The Four Types of Money

Money as Income

This form of money is the province of employeeship. It is the money the employees earn for doing their job. This is crucial, as income retains employees, and employees retain your operations. But you don’t want to be understaffed in peak operations; nor overstaffed in trough operations. The key to managing this right is to plan right. You need to draw a line between your revenues and the growth of your operations. That is to understand what it means to bring in a dollar of revenue and how the operating structure must grow accordingly.

Money as Profit

This form of money is the province of purpose. It is the money the company keeps for doing its job right. To manage profits, you have to be intentional. Accidental profitability is widely mistaken for intentional profitability, and yes you guessed it right, also taken credit for. Besides being intentional, you need to be influential in every aspect of the business, from pricing to material costs to budgeting to staffing to every decision made with a financial impact.

Money as Flow

This form of money is the province of survival. The flow of money is easy to understand but tough to manage, for the same reason: because one minute it’s here; the next minute it's not. The first rule in managing money as flow: you can’t manage your money flow if you look at it once a month. On the inflow side, you need to review your cash flow at least once a week and understand the smallest details related to how revenues are generated, when they are generated, when they are collected, and the seasonality around it. On the outflow side, you need to understand how your costs are associated with your revenues, direct and indirect.

Money as Equity

This form of money is the province of value. If you manage your company’s equity, you manage its long-term value. Equity is driven by flow, and dependable on income and profits. When you’re trying to get investors onboard and demonstrate the value of your business, you will need to show efficiency in operations aligned with growth (income), consistency in (profits), and improvements in (flow). 

The bottom line is: design and train your company to produce income, profits, flow, and equity; or as explained above, produce employeeship, purpose, survival, and value.