When starting a business, separate short-term cash flows from long-term cash flows

There is a strategy that I have seen very rarely discussed in entrepreneurial advice that I think is a critical driver for long term success of new businesses. This strategy involves developing a plan for both short-term and long-term cash flows.

There are a number of reasons why this is so important.

1. It is easy to see the long-term big picture, but harder to see the little steps needed to be taken to get there.

So many start ups have founders that have a big dream. It's easy to see yourself at the head of a corporate table delivering your biannual marketing strategy for your ingenious invention you created many years ago. It's more difficult to envision yourself scraping together short-term finance in order to afford to produce a minimum viable product which only MIGHT recuperate your initial investment, let alone the time spent. Creating a short-term cash flow goal allows the steps to become more clear on your path to the big time

2. Motivation can get stifled when not seeing financial return for reward.

It is incredibly difficult to spend 20 hours a week outside of your regular 9-5 if your business is earning no income. It's only natural for your passion to decrease dramatically if you don't see results in the early stages. A short-term cash flow can also provide you with a form of metric to assess current results while maintaining long-term goals.

3. You deserve to reap the benefits of your work today, as well as in the future.

For the most successful entrepreneurs, the peak of their success is always at some point in the future. The notion is that the hard work put in today will pay off at a later point in time. This rings true for everyone, including yourself if you maintain your work ethic and drive. For this reason, it's also valuable to include some short-term benefits or cash flow objectives so as to benefit the you of today. If you can live your best life today, this will give you the greatest sense of fulfillment and also have a compounding affect on the output you can achieve.

If you've got a business in mind, or are just starting out, what do you think are the best ways that you can immediately monetize your idea so as to separate short-term cash flows from long-term cash flows.

Multiple Income Streams

The vast majority of people in the western world are funneled through the public schooling system where they are taught that they should select a specific skill, hone this skill and then become a contributing member to their respective workforce as best they can. From there, it is up to them to exceed in this role and subsequently increase their earning capacity through a natural progression of their employment.

There is nothing wrong with this system per sé. After all, a capitalist system requires a workforce and generic schooling provides such a platform for its establishment. However, putting aside what we are taught and what the majority put into practice, there are no laws governing you to comply with this general standard.

This brings me to one of my critical advice offerings for all PYT readers: Get yourself a second income stream!

I'm not talking your typical advice of "save for twenty years and build a diversified portfolio for passive income." Everyone should save and look to do this, but it's not really going to earn you financial freedom if you're tucking away 10% of your graduate level salary that increases by CPI each year.

I'm talking about earning a second ACTIVE income stream outside of your typical 9-5.

This could include contracting work after hours on weekends, or possibly starting your own business during this time. It's hard and it takes time, but if you want true financial freedom it's one of the better ways of going about getting it. Relying solely on the income from your day job not only sets you behind in relation to earning capacity, it also exposes you to high risk. Should you lose your job, your income vanishes completely. You are also at the mercy of your employer who essentially has all the bargaining power in the relationship if you only maintain the one source of income.

Over the next few weeks I will be discussing the different strategies you can use in order to establish an multiple income streams in order to attain the financial freedom available and minimize your exposure to the risks of having a single income. For now, feel free to reach out with any experiences you have in building additional active income streams.