3 Questions That Could Save Your Business From Going Broke

What It Covers

John Falcons addresses why growing businesses still feel broke despite increasing revenue. He explains the critical differences between revenue, cash flow, and profit, then provides a seven-step budgeting process to fix cash flow problems and achieve sustainable profitability.

Key Questions Answered

• •Revenue vs Profit vs Cash Flow: Revenue represents total income from sales. Profit equals revenue minus all expenses including taxes. Cash flow measures actual money movement in and out over a specific period, excluding money sitting in banks or owed by customers. Positive cash flow requires more money flowing in than out consistently.
• •Root Cause of Cash Problems: Most business owners struggling with cash flow lack a formal budget. They attempt to solve financial problems by increasing revenue rather than controlling expenses and timing. The principle states revenue is vanity but profit is sanity, meaning high sales numbers mean nothing without actual profitability and positive cash flow.
• •Seven-Step Budget Process: Document all revenue streams from last month's profit and loss statement. List cost of goods sold and all expense categories. Fill in numbers using past statements or educated guesses. Calculate expected profit by subtracting expenses and cost of goods sold from revenue. Review budget weekly to track progress toward monthly goals.
• •Twelve to Eighteen Month Planning: Build budgets covering twelve to eighteen months to account for seasonal business variations. A fireworks stand buys inventory in June and sells in July, creating different cash needs than other months. Weekly budget reviews identify whether revenue targets will be met and which expenses can be reduced or eliminated.