B2B CFO^®    (877) 4-B2B CFO

In this tough economy, it is important for the business owner to review two critical analytical tools to ensure the success of his/her firm.

Breakeven Analysis

Let’s take a look at how increases and decreases in sales and expenses affect your bottom line.

It is very helpful to breakdown expenses into “fixed” and “variable” categories to better understand how each expense category is affected by an increase/decrease in sales. Fixed expenses are those that remain level/constant regardless of the sales level. Variable expenses are those that will go up or down in relation to a change in sales. Some expenses have both fixed and variable aspects to them.

Examples of “fixed” expenses are rent (not tied to a percentage of sales), telephone, depreciation, most utilities and administrative salaries. Examples of “variable” expenses are sales commissions (tied solely to a percentage of sales), cost of goods sold, shipping expenses and supplies. Examples of expenses that have both fixed and variable aspects to them include rent (which may have a fixed portion and a portion based on a percentage of sales, license/franchise fees, sales commissions (commissions paid once sales reach a certain level) and insurance (premium based on sales).

Sales                                                    $1,000,000

Variable Expenses                                 $   750,000  75% of sales

Profit left over to offset fixed expense       $   250,000

Fixed Expenses                                     $   200,000

Profit                                                     $     50,000

Break-even point of company is $800,000 in sales:

   Sales                                                 $   800,000

   Less: Variable Exp ($800,000 x .75)     $   600,000

   Profit left over to offset fixed expense    $   200,000

   Fixed Expenses                                  $   200,000

   Profit                                                  $        0

Current sales of $1,000,000 are $200,000 above the break-even point. This is commonly known as the margin of safety.  You have the comfort of knowing that sales could decline 20% ($200,000) and your company would still be above break-even. Reducing fixed expense, brings down the break-even level. In the example, if fixed expense is reduced by just $25,000, it drops the break-even point to $700,000, thus raising the margin of safety by $100,000.

What happens if sales increase to           $1,200,000

Variable Expenses ($1,200,000 x .75)      $   900,000

Profit left over to offset fixed expense       $   300,000

Fixed Expenses                                     $   200,000

Profit                                                     $   100,000

So, in this example, an extra $50,000 in profit is generated from a $200,000 (20% increase) increase in sales. Sounds good, but you must also consider whether you can afford the increase in sales….what is the effect on A/R, Inventory, A/P, machinery & equipment, etc. Do you have the capital/cash or access to the capital/cash to finance the sales growth?

Cash Flow Analysis

Comparative balance sheet data show the change that has taken place in a company’s working capital position. Analysis of comparative balance sheet data together with a review of activities of the period will reveal the sources and the uses of working capital.

Examples of sources of cash:

• Owners make additional cash deposit/investment
• Bank or other financing
• Decrease accounts receivable
• Decrease inventory
• Increase accounts payable
• Net profits

Examples of uses of cash:

• Pay down debt
• Decrease accounts payable
• Increase inventory
• Increase accounts receivable
• Purchase machinery & equipment
• Net Loss

       Effect on Cash

12/31/10            12/31/09            Increase           Decrease

Cash                                         $  75,000           $  70,000           $   

Notes Receivable                             5,000                5,000                   0                      0

Accounts Receivable                      80,000              83,000               3,000

Inventory                                       60,000              71,000              11,000

Machinery & Equipment                 83,000              44,000                                  $    39,000

     Total                                    $ 303,000          $ 273,000

Notes Payable                           $  58,000           $  39,000               19,000

Accounts Payable                          15,000              25,000                                         10,000

Owner’s Equity                              80,000              30,000              50,000

Retained Earnings                        150,000             179,000                                          29,000

     Total                                    $ 303,000          $273,000           $  83,000           $     78,000

We called them “surprise” counts because the tellers and branch managers were not supposed to know when we were coming or in theory they would be extra careful with their closings that day.  But, they generally had a pretty good idea around the time of the year we would show up.

One client bank, in a small rural town in southern Indiana, was scheduled by us for the surprise cash count in early fall.  We had a staff of 8 people to cover the branches and the home office.  We loaded up in our cars to drive to the town the evening before, so that we could show up early the following morning, do our surprise cash count audits, and head home.

As we pulled in to the parking lot at one of the two motels in town, imagine our surprise when, there on the neon sign, just below the motel name, it blazed out “Welcome Peat Marwick”.  You see, the secretary had confirmed the motel reservations in the Firm’s name, not in the name of an individual, and given that we were taking 8 rooms, in a small town, with only two motels, we were big customers.  So, we were loudly welcomed and announced to the town.  When we showed up at the branches the next morning, the managers had a pretty good laugh at our expense.  Everyone knew we were coming.  The cash counts were perfect (they usually were).

The point is that if you are going to surprise examine books and accounting records, it must be a surprise, or there is no purpose.  It does not always have to involve the outside auditors.  Good internal auditors, controllers, CFOs, and the like are continually “auditing” the numbers they get from the business departments in their companies.  They always have a skeptical approach, they investigate different areas and departments, and they begin their work unannounced.

In my CFO role for my clients, I examine different sets of numbers “unannounced” periodically.  One month it might be a review of the inventory systems, another the receivable collection efforts, another the purchasing departments.  Most clients have very good internal accounting systems and each component need not be investigated every month.  But, random and surprise analyses go a long way towards making sure the accounting and financial systems are and remain accurate, so the numbers produced are worthwhile for management to use in cash flow analysis and planning.  The fact that someone is going to take a look, periodically, unannounced, causes the staff to stay alert and do good work, all the time.  Ronald Reagan said, in reference to our Russian “ally” at the time, as we were negotiating reductions in nuclear warheads:  “Trust But Verify”.  Same thing goes for financial information.

By the way, the next year, we gave up even trying to get motel rooms in that small town.  We stayed in a nearby city, and booked the rooms on our personal credit cards, in a couple of different hotels.  The surprise worked, but no surprise to us, the cash counts were still clean.  They were a well run bank and a good client.

Are your profits where you want them to be? Has your CFO/Controller/CPA helped you to really understand what is driving your company profits or losses? 

 Does your Controller or CFO spend most of his/her time fighting fires, closing the books,  processing transactions, managing HR issues and performing other non-value added services?  Is he/she overwhelmed?

 Or,

 Does your CFO/Controller add tremendous value to your company by:

• Clearly identifying the profitability drivers of your business and leading and driving profitability improvement initiatives for each of them?
• Providing on-going financial analysis of operations that identifies where actions are needed to improve profitability?
• Maintaining up-to-date overhead rates so you understand the true cost of making and selling your products and services.
• Providing quoting and pricing models so you understand the real P&L and cash affect of winning business and know how to price your products or services to win business?
• Employing techniques like 80/20 to improve your business?
• Leading or playing a key role in your strategic planning process to develop ideas and strategic initiatives to make your company a market leader?
• Creating pro-forma financial projections and in-depth financial analyses of new products/services/opportunities to validate major business decisions?
• Squeezing down working capital and improving the cash position.
• Helping the company increase sales? (Yes, really, the CFO!)

 I help companies with and without CFO’s to improve their profitability and financial management and help their financial staff to be more effective. How much would even a small 1-2% improvement to your bottom line mean to you?

 If your financial staff is not addressing all of these areas, your firm could be more profitable. Please contact me at 608-576-3773 to set up a short meeting to learn more.

CASH. WE HELP YOU GET IT.™        WHO IS YOUR CFO?

You would think that a cash flow statement would be an easy read since you are dealing with real money and there are no estimates in the numbers.  Yet, many managers find this statement difficult to understand.   One reason is that the statement is divided into categories and these categories may take a while to understand and the labels used on the categories can be confusing.    Another reason is that it can be difficult to see the relationship between the cash flow statement and the other financial statements.

The cash flow statement’s purpose is to show the cash moving into a business, termed  inflows, and the cash moving out of the business, termed outflows.    The statement is divided into three main categories.

Cash From or Used in Operating Activities

You may also see this category listed as “Cash Provided by or used for Operating Activities”.   No matter what the exact language may be, the category includes all of the cash flow, both in and out, that is related to the actual operations of a business.   It includes the cash received from customers and the cash paid out to vendors, employees for salaries, rents, and any other outflows made to keep the business operating.

Cash From or Used in Investing Activities

Please note that investing  activities used in this statement refer to investments made by the company and not the owners.   The most common example of an item in this category is cash spent on capital investments or long term assets.    If a company purchases machinery which will benefit multiple periods, the cash it pays out will show up in this category.   Conversely, if the company sells assets, the cash it receives will be shown in this category also.

Cash From or Used in Financing Activities

Financing activities refer to a company borrowing or paying back loans or transactions between a company and its shareholders.   If a company receives proceeds from a loan or an equity investment from shareholders, the amounts would be shown in this category.   Conversely, if the company repays a loan or pays dividends to shareholders, the cash paid out would show up here also.

There is a lot of useful information within the cash flow statement.   The Operating category may be the single most important number indicating the health of a business.   The Investing category may indicate how much cash the company is spending on its future or if it is treating the business as a “cash cow”.  The Financing category may indicate how dependent the company is on outside financing if viewed over time.

But how does the cash reconcile with profit?

The cash flow statement starts with net profit for a reason.   Assuming all transactions were done in cash and you exclude depreciation, etc. the profit would be the same as net cash flow.    However, since every transaction is not completed in cash, we then determine which items on the income statement and the balance sheet had the effect of increasing or reducing cash.   For example, let’s take a look at the change in accounts receivable in the current and prior balance sheet dates.   The change in the balance may have increased $50 derived from sales on the income statement of $200 less cash collected of $150.   The $50 difference or change is an adjustment to the profit to derive cash received for the period from operations.

This does involve some work and time invested to understand, so why is it important?   Understanding your company’s cash situation will help you gain insight into what is going on in your business now, where the business may be headed taking into account past trends and future assumptions, and what senior management’s priorities need to be.   You will better understand where your cash is coming from and how to best manage it in the future to attain your goals.   It will generate many questions which need to be addressed and that is but one of the ways a B2B CFO^® can provide value.

At B2B CFO^® we concern ourselves with the client’s success and aspire for them to attain their goals and dreams.

Cash.  We help you get it.

In these tough economic times, in fact in all economic times, small businesses need to take care of their cash.  How do you know that your cash is taken care of?  Do you have internal controls in place to safeguard your cash?

Internal controls are the foundation of all sound businesses practices.  What are some of the internal controls that help safeguard cash?  We can characterize cash controls into the following categories: signature authority, purchasing authority, expense controls, and working capital controls (inventory controls, receivables controls, and payables controls).

Signature Authority

Who has check signing authority in your company?  Is it limited to the owners, principals, or officers of the company?  Is a counter signature required?  Is access to check stock restricted?  Is there a segregation of duties between persons responsible for running, or writing, checks and persons authorized to sign? 

Purchasing Authority

Do you require a purchase order for all purchases?  Not just materials and supplies, but purchase orders for services and outside labor as well?  If you use purchasing cards, do you establish spending limits, as well as sic code restrictions, depending on the cardholder’s position and responsibilities?  To whom have you given purchasing authority and up to what limits?  I was once affiliated with a manufacturer who had given their tooling engineers carte blanche authority to order tools, without a purchase order, via verbal authorizations.  Needless to say, the tooling expenditures were always over budget, both in usage as well as cost.  (By the way – this policy was changed within 30 days of my arrival).

Expense Controls

Do you have a budget for operating and administrative expenses?  Do you track and compare actual expenses to budget?  Does this budget flex the variable expenses (those that are directly, or indirectly, tied to sales volume) to your actual sales volume levels?  In other words, if sales volumes are off 20% do you have mechanisms in place to reduce variable expenses in proportion to the lower sales volume?  Do you monitor actual expenses to budget throughout the month or not until the books are closed?  Are your expenses budgeted by department or by key management person?  Are these people held accountable for the actual versus budget results?

Working Capital Controls

Who’s watching the inventory days on hand?  Do you have a process in place to identify, or better yet prevent, the obsolescence of inventories?  The more inventories you carry the less cash you have available for other uses.  What about your receivables?  Who’s watching the aging?  What are your days sales outstanding?  Are your customers paying to terms?  Are you holding them accountable to your terms?  How about accounts payable?  Are you paying early without a discount (because it’s more convenient for your A/P clerk to “cut checks this way because it’s the way she’s always done it”)?  Are you matching payables terms on raw materials to the receivables terms you get from your major customers who buy the products those materials go into?  For example, if you have a major customer who pays you in 60 days, are you paying your material vendor in 30 days?  Who can afford to carry their largest customer for 30 days or more?

Regardless of the state of the economy, or the state of your particular industry, there is no excuse for not taking care of your cash.  Cash is king in ALL economic cycles.  In a booming economy a healthy cash balance allows your company to make strategic acquisitions or investments when the opportunities arise.  In tougher times, a healthy cash balance provides more options when looking at financing alternatives.  It also might allow you to get through the tough times without having to rely on debt financing.  The foundation of a cash rich company is laid down by sound, strong internal controls such as the ones discussed above.  So, what are you waiting for?  Take care of your cash!

The theme of my Blogs for this year is what I would include in a book about small business finance and accounting. This month is the last of several articles on raising funds for the Small Business.

Remember, Never! Ever! Run Out of Cash, NO MATTER WHAT! But that is often easier said than done, so this month we will continue our discussion on why a good business plan is required to source funds as we look at sourcing outside investment capital. It should be noted that the cost of capital models generally show that equity investments are the most expensive forms of capital. I won’t bore you with the math at this time, but it has to do with a number of factors including the risk premium associated with ownership investment Vs other types of capital investments.

Investors

We will discuss three sources of outside capital. They are used at different stages of the enterprises development. Early investors invest in management. Later stage investors invest in potential synergies, market expansion, processes and systems. All look for the exit strategy and anticipated ROI for the funds invested over the time horizon leading up to that exit.

Accordingly, following are sources of outside financing for various applications and stages of developments:

1)      Angel Investors (Early Stage)

2)      Venture Capital Investors (Development Stage)

3)      Mezzanine Financing and other hybrid financing vehicles (Various Stages)

4)      Private Equity Groups (Later Stages)

Each of these groups has planning horizons and expected returns on investments during that time frame. Again, the business plan must clearly articulate the information they need to initially assess the investment. Part of the goal is to answer the questions they may ask in the document. This is particularly true of the planned exit and timing. Let’s look at these areas separately.

Angel Investors

This is a group that can source funds for early stage development. Typically they fund transactions with capital of up to approximately $1 million.  These early stage investors are looking for companies with potential to significantly increase in value. They look for their seed capital to fuel the initial growth of the company.

Venture Capital

Venture Capitalists typically look to invest $5 million or more. They are medium term investors that look for an exit generally in three to five years.  This could be through a sale, public offering or other exit that yields an acceptable return on their investment.

No Man’s Land

In between Angels and Venture Capital is “No Man’s Land”. Capital needs in this range almost always come from either lenders or internally generated funds. The company needs to grow through this segment to reach the next level of financing. That is where an alternative to pure debt or equity to grow the company can be considered, mezzanine financing.

Mezzanine & other Hybrid Investment Financing

Mezzanine financing may also be referred to as subordinated debt and is used as bridge financing.  Typically it has an interest rate significantly higher than market (often 400 – 600 basis points), warrants for shares at a discounted strike price and/or other debt to equity convertibility features allowing conversion to common shares of stock. Also there may be terms that ratchet ownership in the event of default. The advantage to the lender is that they are ahead of all equity holders in the event of bankruptcy liquidation.

Another hybrid investment is the use of Preferred Stock with convertibility features allowing conversion to common stock. This stock typically, but not always, has no voting rights. Again they are preferred above the rights of the common shareholders in the event of default or bankruptcy liquidation.

Private Equity Groups

Private Equity Groups (PEGs) can be used in a number of way to provide growth capital. They can take out dissident shareholders, create a new platform investment in their portfolio of companies for a particular industry or add to an existing platform investment for a specific industry. They can assist in an Mergers & Acquisitions campaign and can also be used as an exit strategy for the current ownership. Typically these are financial investors focused primarily on investment returns, though occasionally a synergistic valuation may be used for platform additions.   

So regardless of where you plan to source capital, internal, external, debt, or equity, a solid business plan with associated projections is essential to clearly articulate why you need the funds and how they will be used to achieve the goals of the investor/lender, including repayment and return on investment.

Captive Insurance for the Middle Market

By Philip E. Elworth

Every business self insures risk even though they have broad insurance policies in place.  All insurance policies have a list of exclusions from coverage.  If the exclusions are not covered under a separate insurance policy then you are at risk.  In addition, there are many risks in your business that would be very expensive to purchase insurance for even if you could.  These include credit risk, the inability to collect on your accounts receivable or the creditworthiness of your key customers or suppliers.  Certain product liability items are often not covered as well as product or equipment obsolescence or changing market conditions.  Are any of these risks potentially less catastrophic if they occur, than say a fire?

There is a vehicle available that can help business owners cover these risks tax free as well as provide a mechanism for potential estate tax planning, key man retention as well as the safety of having cash assets beyond the reach of creditors.  This vehicle, in its many forms, is called a captive insurance program.  This product has been around for over 100 years but has not been readily available to the middle market until the past decade.  Basically, a captive insurance plan is your own private insurance company but the only company that can file a claim against it is your own.  Premiums accumulate over time and if there are no claims then the cash is yours with more favorable tax treatment then the original premium cost would have allowed for.  You have the ability to transfer up to $1.2 million in premium cost into the captive each year.  This premium is a deduction on the insured’s books and is not taxable income under the captive. 

In order to qualify for a captive, the business should have at least two of the following; taxable income greater than $1.5 million; uninsured risks of $250,000 or more; 100 employees or more; or actual premium costs of $500,000 or greater.  The reason for the requirements is the captive insurance program will cost $40-80,000 to set up and $18-40,000 per year to maintain.  All of this should be more than covered by the tax savings in the first year to make it worthwhile.  Since this cash will leave the business, the premium dollars must not be necessary for ongoing operations for the program to be effective.

Captive insurance plans are complex and should not be entered into lightly, but can be a very effective means of managing risk and ultimately potential vehicles for estate planning, wealth transfer or business exit strategies.

For small businesses and business owners their first reaction is to try to do all things themselves or with a trusted group of employees (some of whom may be family members).  There is a natural reaction to the question of outsourcing which draws the following responses from business owners:

1. Outsourcing is too expensive.
2. How can anyone who is not part of the business know what I know about my operation?
3. I will lose control over the process and must rely on others who have different priorities.
4. How will I know how to choose a particular service for outsourcing?

 Let’s answer each of these questions and I want you to see that in many situations outsourcing can be an excellent solution. 

Outsourcing can be economical in many circumstances.  If the service allows you the opportunity to decide when and how much time you will pay for then the cost of outsourcing can be managed to only those times when the service is needed.  As an example a business can save significant costs by paying for managed IT services (an outsourced help desk) rather than hiring a full-time employee as a network administrator. 

Outsourcing services can often allow the business to focus on their core competencies rather than deal with the complex payroll rules to pay employees on a biweekly basis.  The key here is to outsource those functions that are not core competencies allowing the business owner the time to focus where they have expertise.

While outsourcing does require the owner to relinquish a level of control this issue can be largely mitigated by effectively managing outcomes as you would with any vendor.  The competitive process and investing time to research the best services for your business will go a long way in minimizing the loss of control. 

Choose services on recommendations you trust and leave options in the agreement for you to replace the service if the performance is subpar.  Limit your contact period to one year or less when taking on a new service.  Have a clause that allows cancellation of the contract with a 30 day notice.

Outsourced services can be an asset as shown and keep in mind that an outsourced service will have experiences from a variety of business situations and can be more objective with any advice they impart.

Good examples of outsourced services include: 

Payroll

Human Resources

Marketing

Web Development

Network Support

Bookkeeping

CFO

Finally, there is an excellent blog on this topic by Ed Garay who owns a high successful managed services company in Chandler, AZ Catalyst Computer Technologies.  CCT was the Chandler Small Business of the Year.  He provides an IT solution for small and mid-sized business needing IT support for backup, help desk and network support.  The link to Ed’s blog is shown below:

http://blog.cct247.com/2009/11/16/outsourcing-your-competitive-edge.aspx?ref=rss

Ok, I admit it.  When I heard about the Patient Protection and Affordable Care Act being signed into law and saw that many of the effective dates were far off in the future, I did not do a lot of detailed reading.  Sure I read the summary table in the newspaper, and I thought about sitting in on the dozens of webinars that were offered to me, but for a few months I had more important things to do.  Anyway, the 2600 plus pages of the Act were certain to be explained, clarified and modified by thousands more pages of regulations and interpretations over the next few years, so why don’t I just wait for those?

Well, I finally got around to attending an excellent seminar on the topic, and it succeeded in shaking me out of my denial phase.  I started to focus on the question: “What can small and medium size businesses actually be doing to prepare for the impacts of this Act?”

Here are a few thoughts:

1)  Get help!   You cannot and will not be able to decipher all of the impacts of the law and the subsequent regulations on your own.  With the many different effective dates for the various provisions of the law, there will be a steady stream of content crossing your desk.  Some of it will apply to you and some will not. Some of it you can plan around and some of it will be imposed upon you.   This is an excellent time to make sure that you are being supported by human resource and employee benefits professionals.  Most firms will not have the expertise in house, so they will need to look to either their insurance broker/agent or employment attorney, or in some cases their tax accountant.

Since your attorney and accountant will charge by the hour, you will want to make sure that you are getting as much help as possible from your insurance broker/agent.  If your long time insurance agent also happens to be an old college friend or golf buddy, that is not necessarily a problem.  If that is the only reason they are your insurance agent that most likely is a problem.  Call them today and ask for an update on what you should be doing in light of this new legislation.  See how knowledgeable they are.

2)  Don’t make any major benefit changes without considering the long term implications!  It makes no sense to add a benefit or change eligibility rules without considering the potential long term implications.  You run the risk of adding a feature that you find you can no longer afford or cannot legally offer in the future.   For example, in 2013 the Flexible Spending Account limit will be $2,500.  It would be foolish to increase your limit to $4,000 in 2011, only to have to backtrack in two years.

3) Think systems!  If you are using an in-house payroll system or a package that does not provide regular updates, now is the time to look into other options.  There will be numerous changes that impact tax withholding and reporting.  Unless you have a payroll system that is tightly integrated with your other financial management systems, strongly consider outsourcing the payroll systems function.  There are a number of highly qualified payroll processing companies, (national, regional and local) that will keep track of all of the changes for you.  Most of them can also provide service in other employee related areas:  unemployment claims, COBRA, retirement plans, etc.  This is their business, so chances are they will do it better than you do!

This is also a good time to check into your compliance with 1099 information reporting requirements.  Many companies mistakenly think that these reporting requirements do not apply to them.  Buried in the Act is a provision requiring organizations to issue 1099’s to all providers of goods and services in excess of $600 annually, effective in 2012.  IRS audits of compliance are certain to increase.  Make sure that your accounts payable system gets regular updates so that you will get new versions of 1099 forms as they are modified.

Get started treating your health care headache today!

Helpful Link:  http://www.kff.org/healthreform/8060.cfm

As the economy dips and investors get more nervous, businesses will begin to feel the liquidity pinch. At the same time, companies with strong cash management skills can avoid some of the difficult financial times.

Cash is the lifeblood of the business and, in a down economy, only the most "cash efficient" businesses will survive. However, cash management is not for the faint-hearted. Good cash management requires self discipline to keep a steady course during the roughest of times; and, self confidence to project future cash requirements with the greatest amount of accuracy.

The most critical aspect of cash management is understanding the flow of funds through the business. Starting with the company’s business plan, identifying future revenues and corresponding expenditures, you can determine the timing of each cash flow element in the cash flow cycle.  

13-week Critical Plan

Cash flow budgets should be planned in 13-week intervals. To do this, each source and use of cash should forecasted and budgeted as accurately as possible. The cash flow budget should be reviewed and updated on a weekly basis. This review will allow you to test your cash flow assumptions and make adjustments for unexpected cash flow items. Using the cash flow budget will allow management to be proactive in preparing for the timing of both cash receipts and cash disbursements.

Some of the key elements of the cash flow budget are:

• For accounts receivables, establish procedures to improve:
  1. Average collection periods and aging
  2. Monitor credit quality of the receivables
  3. Improve billing procedures to reduce invoice payments
  4. Enhance the conversion of receivables to cash

• For inventory, establish procedures to improve:
  1. Determine economic forecasted inventory balances
  2. Improve inventory turnover
  3. Turn obsolete inventory into cash
  4. Focus on cash as well as gross profit margins

•   For accounts payable, establish procedures to improve:
  1. Remain less reactive to vendor requirements
  2. Consistently stretch out average payment terms
  3. Obtain discounts when faster payments are made.

The most critical element of a cash flow budget is to recognize that there will be no long-term cash flows without accurate short-term cash flows. Growth requires cash availability to provide for new products or services.  Cash will always be the life-blood of the business and there will be no long-term business if you ignore the short-term cash flow needs.