“Opportunities are everywhere; and you’re missing them”
-Grant Cardone
You can rarely call success luck as the head of our operation, Grant Cardone, started out with less than nothing and some extremely bad luck when his dad died when he was a young child, leaving his family without resources. As a shareholder and CFO of 10X Incubator, I get to live and work in a Universe of people making 100s of millions of dollars a year. There are many elements related to that level of success; but one that stands out is “opportunity.”
Our leadership seeks opportunities, creates opportunities, and goes all in on these opportunities to make sure they all exceed their potential.
Initially, you seize opportunity with your own funds and maximizing your free-cash is the purpose of this article. However, we also aggregate or crowdsource capital to take down monster-opportunities as well.
I went back to college to learn how to become a CEO/CFO, but you can learn how to be opportunity-driven and generate large sums of success and money by understanding how to think like a billionaire.
TO CREATE FREE CASH, WE NEED THE FLOW OF CASH
As the CFO for what is evolving into the most compelling, effective, and vertically integrated tech firm in history, my most important areas to get and keep under control are;
- How the cash flows
- Optimize the amount of cash that is flowing.
Profit and cash flow can be two different things if you are not taking into account payables that do not apply regularly. A monthly P&L, for example, may show that you profited $10,000. Many entrepreneurs look at that as free cash and may spend it on bills (or a new Ferrari). What you may miss are those quarterly, annual, or semiannual taxes, vendor payments, insurance bills, and other items like a refund that are not accounted for every month. Forgetting any of those has gotten many owners is some financial trouble and/or just not allowed them to optimize wealth creation.
MAXIMIZING THE AMOUNT OF FLOWING CASH
Cash FLOW is the root of sustainability and growth of every business, not just “cash.” At a dental office I consulted for, the dentist revealed that they considered their billings to be real cash and looked at any money left over at the end of the month as free cash. Then, on a regular basis, the poor dentist kept getting hit with bills, surprises, and the financial realities of maintaining equipment. He would have to pull from holy, untouchable resources like personal savings and personal credit cards to pay the bills.
He could not figure out why his net worth was on a downslide despite a fairly successful dental practice. Sadly, in his 60s, he had made millions in his career but was still burdened with enormous debt and the need to work full-time like a kid coming out of dental school.
Entrepreneurs and employed people should amortize annual costs into their monthly P&L account or look at an accounting of these items alongside that P&L to avoid getting the shock of cash versus cash flow. Cash flow is what really remains after every debt or bill, or after the price of doing business is paid. Focus on that number—it’s the only real one!
GRABBING YOUR OPPORTUNITIES!
Across the board, so few of clinic and small business owners grasp the true meaning of business ownership. The goal of entrepreneurialism is to gain more and more freedom, wealth, and options for the future over time. If you can safely grasp what your free cash is, you can take that money and grow a future much different than the dentist.
The idea is to constantly be looking for opportunities and learning how to create them. HOWEVER, we need the free cash as that is the money you can grab to grab the opportunities. You can use OPM (Other people’s money) as well, but it is often hard to start, sustain, or take advantage of the opportunities you find without having free-cash of your own.
BUILDING TO SELL: CREATING A BUDGET AND MANAGING OFF THE VARIANCE
In a company tightly managing its profits and especially those trying to turn their finances around, the budget is compared to the P & L in order to assess variances between profit and cash flow.
While a small percentage of people have such enormous profit margins or a 6th sense about money and claim to get away without doing it, it costs most people the wealth they deserve and/or is catastrophic.
Setting a 12-month budget and having a cash flow analysis, could change your financial future and improve your mental health. This is not rocket-surgery. If you need help putting this together, let us know.
Have fun saving the world
Dr. Ben
