(This is a business case study. It will be used to guide discussions during the session: “Cashflow: Killing your Growth Vibe” with co-host Todd of Yankscash at the Paysite Meetup in London on Thursday, November 30th.)
The effect of the morning coffee was wearing off but Todd felt more energy than he had felt in years. He stepped back from the whiteboard he had just filled out with his business partner.
The plan for 2018 was there. The ideas were great. They were the best he had had in more than a decade. He felt excited. The whiteboard was full of ideas that would produce a very positive return on investment (ROI).
Next he thought about where he would get the cash to fund the products.
Todd had a simple question, “How can a company with a good product get the money to grow their business?”
The answer wasn’t simple at all. “First I have to start by leaving budgeting, managing cash flow, paying your bills, out of the conversation,” Todd thought.
“What is business?” he asked himself. Business is creating a plan, getting the financing for the plan, executing the plan for a + ROI and repeating.
The challenge he saw in our industry in regards to the cash flow portion of this flow is financing. Fixing it requires long-term thinking. “How do you manage your money to get financing?” and “What can this industry do to set up an investment stream, either internal to the industry or external?” Todd asked.
Todd understood finance from his life before this industry. “Finance is a simple and brutal deal, but it is clear cut. It is a trust equation. It is an equation in which the lender or investor needs to believe that their cash number IN is less than their cash number OUT taking into account inflation and the time value of money.” Todd reflected. Unfortunately, he thought, “This business has no trust externally or internally. That is the problem we need to solve externally and/or internally.”
The financing problem revolves around valuations of companies, brands and revenue streams; and in the case of adult industry the undervaluing of all of the above. We kill ourselves here.
Todd had a few topics he wanted to discuss with his peers in the industry. So I think in this segment we should discuss the following:
- How do we improve valuations?
- What forms of financing work best for adult companies?
- How do our business relationships with partners effect valuations?
- PPS vs Rev-share and organic traffic vs. affiliate are huge topics here. How legit is your 12-month revenue stream? That should matter?