bag to put more than one order into. What's that going to cost?

So, as you're getting your mind in the mindset of being inside the truck and people are coming to your window to place an order, then you can get really specific and that's always where the details are. The devil in the details. I mean, that's, yeah, it's easy for someone to say buy low, sell high that's excellent advice in the market or with anything.

If you can buy a lamp, you know, for $3 and sell it for $10, that's great advice. If you can buy a stock or a bond, or, you know, gold for $300 and sell it for $3,000. Great advice.

Now, how exactly do you do that? When do you do it? How do you know when it's low and it's going up as opposed to it's low and it's going down? Which kind of gold, where do I buy it?

Do I buy it in blocks or coins? Or, you know, there's just a myriad of questions that happen after that general advice. So it's the same way in business. Business is really pretty simple. As we mentioned earlier, it's basically everything you do in business either brings money in or sends money out. So you got to figure out what you're going to be doing business, and if it's in one category or the other, and then put that down on a piece of paper. All right, we're out there selling, that's going to bring in money, let's get a spreadsheet, a simple worksheet that says $7 coming in for a meal. And then we look on the money going out and say, okay, bread for that meal, 20 cents. Meat for that meal, a $1.33.

And we just go through and what did it take to put that... So now it costs me $3 to sell that $7 meal. All right. So I got $4 left over. Now I've got some more math. Well, I've got the truck. I had to have gas, and then it's going to be needing repairs, at some point. I've got the electricity running all the refrigerating equipment.

I've got the stoves, ovens, the gas for that. I've got employees, you know, all those kinds of expenses that you have. Well, you add those up and then you subtract them from that $4 you have remaining. And now you have whatever's left over, before taxes. So maybe you have some money left over, maybe you don't. It really doesn't matter at this stage.

Mircea Cornelison24:58

Most of us balk at going through those calculations, actually identifying where you're losing money, where, where are the expenses are. Because we don't want to see that information. But the advantage to actually laying out these items, especially in sort of a tool like a profit and loss calculator, is that now you can start manipulating each of those lines to find a scenario in which you're increasing that bottom line figure the net profit before taxes.

Terry Cornelison25:24

Yeah. And actually that's where it becomes really fun because these things are very simple and easy to use financial tools. I've been using for years and trust me if you're in a complicated business, they can become very, very complicated. But for management purposes, what we need them for to plan and to run our business, that part of it is very simple because we don't take every detail.

I mean, if you're in a Costco, you might have, 3000 or 30,000 items that you sell. No way, are you going to try to keep track of how much did that cost? And how much did I sell it for? And I'm having a special on this one today is Black Friday. You know, you can't keep track of that kind of detail, but you have to have a system that does that.

And people that do it for you. And then you, as the manager, you look at the groups of items that fall together that you could say, "Hmm, these home care items are going really well this season." And you can look more closely at what's going well within there. And because that's the season for home care, then you want to increase your inventory there, as opposed to maybe something over on antifreeze, which is for the winter.

And you still have some money going into winter products or because it's the season of transition, you know, it can get really complicated, but you don't need that detail. So the fun part, if you're either already in business or you're planning to start a business, is now you're inside that truck and you realize that, " I've got $7 coming in. I've got, between the cost of creating that sandwich and delivery and packaging, spoon, and fork and whatever it takes, and all the operational costs from my truck and my people that are working there and the gas and electricity. I'm down to about a dollar. And I, I'm sure there's things I've missed."

Right? So that's not looking so good. It's just not a dollar. How many meals do you have to sell to make any money with that? And then you haven't paid taxes yet. So that's where it might start. It may look really good. It may look really bad. Doesn't matter. Don't get worried about it at this point.

The fun now begins because, and this is really important because when you go through that whole scenario, you've got a starting point. You've got something to measure against, you know, it's like are you short or tall? I don't know. Well, stand next to this person. Well, according to that person, I'm tall. Now stand next to this person. Well, I'm short. That's the kind of thing. You're looking. You put this first spreadsheet together. You don't know if it's good or bad. I mean, you might have a feeling that it's not good enough or it's really bad, but it doesn't matter at this point. What really matters is now. You look at that and say, maybe sandwiches are not the way to go.

Let me look around and see who's out there with food trucks. What's popular, even though I thought sandwiches were popular. Doesn't look like I'm going to make money with that.

Mircea Cornelison28:24

We look at other options for vehicles, for example, and you can literally go line by line looking at each one of your expenses and your variable costs.

Those that occur every time you make a sale. And see, where can I either substitute a better option, a more efficient option, a cheaper option while still maintaining quality or what have you. You can generate different scenarios, as you develop a business model that can actually make you the money you want.

Terry Cornelison28:49

Yeah. So it's not about, don't want to get into the details of any particular business, right here. But it's the same in every business. Once you have thought through as much as you can. What it would be like to actually open the doors and then do business. "Opening the doors," means all this stuff that if you have to buy a truck before you open your doors if you have to hire people, if you have to get certificates.

But just thinking through all that, and then thinking through what it's going to be like when you're actually in there working and serving customers. And at the end of the day, closing shop up and preparing for the next day, just think it all through. Because you know, things will pop up. If you're actually thinking it through. At the end of the day, what are you going to do?

Well, you're going to have to spend a few hours just cleaning up because if you don't two things happen: one, it gets really bad really quickly, if you, everybody knows what the kitchen looks like, and you can imagine the grease and how difficult it is if you leave it for a day or two days.

So it's really critical to put that food truck, everything about it, ready for business before you close down that night. So you may finish at nine o'clock, but you're not going to be finished until 11 o'clock. Well, what are you doing for those two hours? And what is it going to cost you? It's going to cost you extra employee time, cleaning supplies.

You know, there there's things that will come to your mind there, which you add to your worksheet. Those are more expenses. So now instead of a dollar, you totally forget about all these things. And now you've got zero left over on your first scenario. But you look out there and there's a lot of food trucks and they seem to be doing good business. Go talk to some of them.

"How are you doing it? Cause I just went through this whole process myself and I can't figure it out. You know, it sounded great, but I'm not making any money." Well, we have another podcast on talking to competitors, but that's one of the first places to start.

Okay. So again, we started this conversation out talking about, "Why do so many businesses fail, especially small business startups?" Well, I think the statistic was SBA or SCORE, but the government agency who is responsible for looking after small businesses in the United States says that 82% of small businesses fail because of cash flow.

Their failures are related to cash flow, meaning too much money flowing out and not enough coming in. So they don't have enough money to pay their bills when they need to pay their bills.

And So it's good to know that cash flow is the problem. Identify the problem. That's half of the solution. Now in order to do the other half of the solution, you have to roll up your sleeves and figure out why you don't have enough money.

Well, you can address that before you start your business, by going through a scenario that we just went through with the food truck, you know, putting your mind inside that food truck and figuring out as best you can, all that it will take and what that will cost to actually prepare for launching and managing that business--creating that business and growing that business.

All right. So you go through that whole, that whole scenario and then you, again, there's two parts to business. They both tell the same story. One is the numbers, that's the financial side of it. And the other is the narrative. That's the story. That's what you're really doing. Everything you do. So you put those two together and that's how you can manage cash flow and the rest of your business.

That's all we're doing here. You can either address the cash flow elephant before you go into business, by going through this process, or you can address it after you get into business and you're stuck and struggling and not making enough money. Either way it's the exact same process. First of all, figure exactly where you are on the financial side of it, on a spreadsheet. Are you able to make a profit? If you are able to make a profit, do you have enough money to survive until you make a profit? You know, it's just a very simple...

Mircea Cornelison32:54

That means locating your numbers wherever they live currently between QuickBooks, whatever other dashboards you've got that are automatically generated, organizing the key figures, sales cost of sales, operating expenses into a simple sheet, and we'll actually provide the same worksheets that we use in the description of this podcast. And then start playing inside that worksheet. Find a scenario that actually works for you.

Terry Cornelison33:19

Yeah. And the big difference between if you do this exercise before you start your business or after you're in business, is that there's more time before, so you can plan it out and... still, I have to tell you that it doesn't matter how much planning that you do.

The whole career of being in business or being your own boss is a journey. It's an adventure. It is the most rewarding that I can imagine, career that that I would want to do. And most of the people that I know who have been successful and are successful, even if they're not quite as successful as they'd like to be they would do it again and again and again, because it is that. You're your own boss.

You are pretty much captain of your ship. You're making decisions. You have free will to sail any direction you want to go and experiment. And so it's just an extremely rewarding place to be in your life, owning your own business. The reality is that if you do some planning and detailed like this, before you go into business, then your odds are better that you will be able to deal with the problems that come up inevitably in your business, because you've thought through a number of scenarios in this process.

Now, if you're already in business and you discover, well, I'm going broke I'm not able to pay my employees. You know, my spouse is still working a second job or a third job. I'm working to pay for insurance and kids' schooling and clothes and all those kinds of things.

Well, then it's kind of, more desperate. So you think, "I got to get this going? I borrowed money for it," or whatever reasons are. You're in business now, and you're actually, if the business is going well, you are overwhelmed usually with things to do. You entered into this business learning from the moment you started, as opposed to learning something before you started.

So it's a steep learning curve. And it pretty much has to be done right now. So but the same process, exact same process. There is nothing more to business than the numbers over here and the narrative over here. They just match up perfectly, everything you do on the narrative side of it. Everything you do there either brings money in or takes money out.

So if you're in business, you just look at starting out sales. What am I selling? How much money am I bringing in? How much does that cost me? Is there anything left over? And if there isn't anything leftover, that means that you've got a serious problem that you have to address there.

Forget about going any further down. You just start there. Well, am I not charging enough? And if you can charge more, then that's something you put in your worksheet and see what that would do. Maybe that helps all you need, or maybe just helps a little bit.

Mircea Cornelison36:11

So simply by keeping track of this information, managing it, measuring it, playing around with it in a simple tool, like a Google sheet, spreadsheet. As the owner/operator of your small business, you dramatically increase your odds of success and reduce the risk of succumbing to cash flow problems.

Terry Cornelison36:31

Yeah. And the great thing about these tools is that you can do all this in real time, very quick.

And you can run through scenarios in just a matter of minutes to find a scenario that would possibly get you from where you are to where you want to be. For example, if you're in this food truck and you're selling sandwiches for $7 and you're down to zero profit.

And so you can't keep up. You're not able to make a profitable business out of this. Then, first thing, we go to this spreadsheet and say, "Could I raise the price of these sandwiches to $9." We just