4 ms·

I've got one. Entrepreneurs need to understand the difference between capital growth and cashflow.

• csbrooks 12y ago
  Can you elaborate? Or post a good link? I'm guessing the issue isn't "what is the difference" but "why does it matter, and when do they get confused with each other"?
  • greenyoda 12y ago
    Cash flow is what it sounds like: the money flowing into and out of your business. Your company could have a million non-paying users (with the number doubling each month) and a market value of a billion dollars, but if you don't have enough money in your corporate checking account to pay your salaries, rent, web hosting and other expenses, your company is dead.
  • aaron987 12y ago
    Pretty much what greenyoda said. Capital growth refers to the value of the company itself, while cashflow relates to the day-to-day income and expenses needed to run the company. They aren't necessarily correlated with each other. For example, a niche website can provide a lot of cashflow by selling an e-book or something, but it has limited potential for capital growth. There are only so many people who will buy your e-book, and there is a very low barrier to entry. On the other hand, a biotech startup has massive potential for capital growth if they found the cure for HIV or something. But until they get FDA approval, they won't have much if any income. Investors might give the company a high valuation because of its long term potential, but it's not the best choice of business if you want a quick income.