Purchasing Power

Oct 6, 2023


Purchasing Power

The job of the entrepreneur is to make sure the company doesn’t run out of cash.


Here’s an old business adage you may have heard: “Cash is king.”

It’s true. You can have millions of dollars in orders on the books, but without cash in the bank, it doesn’t matter. IOUs don’t pay the bills—if you can’t pay your employees or keep the lights on, you’re done.

Purchasing Power is the sum total of all liquid assets a business has at its disposal. That includes your cash, credit, and any outside financing that’s available. More purchasing power is always better, as long as you use that power wisely.

Purchasing Power is what you use to pay your Overhead and your suppliers. As long as you continue to pay them, you’re in business. As soon as you run out of Purchasing Power, you’re finished. Game over. Always keep track of how much Purchasing Power you have available.

How much cash do you have in the bank? How much available credit do you have access to? The more Purchasing Power you have, the better off you are.

Keeping track of your available Purchasing Power makes it much easier to run a business. Instead of constantly worrying about paying the bills, Purchasing Power gives you room to breathe, secure in the knowledge that you’re not going to suddenly run out of money.

That frees up a great deal of mental and emotional energy you can put to better use—figuring out how to improve your business.

Always pay close attention to how much Purchasing Power you have left —it’s the difference between a business that stays open and a business that fails.