Cash and Burn: How I Saved My Business From Financial Failure

How could I have been so stupid to allow a situation to arise where I had to pay out more money than I actually had in my bank account? I didn’t want to upset my vendors; they were the lifeblood of my company in terms of producing something for my clients. In my head, my business wasn’t going to survive the next 30 days.

The Solution

I decided to visit my parents’ house that weekend and speak with my father, who has always been a mentor of mine and someone in whom I confided in times of trouble. I explained my situation and we sat there for hours, discussing what caused the problem and different ways to remedy it in the future.

With a hard look, I realized that my first problem was obvious:

1. I wasn’t enforcing any sort of payment terms with my clients, and I was paying my vendors too quickly.

Essentially I was paying for jobs long before I was actually being paid for them—a model that will eventually catch up with you. I proceeded to set up new terms both for the clients and the vendors: I began to require a certain percentage of money up front from the client, and also came to an agreement with vendors to pay them in a manner that’s more realistic for me as a business owner.

In order to enforce these new policies and prevent myself from making such a great mistake again, I found that:

2. I needed a better way to track what money was going in and out of my company.

My father insisted that I set up a “reserves” bank account for my business: whenever money was received for a job, I would set aside what I knew to be the future costs of this job into this separate bank account. This way, regardless of when the job got done, the money that would be needed to eventually pay the vendor would always be there.

This truly was my great mistake, but what matters is surviving it — and learning from the experience.

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Photo Credit: Set

Justin Beegel is the founder of Infographic World, Inc. He left the big corporate world at 23 to help companies transform the way they communicate their messages—essentially taking things people don’t want to read (long and boring PDFs, text-heavy articles and dense subject matter) and turning them into captivating visualizations that people actually want to read.