The Quality of Earnings report alone will NOT protect you from getting into financial ruin post-close.
Lack of cash is a huge issue post-close.
Something will go wrong that costs money. You will learn new things about the business that cost money. The actual cost is usually higher than the plan.
I’ve seen searchers start losing $30,000, $10,000, and $15,000 per month. Having a rolling 13-week cash flow plan would have helped avoid starting operations at a loss.
What you need to know now about a rolling 13-week cash flow plan.
- Core Concept
Having a rolling 13-week Cash Flow Plan helps you sleep better at night. It’s a detailed plan covering about one quarter, showing incoming cash (such as customer payments) and outgoing cash (such as operational expenses and loan payments).
- Purpose
Margin of Safety: Knowing you will have a runway for emergencies - like that building fire no one predicted or the ability to make payroll when Stripe unexpectedly freezes your account - gives you peace of mind.
Map: Updating the plan also shows you the impact of the decisions you're making right now that you may not otherwise consider. i.e. Does the upcoming sale you're planning hurt your cash flow? Is there a surprise cash surplus coming your way?
Know what you own: The seller probably forgot more things about the business than you will learn in the first 30 days. Having a 13-week cash flow plan helps you get the pulse of the business from day one.
Your P&L forecast is not tied to cash. And your monthly cash flow statement is NOT the hands-on detailed numbers that need at your fingertips every week to know the pulse of your cash flow.
How to Implement Set yourself up for success and start your 13-week cash flow plan during the diligence phase. Refine it as you learn more and finalize it during the closing phase Every week, work with your CFO to make sure it’s updated and accurate so you know exactly how much cash your business has and plans to spend.
You’ll save yourself sleepless nights and hours of stress.
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