I always heard about cashflow being the most important thing to look at in a business. When the sales for solar hot water increased, we had to put some cash into the business to finance that growth.
I then made a decision that I always wanted to create businesses that are cashflow positive throughout the development. So before starting to sell solar panels (which cost over $10,000 – of which the government paid around 90%), we said that we would only sell to clients who were willing to pay upfront and could wait for the government to pay them back.
That reduced our clients, but even more importantly reduced our risk. There was virtually no limit to our growth that way.
After selling for a few months, our cash reserves increased. So we calculated that we can offer fully financed solar systems to 200 people (they only had to pay the 10% and we’d wait for the government to pay us back – promised for 8 weeks after installation).
Sales went crazy, and instead of 200, financed systems, we sold about 500. At the same time, the government process was much slower than anticipated (why was I surprised about that?), so we suddenly find ourselves in a position of cash shortage.
We went to the bank, we went to other private investors, both not looking too good. There are two other options we are working on.
Now I know why they say “Cash is King” and I’ll always take it into account even more seriously.