Cash vs Earnings - What's the Difference?

Do you understand the difference between the two?

I’ve seen so many business owners clueless on these basics.

And they begin to pay for their ignorance…

Because in today’s world, business moves quicker than ever. If

you don’t do you your research and educate yourself on the core

terms you should be familiar with, then someone else will.

And your business will slowly cough and wheeze its way into the graveyard with the other 95%+ businesses that never make it past the first couple of years.

There IS a difference between cash and earnings, and that’s what I’m going to teach you today.

The pivotal difference between profits and cash is this:

You can’t spend your profits. That’s all you need to know.

You can only spend cash. Sure, you can see a dollar sign in front of your profits on your spreadsheets, on your statements. But just because it has a dollar sign, doesn’t mean you can spend it.

Here’s the thing: profits are the THEORY of whether your revenue did

or did not exceed your expenses.

It has NOTHING to do with cash. Read the above sentence again and

etch it into your mind.

Profit = theory…

Cash = fact.

This is the shift in perspective that needs to take place. It’s a simple

distinction. But small shifts can lead to new paradigms. Don’t underestimate that.

I've been involved in hundreds of conversations and have insight into a wide array of businesses, and you'd be shocked how many business owners make this mistake again and again. And again.

And a-g-a-i-n.

Let me give you an example: do you think it’s possible for a business to have 100k in profits BUT have no cash?

The answer is ABSOLUTELY.

Say you have a very big order from a certain customer…

…but that customer hasn’t paid yet. And you recently bought a lot of inventory. Too much in fact…

So even though you have 100k profit on your income statement…

All your cash was spent on inventory for the next quarter!

See? What looks like a big profit on paper = no cash.

And the opposite is also true.

You can have 100k losses BUT 200k cash AT THE SAME TIME!

Here's how...

Say you borrowed 200k and haven’t paid the large bills from your suppliers. So you’ve got 200k cash in the business but are making 100k in losses.

The bottom line is cash and profits have NOTHING to do with each other.

They move in opposite directions like repelling magnets much more than you’d expect.

My challenge for you today is to answer these two questions:

1. Ask yourself, "How familiar am I with cash vs. profits in my business?"

2. And then ask yourself what your business would look like if you tracked these things everyday?

If this is something you’re struggling with and you have serious cash problems, then I’m offering you the opportunity to book a call with me and my team.

Growing slowly might not be the best option for you right now. Learning about M&A, and how others are buying businesses to instantly fix their existing business problems might be what you need.

To Your Success!

- Moran