Small Business Cash Flow – More Important Than Revenue in the Beginning

Most network marketers concentrate on building their business because they understand the power of residual income. I totally understand that, long-term, residual income is my goal as well. Residual income, or “passive income,” is the type of revenue that you work hard to build in the beginning, but it keeps on coming in long after the work is done. When you stop to take a vacation – or even stop building your business altogether – your residual income still comes in week after week, month after month, year after year. It’s the holy grail of MLM and network marketing.

In the beginning, however, most network marketers don’t start out with this consistent flow of passive income. There are many network marketers, both online and off, that are working very to build their businesses so that they can create this type of revenue. Most of us start out with regular  jobs and very often, a limited monthly income.  This where your businesses cash flow comes in and why it so important.

Cash flow is the money that you have leftover to continue your business building efforts (and play with) after you’ve taken your income minus your expenses. A lot of people don’t have a decent cash flow, which makes it very difficult to continually build their business. In fact, most people start out with a “negative cash flow” which means their business expenses are more than their business income. This is normal in the beginning, but it is not a sustainable way to conduct your business.

Here are 5 tips about the importance of cash flow when you begin building your network marketing business:

1. In the beginning, cash flow is more important than revenue. Most network marketers who don’t focus on generating cash flow run out of money after 3 months and decide to quit. You should be crunching the numbers from the very beginning to determine how much you need to break even and cover your monthly business expenses (autoship, tools, etc.).
2. Cash flow is what will enable you to market your business, generate more leads, continue to educate yourself, and build your downline. Building your business costs money – bottom line. Marketing, advertising, and business tools are needed to generate leads and build your downline. Continued personal development and education is needed to become the type of business owner and leader you aspire to. These things cost money, though the expenses will vary from person to person. Cash flow will allow you to pay for them and keep moving forward.
3. Build multiple income streams from the very beginning. So many network marketers fail to do this! I totally understand believing in the power of your primary businesses compensation plan. However, having multiple streams of income only makes you more powerful. If one of your income streams dries up you won’t feel the same urge to panic that you would if it were your only source of income. Building your business online allows you to leverage the power of the Internet in a variety of ways from Google Adsense to affiliate programs. The Internet makes it easier than ever to build multiple income streams, so there is no reason why you shouldn’t be doing it.
4. Minimize expenses and spend only what you need for your business. It’s very easy to get wooed by this offer and that one, even for a more seasoned marketer. But in the beginning, you should create a budget and do your best to stick to it. Try not to get distracted by the many, many offers out there. Start by making a list of how much all of your business expenses are (autoship, marketing costs, tools, etc.). Then make sure you are getting the best value for your money and that there aren’t other alternatives out there that offer the same quality at a lower price.
5. Help your downline break even as quickly as possible to maximize retention. This is a big one. We all want to retain the people we sponsor into our businesses because our downline is crucial to our businesses success… and that coveted residual income.  When you sponsor someone into your business, make explaining the importance of cash flow one of the things that you do for them. Consider taking the time to assist them in devising a “break even” plan (i.e. listing their business expenses and deciding the best ways to cover them as quickly as possible). If you can get your team members to break even and profit sooner than later, your retention rate will increase dramatically.

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