Cash Flow in a Magick Business

by Mike Sententia on August 5, 2010

You found my old blog. Thanks for visiting! For my new writing, visit mikesententia.com.

In this post:

  • What cash flows are and why they matter
  • How to build a magick business with a positive (good) cash flow

Intro

Read some business blogs and you quickly learn that, in small businesses, cash is king.

Cash flow is the delay between when you pay your expenses and when your customers pay you.  Getting money before you have to spend it simplifies your business and makes it much more likely to succeed.

First, I’ll give an example of cash flows, then I’ll apply it to my personality integration business.

Cash Flow Summary

Say you run a company that sells CDs.  For meditation or whatever.  You pay the manufacturer $2 per CD.  You can sell them in a store and get $4 as your commission ($2 profit), or sell them online and get $4 per CD, but spend an additional $1 on shipping ($1 profit).

$2 profit is better than $1 profit.  But that business model has cash flow problems.  Here’s why.

When you sell in a store on commission, you pay for the CDs up front, then the store pays you 30 days after the CD sells.  It takes 2-3 months before any money comes back to you.  That’s a cash flow negative business.  It’s hard to make work because it takes a while to produce a profit.  And each time you expand, you have to invest more up front then last long enough to see any profit.

In contrast, say you sell the CDs online, “allowing 4-6 weeks for shipping.”  A CD takes 1-2 weeks to manufacture and 1 week to ship, so you don’t need any inventory.  Bill your customer $4 when they order, use $3 to get them the CD, and keep $1 profit.  You don’t need to invest your own money, you pay your expenses with the money your customer just gave you.  That’s a cash flow positive business.

When you don’t spend your own money to run the business, you don’t have to worry about investors, loans, slowdowns in the market, etc.  If you walk away, you don’t lose money sunk into inventory because there isn’t any.  Cash flow positive businesses are much easier to run, so I want to make sure my business will be cash flow positive.

Cash Flow for Personality Integration

Personality integration is a service-based business: I do something for you, you pay for the hour.  Service-based business don’t have to worry about inventory, and since I’m the only employee for now, I don’t have to worry about recurring costs from staff.

What I do have to worry about are costs from delivering services.  In my other life, I consult for large companies.  When I travel, I spend my own money on airfare and hotels, then bill those expenses back to my clients.  It takes about 30 days for them to pay me.  This would be cash-flow negative, except that I pay with credit cards so I don’t really pay the travel expenses for 30-60 days, which makes the travel expenses cash-flow neutral.

For magick services, I’ll need to rent space.  Established clients might be comfortable working at their house, but new clients would probably want to meet at an occult shop (in the room they use for tarot readings).

I’ll need to arrange with the local occult shops to rent their space as needed, and pay after I use it, so I can pay with the money the client paid me with.  Since I’m scheduling around the shop’s weekly events, I need to develop a relationship with several occult shops in the area.  And since I might not be able to handle same-day bookings or complete an appointment when a new client initially calls me, I’ll need enough material for new clients to read to sustain their interest while we schedule an appointment.

Both of those results suggest that low-cost group workshops offered through the local occult shops may be a good marketing plan.  I’ll write more about marketing in the next business post.

Other posts in this series: If you liked this post, consider visiting my current blog at mikesententia.com.

{ 2 comments… read them below or add one }

Kristen August 6, 2010 at 10:11 AM

Running your business as a cash flow positive situation is definitely optimal. Speaking from experience (especially since I can relate to the example you used about selling CDs), it stinks to have some of your company’s cash tied up in inventory.

Since you’ll be operating a service-based business, you’ll be able to avoid all the product/inventory dilemmas, but there’s still the initial investment required to produce marketing materials. You’ll be doing a lot of in-person advertising by visiting the local occult shops, but you’ll also have to pay the design and printing costs for brochures, business cards, etc. up front.

Renting space is another hurdle but it sounds like you have a good plan lined up. You should check out places that rent individual rooms as part of a larger space. We have some places around here where massage therapists, yoga instructors, and even manicurists/cosmeticians can rent a single room in a place that has 10 or 20 little rooms. Each person has their own office with a door to close it off from the rest of the place, and there are central bathroom facilities that are shared by all the renters and their clients. You might try working out a deal to share an office with a massage therapist or someone in a similar profession. You can split the rent, and you get the room on certain days of the week while the other person gets the room on the other days of the week.

Reply

Mike August 7, 2010 at 3:21 PM

Great idea about splitting office space, renting a room by the hour at a massage facility, something like that. Thanks!

Reply

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