Why Cash Flow is King
And How to Forecast It

Not having enough CASH FLOW creates teeth-grinding stress and pressure.

Cash shortfalls affect your health, sleep, relationships, and fundamental happiness with your fitness career and business. 

No one works to walk around worried all the time about being able to pay their bills.

That’s why it’s so important you’re focused on the most important strategies to INCREASE CASH FLOW month-over-month… even when you’re reinvesting in growth.

In business… CASH is KING. 

How much cash you have in the bank should NOT be a surprise to you. 

How much cash you will have in three months should NOT be a surprise, either. 

And knowing how much cash in the next 12 weeks is crucial to all your decision-making. 

Can you afford to invest in X or Y?

If you can’t confidently answer that question (BASED ON YOUR ACTUAL NUMBERS, NOT FEELINGS) then you’ve got a problem.

Let’s talk about how you can fix it.

In this exclusive look at cash flow forecasting, we’re going to cover why cash flow is critical to your successful growth and why you need to predict your cash to make good decisions. 

Why cash forecasting matters

You can’t drive a car by only looking in the rearview mirror. You must look through the windshield and watch the road ahead, to drive the car successfully through the terrain (avoid potholes, etc).

Financial statements such as a P&L statement are the rearview mirror. 

It only tells you what’s already happened (historical view).  

The problem with this is you can make a profit on your P&L, but still be out of cash. 

P&Ls do NOT inform you of what’s coming up ahead. Only by looking through the windshield can you make strategic decisions about how you invest your cash, such as capital improvements, new hires, wage increases, debt paydown, and savings. 

Cash Flow Forecasting is about looking ahead and making decisions based on projected cash flow in your business, but first you need to understand how to read the data.

This is MISSION CRITICAL. 

If you don’t have a cash forecast in place for your business, then you are driving down the road with your eyes closed. This is dangerous and irresponsible as a business owner.

You MUST take the time to get clear on your projected cash positions, week by week, for 12 weeks ahead.

And that means investing time to look at the data, organize it, and understand your projections. 

Steps to cash forecasting

In the simplest terms, cash flow is Money In – Money Out over a specific period of time. We recommend (strongly) 12 weeks out. 

1. Gather the data you need. Collect enough information to forecast 12 weeks out, including seasons, quarterly, and annual expenses.

We recommend client management software for record-keeping and accuracy’s sake and online banking access to project fixed and variable expenses.

2. Input projected revenue. What’s the “Money In?” Enter recurring revenue payments to be collected week by week. Also, enter additional income you expect.

3. Input project expenses. What’s the “Money Out?” Refer to your banking to identify which dates predictable expenses are paid.

Now step back and review 

Invest time THINKING about improvements. What will you need to do to improve the money coming in or reduce the money going out?

Set aside emotional reactions and fear. Take a deep breath and recognize the opportunities of knowing the real picture of your business finances. 

Are you in Survival Mode or Growth Mode?

Survival Mode=Cash flow is negative or declining to low levels in your operating capital (bank account balance) over the next 90 days (we look at receivables and expected new sales against your expenses on a weekly basis).

Growth Mode=Cash flow for the next 90 days is positive and growing consistently or flat lined at levels that don’t cause immediate concern. Based on that distinction, there are different actions we can take to focus on longer term initiatives with your business like hiring staff, investing in facility improvements, etc.

Based on whether you are in survival or growth modes, identify which actions you can take one week at a time to positively impact your cash dash. 

If you’re in survival mode, weekly focus is key until you are “in the black” for a full 12 weeks out.

This is the work of owning a business: The math never lies!

When cash flow is blinking RED

If you’re not just red but “blinking red,” you need to correct course quickly. Audit your spending immediately. Create weekly payment plans for large expenses. 

Leverage a cash-boosting method such as raising your rates, reactivating old clients, or running a promotion. 

Whatever you do, do NOT ignore it. 

Create the ‘Habit of Forecasting’

Cash flow forecasting is not a “once and done” thing. Take responsibility for your time and your focus. Commit to taking action–not burying your head in the sand.

All this means is block out your calendar weekly. Set boundaries and don’t get off track. Cash forecasting, like weather forecasting, needs to be updated regularly.

Create a weekly rhythm to update your cash dash with last week’s expenses and income from your banking, and new sales or items to add to the forecast. 

ALWAYS HAVE A RUNNING 12-WEEK FORECAST!

Next Actions

Remember: Cash is KING. As a business owner you must understand how your decisions affect cash flow. The simplest way of looking at Cash Flow “future money in and future money out.” It’s THAT EASY! 

But you have to commit to looking at your money weekly to make better decisions.

At NPE, we have Cash Forecasting lessons that we use to help fitness entrepreneurs predict their cash flow and plan for the future. Our clients tell us our NPE Cash Dash Template makes a powerful difference not only in helping them make decisions to improve their cash flow, but in helping them enjoy their fitness business more. 

Our clients become experts in understanding their numbers so they aren’t caught flat-footed and know where cash is coming from. They can spot and address cash-flow issues months BEFORE they become problems.

To learn more about telling your fitness business story “by the numbers” schedule a call with an NPE Success Coach

Our NPE Success Coaches have all “been there, done that” in the fitness industry and now they’re bringing their expertise to help fitness business owners like yourself clear away their biggest obstacles and show a new path forward. 

When you don’t have a background in finance, cash flow forecasting can seem overwhelming to learn, set-up, and understand. But don’t let that stop you. Winners don’t avoid challenges, they face them head on.

Take charge of getting your financial house in order by scheduling a call with an NPE Success Coach today. And then get ready to grow your fitness business and create the life you want. 

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Tiffany Stewart, Programs Director
Tiffany joined NPE in 2014 as Operations Manager and now directs all of NPE’s programs. She has great passion for educating and supporting fitness entrepreneurs so they can grow their business and create the life they want. She got her passion for entrepreneurship from her parents, who were successful entrepreneurs in the aviation and restaurant industries.