Apparently over 60% of failed businesses are profitable. They fail because people don’t keep enough cash on hand to deal with:
- the delay from accounts payable to accounts receivable
- emergency/unexpected expenses
- expected expenses that increase due to unexpectedly high demand
I found this shocking at first, but then I remembered that most people don’t keep a reasonable cash cushion in their personal lives to deal with the analogous situations. This makes me sad! Low probability events are not likely to happen individually, but it’s likely that a low probability event will happen to you at some point!
Whether it’s in your personal life or your business life, I urge you to take a look at your cash reserves and consider revising them.