When my co-founder and I started Storyhackers, we never anticipated that within seven years, we would become a 28-person team with dozens of clients.
With a thriving business model and a team of intellectually curious consultants by our side, we found ourselves empowered to pursue big ideas—to democratize access to storytelling education, build documentaries, and mentor emerging consultants to build their own businesses. It’s been a fun ride so far and we are so excited for the coming years.
But there was—and continues to be—a major challenge that stands in the way of pursuing vision: cash flow.
We’ve never prioritized the accounting side of our business. Frankly, we didn’t really know where to start. We relied on spreadsheets before graduating to an accounting software that wasn’t robust enough to scale with our organization. We learned the hard way that growth doesn’t always correlate with cash flow. As our business grew, we decided to hire a strategic accounting firm.
Even though our sales and growth metrics were healthy, our financial infrastructure was at risk. Like most agencies, we pay our team faster than we receive funds from customers. This is an inherent challenge for most service business, but when it takes three, six, or even nine months to collect on accounts receivable, CEOs start to get uncomfortable.
As our accounting partner, Bill Mosca, founder of Accountiful told to us, “I’ve seen highly profitable businesses fold, purely due to cash flow.”
Fortunately, we weren’t anywhere close to our breaking point as a business. We always maintained cash reserves. Still, I felt like Pandora’s Box had swallowed me whole to explore a brand new world.
“The thing that sinks entrepreneurs again and again is conflating profit with cash flow,” Bill explained. “Just because a business is profitable doesn’t mean it’s got sufficient cash flow to sustain itself.”
With these words of wisdom, we decided to put our growth plans on hold—indefinitely—until we felt comfortable with a financial infrastructure that would grow with us. One year after making that decision, we’ve reached about 80% of our financial goals.
I’m an entrepreneur, not a cash flow expert. Our team is made up of storytellers, technologists, statisticians, and artists. Despite our knowledge gaps, however, we’re committed to running a sustainable, cash-dependent business that helps us achieve our long-term goals.
We’re also committed to helping fellow entrepreneurs learn from our experience. By virtue of our biggest mistakes, here are some of the most powerful cash flow lessons that we’ve learned in our first seven years.