Codie SanchezFounder @ Contrarian Thinking

Cashflow Businesses VS Cashsuck Businesses

13 Mar 2024 · 1 min

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Codie Sanchez explains the difference between two business archetypes: "cash suck" businesses (you provide the service, then you get paid; often infrequent large payments, high client concentration) versus "cash flow" businesses (you get paid first—ideally many small, recurring payments like subscriptions—or productized services delivered repeatedly). She argues cash-flow, repeatable, predictable, diversified businesses are worth more than similarly revenue-sized cash-suck businesses.

Chapters

There are two types of businesses, a cash suck business and a cash flow business. Here's the difference between the two. Cash suck. You provide the service, then you get money. Cash flow get the money then you do the service. You only make money maybe one or two times a year. Cash flow business. Lots of little checks continuously, ideally subscriptions. So you have two big clients. If they leave, you're in trouble. Cash flow business. You have lots of clients which diversifies your risk. You use RFPS and custom products so that every time you deliver a service it looks different. A lot more work for you. Cash flow business to your service is productized so you deliver the same thing again and again and again. This business that does $1 million in revenue and this business that does $1 million in revenue are not worth the same thing. You want cash flow businesses repeatable, predictable, de risked businesses, not cash suck businesses.