The Cost vs. Cash Flow Conundrum

Meet Dallas.

He owns a small consulting firm in Atlanta. Yobro offers professional editing services to bloggers and writers.

Dallas runs his entire business on his MacBook. While cruising through a client project one morning at his favorite coffee shop, Dallas manages to spill water on his… business.

Two hours after the spill, the Apple Store Genius informs Dallas that water did, in fact, get inside the shell. The hard drive is fine, but some of the components already show signs of corrosion.

Bummer. Now Dallas is in a pickle.

The Cost vs. Cash Flow Conundrum

Dallas takes pride in helping his clients meet publishing deadlines. He gets consistent referrals, and his project pipeline is full. But unfortunately, he can’t serve his clients without a computer.

Dallas gets two prices from the Apple Genius: the cost of repairing the old laptop and the cost of replacing it with a new machine.

He then logs into Pulse to look at his cash flow projections. How does a new laptop purchase affect his cash flow?

It’s just as he feared: a new laptop will totally wipe out his cash reserves, and even the repair cost will stretch him pretty thin.

What to do?

Insert: A Lifeline

A month ago, a mentor recommended that Dallas should secure a line of credit and use it to bridge any gaps in cash flow. Dallas applied for the line and got approved the same week.

Dallas does three things right then and there:

1) He springs for the new MacBook, his old one was slow anyway

2) He pays for it with his line of credit

3) He divides the cost by three and adds those three installments to Pulse

He’ll have the new laptop paid off within three months, and he won’t miss a single deadline. Sure, he’ll have to pay some interest on the line of credit, but he gets to keep his cash reserves intact.

There’s no better feeling for a solo practitioner than having cash on hand.

Planning for the Business’s Future

But he’s learned his lesson: he needs to double his cash reserves within the next six months.

To do that, he needs to grow his business by 25%.

To do that, he needs to spend more time on marketing.

To do that, he needs to find someone who can help with the actual editing work—someone who is at least as good if not better than himself.

Dallas Doubles Down

A few years later, Dallas has doubled his editing business. His associate editor played a major role in that growth, and now he is considering hiring Evie full-time.

Dallas first needs to make sure he can afford legal fees for incorporating an LLC and takes a look at his cash flow projections. He emails his attorney to ask if he can pay the fees in three separate installments. His attorney agrees.

Dallas also uses Pulse to look at his historical earnings. As he reviews those numbers, he begins to feel quite confident in hiring Evie. His first W-2 employee is affordable. And now that he’ll have full-time help with his company’s production schedule, hiring Evie will be profitable.

Necessary Growth

Six months later, Dallas expands his “editing” business to design services. Give the people what they want, right? Enough of his clients asked for designer recommendations or self-published their books with unattractive covers that he finally worked out a deal with his brilliant designer friend and added the new offerings to his website.

The only problem is—if you can call this a problem—demand for design services, including ebooks, infographics, illustrations, and even original art for a children’s book—has grown significantly faster than the editing arm of the business.

He’s done a few covers for an imprint at a big publisher, and there’s no sign of those leads slowing down.

Covering His Bases

Should Dallas join forces with his designer? Can he afford to hire him outright? The publisher has a net-60 payment schedule, so he won’t act until he’s got the cash on hand.

Pulse has become the backbone of his business. Dallas doesn’t spend money he doesn’t have. But on occasion, he sees an opportunity and takes a calculated risk.

That’s just good business.