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Profit vs.

Cash Flow:

What’s the Difference—and

Who Cares?

any participants in our workshops are surprised to learn
M that instant profits and rapid growth aren’t always cause
for celebration. I tell them the story of The Wonder Widget
Company.
The startup company launched with $100,000 in cash and
the hottest product in its market, the amazing Wonder Widget.
The owners had sales and profits from the first month they had
a product to sell! All they had to do was make the product and
ship it to waiting customers who would pay enough to give
Wonder Widget handsome margins from day 1. And so they
leased and outfitted a factory (no cash outlay initially), leased
the production equipment and furnishings (still no initial cash
outlay), bought the materials, hired the workers, made the
product, and shipped it. They then mailed invoices totaling
$50,000 to customers in their first month of sales. Amazing!
They paid their bills as they came due and collected from
customers in the normal course of doing business. Their cus-
tomers were sometimes a bit slow, of course, but nothing out of

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