All entrepreneurs and many executives face in their professional careers the dreaded negative cash flow scenario.

For entrepreneurs this is a normal phase going from start up to, hopefully, mature company. For CEOs it can happen during an economic downturn or if the company had previously made serious mistakes or faced a catastrophe.

The underlying mistake that these managers nearly all make is to consider cash flow break even as a goal. It is a milestone. The goal, of course, is a pre-agreed return on equity (ROE). There might be many more milestones, such as cost per unit and number of customers, but ROE is the target. Continue reading →