EBITDA for Dummies: Formula, Margin, Ratio, Calculator & More
“EBITDA” is an abbreviation for “earnings before interest, taxes, depreciation and amortization;” every business owner should be aware of this approach and how to calculate EBITDA.
In business, cash is the name of the game. The fear of your business running out of cash is a real concern, and the stress that comes with that is real as well — especially for business owners who have never planned or monitored their cash flow.
Understanding the warning signs of a potential lack of cash within your business is imperative to solving the problem. There are a few key symptoms to be aware of when monitoring your businesses cash flow.
Running out of cash for your business is a fear of every business owner. There are many reasons why a business may run low on cash, but there also proactive steps you can take to get your business back on the right track. Before implementing any of these tactics, you’ll want to understand how much runway (cash) you have left if things do not improve. This way, you’ll know how long you can sustain your business even if nothing changes.
Your zero cash date is the estimated date that your business will be out of money at your current burn rate. If your business isn’t regularly cash flow positive, it’s important to track this metric. As you continue to do business and become more operationally efficient, your zero cash date should move further out in time.
To track your business’ zero cash date, take the cash you have on hand and compare it to your overall expenses per month. You’ll divide the available cash by your total monthly expenses to determine how many months you have left and when exactly your zero cash date is.
Making sure your business always has enough cash on hand is vital to its success. There are many ways to ensure that your business doesn’t run out of cash.