Why profitable businesses go bust
Lesson 8 of 13 in our free Business Money Basics guide: a 5-minute money game with the key points below.
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Questions you'll answer
Illustration: Mo starts with £1,500. Each month he pays £1,000 of ingredients plus £800 rent upfront. The cafe pays £2,500 for each month's cakes, 60 days later. How much is Mo SHORT by the end of month 2?
What's the most useful thing Mo can do BEFORE signing the cafe contract?
Quick facts
- Asking for a 50% deposit on big orders → Helps. Cash arrives before the costs pile up.
- Giving a customer 90 days to pay → Hurts. You fund their business for three months.
- Buying six months of packaging upfront for a small discount → Hurts. Cash is stuck in a cupboard as boxes.
- Sending invoices the day the job is done → Helps. The payment clock starts sooner.
- Agreeing 30-day terms with your flour supplier → Helps. You keep the cash a bit longer before paying.
- Forgetting to chase an overdue invoice → Hurts. Late money is money you can't use for bills.