It was standing room only for renowned entrepreneur and Strategic Management Professor, Dwight Carey, as he led the “Cash Flow, Profits & Financials” workshop on February 18 in Fox’s IEI Lab.
Professor Carey started his presentation by stating, “Cash is more important than your momma because without cash you are out of business.” Students laughed at his opening remark, but he was very serious.
Throughout the workshop, he never strayed from the discussion of a cash flow pro forma, as it is key to an entrepreneur who does not want to run out of cash. He asked students about the components of a balance sheet and the main difference between income sheets and balance sheets because these answers are key to a successful cash flow pro forma. He shared the easy part of a cash flow pro forma is the expenses, and the hard part is the income.
As a young entrepreneur, the odds are going to be against you. Professor Carey said, “In the first five years, about 50 or more percent of all startups are going to go bankrupt. At the end of 10 years, only one in 10 companies will make it.” He provided advice on how to avoid joining these statistics:
- There is such a thing as “love money.” For example, your father is willing to cash in his 401K to get your business going. Be cautious because if this money burns out, you may have your father living with you for the rest of your life. Ultimately, be careful when borrowing this so-called love money!
- It is extremely important to project your revenue. This means, sit down with no distractions and write down every little thing that could affect your business sales in the future. This includes strikes, natural disasters, the city shutting down, etc. As entrepreneurs, you need to always look into the future for your business to succeed.
- Do not hire people in the beginning of your company simply just to “hire people.” You need to remember that once you hire someone, you have an ethical and moral responsibility to make them good employees. It is immoral to simply hire and fire people just because you suddenly realize you don’t need them in your company. Instead, hire independent contractors or your peers who have the skills your business needs to get started.
- If you want your product in a company, don’t be afraid to call that company’s president. Ask for just 15 minutes of his/her time to pitch your product to get it in that dream company. Perfect your pitch in front of a mirror so you are confident and ready to share your innovation and passion with the world!
- Lastly, ask yourself from May to the end of your first year, “Can I afford to lose $45,000?” If you say no, don’t throw your idea away quite yet. Instead, go back over your cash flow pro forma and either (1) increase your sales or (2) cut your expenses. Ultimately, be incredibly realistic about your product and business and ruthlessly honest with yourself in order to succeed.
At the end of the workshop, Professor Carey gave students “homework” to research the founder of SPANX, Sara Blakely, who is the first female billionaire under 30 years old. He told students to listen to her story from The Edge Connection, as she will share, “One day you wake up and you’re an inventor and then one day you wake up and you’re a company.” Learn more about Sara and her booming business here.