Cash flow management is critical for all businesses. To protect your company’s growth, it’s more important than ever to avoid cash flow issues and safeguard your money. Listen to this episode for some sound advice on how to protect your cash flow.
Cash flow management is critical for all businesses. To protect your company’s growth, it’s more important than ever to avoid cash flow issues and safeguard your money. Listen to this episode for some sound advice on how to protect your cash flow.
Den Lennie (1s):
G’day, guys! It’s Den, we’re back. We’ve had a bit of a break and a little bit of time out to rebuild a few things, rounding the podcast, and you may have noticed we’ve been doing a few YouTube episodes, but we are back good and proper. Now we’re going to be back. This is the 1st of March. This is episode 251 of the How to Scale a Video Business podcast. And today we’re going to be talking about cash flow and protecting it.
(28s):
Welcome to the video business accelerator podcast. Each week we uncover the secrets to creating a wildly successful and scalable video production business with your host, Den Lennie. Discover how the accelerator program is transforming the lives of our members at www.videobusinessaccelerator.com. Enjoy this episode.
Den Lennie (57s):
Well, guys, it’s good to be back. We’ve been a little bit ad hoc with episodes the first couple of months of this year. And that was for a number of reasons. We’ve been changing our marketing strategy and we have been really doing a lot of work with our members inside our two business programs, launching new platforms. And really, you know, as, as you should be in any business, you focus on your paying clients and giving them all of the attention they need. And, and the truth is I just, I just run it a capacity to also continue with two episodes a week the shore, but also we were going to be moving the strategy. So I’m going to be moving to an online video strategy this year. So my goal is going to be putting one YouTube video a week, and I’m so sad for me on YouTube and you’ll see what those videos are.
Den Lennie (1m 44s):
And they’re very kind of rough and ready down and dirty Watson all behind the scenes videos of trainings that we’re doing or aspects or lessons in my life that I can share with you from my journey, growing a video production company, and subsequently moving that business into an online mastermind and business coaching model, helping video business owners succeed. So it’s great to be back. And I wanted to kick things off today with a really important conversation around cash flow. We had an enormously powerful conversation on the coaching call in the VBA today about cashflow and how, you know, there are times in your video business when you need to be investing in new equipment or new technology, but how you pay for that technology is where the bumps in the road can appear.
Den Lennie (2m 39s):
So to give you some context, if you are needing to buy a few more cameras for a specific job, you always going to be faced with the decision to either hire those cameras or maybe buy those cameras. And when you are faced with that decision, if you buy the gear, oftentimes that’s going give quite a big hit to your cash flow. And one of the areas that I think you have to be really mindful of is there while I think I’ve got these jobs coming up and therefore, you know, five or six jobs not pay for all this gear, but what we had a big discussion around this morning was a lot of experience in the group talking about when those situations hadn’t materialized.
Den Lennie (3m 21s):
And I think as filmmakers, as creators, we have a tendency to a tendency to push a little bit into the optimism. And, and, and sometimes when, when you know, you’ve got a few gigs coming up and you think, well, if we got to the another three or four more layers, it’ll totally cover the cost of this, this gear, but, but some teams and actually more often than not the things don’t materialize, they don’t actually come to life. And so you end up with like this gear and it’s sitting in the corner, it’s not making the money you’d hoped and you’d spend all your capital on it. So, I remember a time when I had my production company back in the UK and I’d bought an F5 and a 10 40 system, and I had some great Zeiss lenses and matte boxes and all that kind of really high-end gear.
Den Lennie (4m 12s):
And I really thought that at that time, having that gear would enable me to get better quality jobs. And the truth is I did a job for a client one time on it. And then the next time I shot it on the A7S and they didn’t notice any difference in the output. And so it became a bit of a nuisance. I sold it all. And, and since then, I’ve always been very kind of, sort of small footprint. Not that we do a huge amount of production anymore, really, we don’t. But the other thing is, is how you finance that equipment. Sometimes there’s this sense that if you finance something it’s dead money, but I want you to think about finance in terms of cash flow.
Den Lennie (4m 53s):
Let’s say you want to spend 20 grand on some equipment. You know, if you’ve got that money sitting in your account and you spend it, it’s no longer in your account that you pay upfront for the entire gear, and then it sits with you. And then you have to wait months or years for the gear rentals come back in to offset the costs of that gear. Whereas if you finance it, you’re maybe paying a little bit of interest, but instead of 20 grand in one hit, maybe you’re paying a thousand a month over 24 months. Now evenly, you might be paying four grand interest, which would be a lot. Your only liability is a grand a month.
Den Lennie (5m 33s):
So that 20 grand that’s sitting in the bank is still sitting in the bank and allowing for taxes and allowing for unforeseen expenses or, you know, God forbid pandemics. So I think, you always want to be doing is, is building up a cash reserve. And there are two areas in which I recommend building up a cash reserve. The first one is, if you don’t have one immediately start a second bank account and your called taxes and take 20 or 25% of every single invoice that comes in and throw it into your tax account and make that a one-way street. So you can only put money in, you can never take money out. And what that will do that will build up your tax pool.
Den Lennie (6m 15s):
And hopefully, at the end of the financial year, you will be in an access position. You will be in a cashflow positive position where your taxes might be, you know, 35,000, and you’ve got 50 grand in there. It creates an enormous amount of certainty and enormous amount of peace of mind. And when you’ve got your tax money sitting there, you know, when that tax bill comes in, you just pay it and it’s, it’s no sweat, but also when you’ve got cash reserves, you, you tend not to take crappy jobs. You tend to spend more time thinking about who you’re working with, and that’s really important as well. And so the next cash reserve I would ask you to think about building is six months worth of operating expenses.
Den Lennie (7m 2s):
If you have six months worth of operating expenses in a bank account, that means that no matter what happens, let’s see you break a leg or something happens in your family, or something happens in the market. You know you can survive without selling a thing for six months. And those two things, having a tax account and having six months of operating expenses in the bank means that whatever’s left in the operating account. Then that’s your day-to-day. And what I’ve observed is that look, you know, we were talking about this morning, you know, gas, the gear acquisition syndrome, we all love gear. We all love having great toys. We haven’t great tools and our tools are our toys. You know, it’s the kind of thing that we, we love to do, and we love to have the best gear.
Den Lennie (7m 45s):
I mean, I’m no exception. I’ve got amazing what doubled double redundancy here in the studio. I’ve got multiple sets of studio monitors and, and great looking, you know, physical monitors like for, for, for working. And so my workflow is, is really smooth and really fast. But in the past, I’ve made the mistake of buying too much, too soon. And that affecting cashflow, fortunately, nowadays, that’s not an issue for us, but what I found and I’ve discussed this with a number of very successful business owners, is that the more cashflow pools that you build, actually, the more cautious you are about how you spend your money and you end up actually being a little more frugal, which means that your cashflow stores grow.
Den Lennie (8m 34s):
And then if you do want to buy something, you can simply take the cash out and buy it. And so I hope this is just like a little bit of an insight into managing cash flow. I’ll leave you with one or the other tip is if you, if you’re early in business and you want to buy some equipment, there are ways to get creative. You could think of things like zippay or Afterpay, where you can take a five grand camera and split it into four payments. Anything that helps you to just reduce the amount of cash flow required right at the point of purchase will really help you going forward. That’s it for me guys this week, I will catch you for our next episode on Thursday,
(9m 17s):
You’ve been listening to the video business accelerator podcast with your host, Den Lennie. If you are a video business owner who is tired of going it alone and would benefit from mentorship support and weekly accountability then mouse over to www.videobusinessaccelerator.com to learn more about how the accelerator program can help you today. Don’t forget to subscribe and rate the show over on iTunes. And we’d really appreciate you taking a few minutes to leave a review.
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Scale Your Video Business Fast & Finally Find The Freedom You’ve Been Looking For By Using These 8 Growth Accelerators
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