Trade CASH for CASH FLOW

Trading Gold for the Golden Goose

The most valuable skill in business is to create value.

Refined further, the most valuable skill is to create systems and processes where you invest (cash or time) and receive recurring cash flow out.

That’s the core skill everyone looking to build an edge based business should look to build.

How can I invest “X” amount of time, energy and cash (AKA Resources) and receive “Y” amount of cash flow / profit out after a certain lag period (Z).

If you can build this system to optimise for each individual part, you will have a successful business.

Even optimising the “Z” time-lag period is important as well, if you can reduce the time lag time to profit that helps both cash flow cycles and just re-investing profits into other systems/areas.

But we’re going to focus on the X to Y perspective.

How can I input time + money (assuming you have no other assets/resources you can leverage) to gain Y output of cash flow systems (non-time-input profit on a monthly basis).

Build Your “X”

The desired outcome of Y is obvious; more, semi-passive cash flow.

But actually what to input as your X variable is the tough part.

There’s 2 currencies of business; Time + Money, which can then be filtered down further multiple times; your time, your team’s time (which is your money) and so on.

But I’ll just run through a quick example of one of our “X” systems, so you can get an idea.

In an Amazon KDP business, that’s the ones where you create a “book” and then upload it to amazon, run all the marketing and at the end of your launch sequence, see where you are and if/how many sales you are making.

This is what’s outlined in our start-up series below.

But there’s multiple ways to actually build the book.

You can either write + proof + design everything yourself.

This will take an incredible amount of time and energy, as this includes researching everything, learning how to design proper covers, styling and just learning all the KDP technical basics.

Or you can do a hybrid version where potentially you write most of the book but send it to a proof reader and editor who also styles it, as well a designer to do all imagery and cover designs.

Or of course you can outsource every single part.

There’s pros and cons to both, but from a pure time POV, let’s imagine you just outsource absolutely everything for a simple book, that costs you £2,000 total.

This is essentially what I’ve done for a couple of the books in the list.

Next you run a massive launch sequence, for us, this is “what we do” so we know it’s going to work, it’s just a matter of how well. But once you add up the resources and employee time to do this, that’s close to another £1,000 all in.

So you have a book that’s great, you’ve launched the book well, now what?

Well, the short version is, once you are happy with everything from your X input, you see where you are.

So in my case I’ve invested £3,000 of cash.

How many sales does this book make per day/week/month/year?

Currently, for this specific example it’s around 4/day, so pretty low. When you account for the fact that royalties are only around £2.5 per sale, that’s only £10/day profit.

Was it worth it?

Well, in short, it depends on 3 things;

1.) Asset value increase - what’s the added enterprise value based on this increase of £10/day?

2.) Sustainability of cash flow - will this £10/day stay forever? Will it increase? Decrease? Etc.

3.) Goals & your cash to cash flow timeline goals.

Answering all these:

1.) The increase in asset value is based on where you already are, but adding £300/month net profit to a business, is probably worth about 30x that amount, so 300x30 = £9,000 (about a 3X ROI on our initial £3k outlay).

2.) Next, sustainability of cash flow - will this £10/day stay forever? Generally once a product is set-up and natural organic sales come in, it should stick. There’s a chance it will increase or decrease over time naturally, esp if we look to launch in other marketplaces, but on average it tends to be consistent.

3.) Goals/cash flow cycles - Based on £300/month, it’ll take us 10 months to get our money back from this. To some people, this might seem like a long time, but because I’m confident in the process and the answers to part 1 and 2, this is something I’m actually fine with, but it all comes back to your goals.

Imagine you add another 2 zeros to these numbers, what do you end up with.

• Outlay £300,000 on a project.

• Earn £30,000/month profit.

• Have an asset that’s worth £30k x 40 = 1.2M value at the end of it….

Suddenly seems like a way better deal.

That’s where the leverage side of the “X” input comes in, if you can create a process that doesn’t change based on the outcomes, only increases in proportion to the X 10X, 100X inputs. That’s a golden system.