Cash Flow = Creative Freedom

I have friend who is an accountant (and loves it), and a couple of years ago when we used to work together we would always get into some light hearted banter on which of our job roles were more important within the company.

He always started the argument with the complaints on how much my department (marketing) spends and how we always spend our days on the phone, going out to customer lunches or receiving supplier gifts, while he, the hard working accountant, sat at his desk all day and did not get any recognition from any customers or suppliers.

He was adamant that his job function of overseeing the budgets, paying bills and balancing the books was the heart of the company while I always argued back that without marketing the company would not make any sales and thus would not have any money regardless!

It’s not until years later, when I am now sitting at the head of my own small business that I realised that he has a point. A very strong point actually. It’s cliche but ‘numbers really don’t lie’. You either have made money on a cake or you have not. You either have money in the bank or you don’t. There is no in between. And I have learnt quickly that if you don’t know or keep an eye on your cash flow you hit some walls pretty quickly.

You pretty much need cash flow to do business – advertise, buy supplies, for petrol…etc If you are not ‘liquid’ enough you suddenly close yourself off to a whole level of potential – extra classes, travel opportunities, new tools/equipment and so on. Basically good cash flow = creative freedom.

From what I have noticed in myself and students in the last couple of years, I can safely say that emotions play a quite a part in effecting our cash flow. Seems weird right? Why emotions?

How many times have we worked out a price for a cake only to reduce it slightly because we ‘felt’ it was too high? How many times have I spoken to students who although they knew it took them days and many hours to complete a cake, they still ‘felt’ that it was not good enough and therefore not ‘worthy’ of charging what they need to charge? How many times have we thought that it’s ok to give away a free cake in order to get some ‘future’ business and because we felt ‘guilty’ about charging for something we loved doing? And not to mention the number of times I hear my students say that they just can’t bring themselves to charge that much.

This is not another post about pricing and customers but rather about personally overcoming our own emotional/ metal obstacles inside ourselves. Sometimes, the problem does not lie with the customer. They truly don’t understand the amount of work that goes into designer cakes because they don’t make them. I don’t blame them, I don’t make movies, so I would not understand how long the filming and editing process would take. Therefore, I think we have the responsibilities as cake designers to not only educate the market but also to be confident with our work and to believe we are worth it.

I met a student a couple of weeks ago who was an accountant and when she was asked to price her cake, she worked it all out and then said to me that she was a bit unsure because her price seem a bit high but there was no way she would/could do it for less than that based on all the variables she had costed in. While the other students were feeling a bit uneasy about having to charge ‘so much’ (in their opinion) and were giving me prices about half that amount. I think we can all learn something from the accountant student of mine – work out the numbers and you will see the truth and know your ‘bottom line’.

Some days I think back to my corporate life and how my accountant friend would always ask me ‘we’re not even making any money on that product, why are we advertising it and spending money on it? In fact we are now making a loss!’. Well, the reasoning from our department was so that we can get more customers to try our products, perhaps sell them on to other things and gain awareness of our brand… sound familiar?

In the earlier days, I would take any opportunity to provide free products to companies and people reasoning to myself that it was free publicity so why not? I would basically, spend hours and weeks baking and decorating only to realise that the products I was giving away was not what I wanted to specialise in and did not lead to a huge increase in sales.

I’m sure this strategy would work if I was moving an every day product (ie. a chocolate bar) but here I am trying to sell designer hand made cakes to anyone and everyone. So all this time I have spent costs the business money, and in certain circumstances, (looking at it from an accountant’s point of view) I would have been better spending a fixed amount on a targeted advertising campaign and spend the rest of the time doing something else. I would have been far less exhausted and got a lot more done.

Maybe we can all take a page out of an accountant’s book once in awhile – my accountant friend would be so proud 🙂

11 thoughts on “Cash Flow = Creative Freedom

  1. I love this post! I struggle with this a lot of the time, so it’s nice to know I’m not alone. Been at this awhile now (the business thing) I boy do I know it’s all in the numbers 🙂

  2. This make great sense to me. I would price my cakes low so as not to scare of potential clients, but as I became faster, did training (very expensive) and increased the tools I use I have found a confidence in pricing. Even so, many times I find myself spending many too many hours working over a cake, and although it looks terrific and the client is happy I have still undercharged (at least not by so much now though). Thanks for addressing this, I love caking but also want a viable business xx

  3. I’m an accountant thinking about going to start my own business, but it’s a scary game.

    Sharon give yourself more credit, I think your work is more than worth it! you create amazing things!!!

  4. This is one of the most brilliant things I’ve ever read on this subject. I’ve tried to explain this basic fact of business to people and never had the right words. I’m a numbers person, myself. I have always loved math because it’s so gorgeously dependable. 2+2 always = 4. There no arguing about it – no discussion, like, “Are you quite sure? 4 just doesn’t seem right to me”. Thank you for your spot on insight and lovely way of expressing it.

    1. You are welcome! To be honest I am not a numbers person, but since starting the business I’ve had to learn pretty quick, because like you said 2+2 = 4 and there is no ‘are you sure?’ about it 🙂

  5. Hi Sharon,
    I love this post. I am a full-time Maths teacher and when I started to realise that I was paying myself a lower hourly rate than most of my students earn at their part-time jobs, I decided I needed to increase my prices again! I now don’t feel guilty AT ALL about my quotes.

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