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In this post:
- What cash flows are and why they matter
- How to build a magick business with a positive (good) cash flow
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:
- First Steps to Starting a Magick-Based Business (July 31, 2010)
- Cash Flow in a Magick Business (August 5, 2010)
- How To Market a Magick Business for $20 (August 12, 2010)
- I Repair Inner Children: The Art of the Intro (August 23, 2010)
- What I Learned from Testing My Handshake Intro (September 3, 2010)