Cash flow is the lifeline to business success

Meaghan Giusti has been fortunate enough to combine her love of dance with her desire to run her own business.

Cash flow is the lifeline to business success

Meaghan Giusti has been kicking up her heels since the age of five. The performing arts — everything from ballet to hip hop, tap, jazz, theatre and song — have been her lifelong passion. And she has the credentials to prove it.

Ms. Giusti trained in dance, theatre and voice in Sudbury before she went on to attain a master of arts degree in dance from Toronto’s York University. Her accomplishments are many and impressive.

But it was a summer theatre camp for kids that she founded and ran during summer breaks from her university studies that set the stage for her future as an entrepreneur.

“That summer camp was an eye opener and an initial baby step toward starting my own business,” she says.

Today Ms. Giusti, 31, is owner and artistic director of the Broadway Arts Centre (BAC) in downtown Toronto. With 3,200 square feet of studio space and 10 staff, BAC offers training in dance, theatre, and vocals to more than 200 students aged 18 months to adult.

When she opened her business in 2011, the leased studio space and staff represented a dauntingly large overheard, says Ms. Giusti. For help she turned to the Canadian Youth Business Foundation (CYBF) to gain a better understanding of forecasting and cash flow management.

“Before you start in business, you are just playing with the numbers and are wishful and hopeful,” she says. “CYBF helped me to see the reality of financial management and that cash flow is the lifeline of a business. Without that understanding, my business would not be financially stable.”

A recent survey, conducted on behalf of Intuit Canada, found that 83 per cent of small business owners have only a basic (or lower) grasp of financial fundamentals. According to Statistics Canada, only 51 per cent of small businesses reach their fifth anniversary.

Financial literacy is the key, says Dominik Loncar, entrepreneur-in-residence with CYBF. There are many misconceptions about what it means to start a business, he says. Many believe it’s simply about having a great idea. But once a business is up and running, cash flow is crucial. Poor cash flow can lead to rash decisions and bad choices. It is one of the primary causes of small business failure.

Cash flow is the best framework for discussing the important decisions that need to be made about a business, says Mr. Loncar. “It tells a story and helps business owners to understand what they need to do, what they are doing and how it affects their business.”

The challenge for many entrepreneurs is knowing where to begin.  According to Mr. Loncar, it starts with a detailed month-by-month cash flow for the first two years of the business that includes projected monthly revenues, marketing and advertising expenses, leasing and staffing costs, and any other revenue and expense streams.

It is also about realizing that even ‘free’ social media comes at a price, he says. Starting and maintaining a blog or a Facebook page takes time and resources. It is important to understand what those things can do for the business before making the necessary investment.

CYBF offers a number of tools and resources to help entrepreneurs get their business on a solid financial footing before it’s too late.

Financial templates are available online to help entrepreneurs outline start-up costs, financing, sales forecasts and complete a month-by-month cash flow for the first two years of their business. CYBF’s interactive online business planner includes a cash-flow tool where entrepreneurs can learn the intricacies of cash-flow management using their own numbers.

Weekly webinars about cash flow basics are also available to those that have inquired about CYBF’s Start-up Program. Young entrepreneurs who take part in the Start-up Program have access to an extended network of community partners and regional business managers that offer support in financial management, and they are hand-matched with a business mentor to help them along the way. And aspiring business owners can also be referred to the CYBF Entrepreneur-in-Residence for one-on-one advice.

“We believe that you can never get enough good information to help you start a business,” says Mr. Loncar. “The more resources that you have at your fingertips, and the more feedback you get, the better prepared you are to run a successful business. It’s about going deeper to get your business off the ground.”

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