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Most founders are wired to chase growth. More clients. More contracts. More expansion. But growth can become its own trap.
I remember a period in my company when everything looked strong from the outside. Revenue was climbing. New contracts were coming in. We were busy and growing. Then I sat down and looked closely at the numbers. Something was off. We had growth, but growth without liquidity creates pressure. We experienced this firsthand with one of our early staffing contracts. It was a great opportunity. The margins were healthy, demand was consistent and the work kept coming. The challenge was timing.
Our client paid on a 60-day cycle, sometimes longer. At the same time, our clinicians needed to be paid every two weeks. For a period of time, we were effectively financing the entire contract ourselves. The revenue was there. The cash was not. That’s where businesses get into trouble.
That experience changed how I think about money. It shifted my focus from revenue to resilience. Most companies don’t fail because they lack opportunity. They fail because they run out of cash at the wrong time. That’s where the six-month cash rule comes in.
Profit is not cash flow
The six-month cash rule is simple: maintain enough cash on hand to cover at least six months of operating expenses. Twelve months is even better, but six months provides a meaningful buffer. That reserve does more than protect the business. It gives you time to think clearly and make decisions from a position of strength instead of pressure.
One of the biggest misconceptions among founders is assuming that a profitable business is automatically a healthy business. Profit and cash flow are not the same thing. Profit shows up on your income statement. Cash flow shows up in your bank account.
I’ve seen business owners celebrate a strong month only to spend the next week figuring out how to make payroll. The revenue was real, but it was tied up in unpaid invoices. That disconnect catches many founders off guard.
A simple way to stay grounded is to consistently track three numbers:
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