The Personal MBA

Master the Art of Business

A world-class business education in a single volume. Learn the universal principles behind every successful business, then use these ideas to make more money, get more done, and have more fun in your life and work.

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What Is 'Purchasing Power'?

Purchasing Power is the sum total of all liquid assets a business has at its disposal. The more the better, as long as you use that power wisely.

Keeping a track of your Purchasing Power makes running a business easier and less stressful.

Josh Kaufman Explains 'Purchasing Power'

Here’s an old business adage you may have heard: “Cash is king.”

It’s true. You can have millions of dollars in orders on the books, but without cash in the bank, it doesn’t matter. IOUs don’t pay the bills - if you can’t pay your employees or your keep the lights on, you’re done.

Purchasing Power is the sum total of all liquid assets a business has at its disposal. That includes your cash, credit, and any outside financing that's available. More purchasing power is always better, provided you use that power wisely.

Purchasing Power is what you use to pay your Overhead and your suppliers. As long as you continue to pay them, you’re in business. As soon as you run out of purchasing power, you’re finished. Game over.

When operating a business, always track how much Purchasing Power you have left. How much cash do you have in the bank? How much available credit do you have access to? The more purchasing power you have, the better off you are.

Keeping track of your available Purchasing Power makes it much easier to run a business. Instead of constantly worrying about paying the bills, purchasing power gives you room to breathe, secure in the knowledge that you’re not going to suddenly run out of money. That frees up a great deal of mental and emotional energy you can put to better use — figuring out how to improve your business.

Always pay close attention to how much purchasing power you have left — it’s the difference between a business that stays open and a business that fails.

Questions About 'Purchasing Power'


"The job of the entrepreneur is to make sure the company doesn't run out of cash."

Bill Sahlman, professor at Harvard Business School


From Chapter 5:

Finance


https://personalmba.com/purchasing-power/



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The Personal MBA

Master the Art of Business

A world-class business education in a single volume. Learn the universal principles behind every successful business, then use these ideas to make more money, get more done, and have more fun in your life and work.

Buy the book:


About Josh Kaufman

Josh Kaufman is an acclaimed business, learning, and skill acquisition expert. He is the author of two international bestsellers: The Personal MBA and The First 20 Hours. Josh's research and writing have helped millions of people worldwide learn the fundamentals of modern business.

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