RE:CEO, Martin Cronin
be careful in what is meant by being cash flow positive and being profitable they are not the same thing!!! It is really good to be in this position and let's say have free cash flow but again while they are hand and glove and related they are separate. good luck all. What is the difference between profitable and cash flow positive? https://www.quora.com/How-can-I-sell-some-of-my-equity-in-a-company-without-publicly-posting-information-about-our-business 10 Answers Michael Wolfe Michael Wolfe, Founder & Entrepreneur -- Gladly, Vontu, Kana, I/PRO Updated Feb 29, 2012 Upvoted by David S. Rose, Managing Partner, Rose Tech Ventures; CEO, Gust and Marc Bodnick, Helped raise Quora's Series B & C rounds Let's say that I sell you a magazine subscription for $24: $2 per issue for 12 months. You write me a check for $24. I just got $24 in cash flow. But I have not delivered the magazines to you yet. Am I really guaranteed to get that $24? What if you cancel your subscription and I owe you the balance? What if I discontinue that magazine? What if I go out of business and owe my customers refunds? It is more accurate for me to book $2 a month in revenue as I deliver the magazines to you. This more accurately models the economics of the transaction. Or let's say I buy a computer from Dell, and they take 60 days to send it to me. They take $1000 off of my Visa and put it into the bank on day one [ba*tards] (sic) but don't give me my computer until 30 days later. Should they recognize that $1000? (Great article on how Dell could be cash flow positive even when they are not profitable: https://abovethecrowd.com/2001/06...) Or let's say that you are a sales rep, and I pay you $30K per quarter in commissions. And I can guess on average how much I'm going to need to pay each of my reps based on historical averages. Is it accurate for me to tell my stockholders that I had $0 in commission expenses for two months and then $30K in the third month, or is it more accurate to say that my commission expenses are $10K per month, even though two months of the quarter no cash goes out the door? Let's say you and I are software CEOs each having trouble making our quarter. I tell you, I'll buy your product for $1M if you buy my product for $1M. On a cash flow basis, this event was worth $0, but should I book that $1M in revenue? GAAP (Generally Accepted Accounting Principles) (https://en.wikipedia.org/wiki/Gen...) was put into place post-Great Depression...like many regulations coming out of the era it was designed to 1) "protect" investors from companies by making sure they received accurate information and 2) ensure standardization. Some of them may not make sense to you (you may not even agree with the above), however they are consistent across companies and industries and even countries.