Cash flow is always king

I was talking to a colleague about setting up his own business this morning, and we were working through some numbers.

Looking at the amount of income per transaction compared with the outgoings per transaction, the business looked like it could work. There will be overheads, of course, but the start-up costs of this particular business are minimal. There are some costs per transaction.

The trouble is that he has really almost no money to put into the business. It really is starting from scratch. He might have to take out a loan from a bank, but it does increase the hoops you have to jump through. Best avoided.

It is the costs per transaction that could be the killer. It reminded me once again that "cash flow is king". If he can ensure that he gets payment in as soon as possible and delay payments to his supplier as long as possible then with positive cash flow he could make a go of it. But if he fails, without funds to fall back on, he could come crashing down as soon as the business starts.

A small investor might be the best answer. We'll discuss further...