Every business—no matter how big or small—faces four critical constraints that determine success or failure. If you’re running a company that's doing $2M or $200M in revenue, these constraints will either fuel your growth or limit your potential. Over the next four editions of Paper Napkin Wisdom Weekly, we’re going to break down each one and give you practical, actionable guides to navigate them like a pro.
This week, we’re tackling the first and most dangerous constraint: Cash Flow & Profit. If your business is making money but still feels like it’s constantly strapped for cash, you’re not alone. Profit doesn’t just happen—it has to be engineered into every financial decision. That’s why in this guide, we’re diving deep into Alan Miltz’s Seven Levers of Cash Flow, Greg Crabtree’s Four Forces of Cash Flow, and Mike Michalowicz’s Profit First. These three frameworks will give you a clear roadmap to stabilize your cash flow, increase profitability, and take back control of your business finances. Stay tuned—because in the next three issues, we’ll tackle the other major constraints holding businesses back and show you exactly how to break through them.
After tackling Cash Flow & Profit this week, we’ll dive into the three other major constraints that can make or break your business:
🔹 People & Leadership – Is your team aligned, engaged, and driving growth—or are they holding your business back? Learn how to attract, retain, and lead A-players who fuel your vision.
🔹 Sales & Revenue Growth – Are you chasing sales or building a scalable, predictable revenue engine? We’ll break down how to grow profitably without burning out.
🔹 Execution & Systems – Your business is only as strong as the systems that run it. If you feel stuck in the day-to-day, we’ll show you how to optimize operations and scale with confidence.
Stay tuned for the next three Paper Napkin Wisdom Weekly editions—because once you understand and overcome these four constraints, your business becomes unstoppable.
In this week's Paper Napkin Wisdom Weekly:
- Paper Napkin Wisdom Preview
- Understanding Finance: Why Profit Must Be Baked Into Every Plan
- The Power of Educating Your Team on Finances
- The Profit Blueprint - e-book just for friends of Paper Napkin Wisdom
- Week in Review
- What's on Your Dashboard?
Paper Napkin Wisdom Podcast Preview
This is the only place where we give you a sneak peek into what's coming up on Paper Napkin Wisdom. Remember to share this with anyone who needs to hear these messages.
Episode 218: Eldon Sprickerhoff, founder and Chief Innovation Officer at eSentire, reveals how staying calm in a crisis not only protects your business but drives breakthrough innovation. Eldon shares powerful insights on resilience and leadership.
Epsiode 219: Michael Schoenberger, as an experienced executive, high-growth entrepreneur, and strategist, he shares the secrets to driving sustainable success by staying calm and intentional under pressure. Michael shares how great leadership can thrive even in chaos!
Epsiode 220: Andy Fine, a dynamic tech leader and strategic innovator and founder of Sartoro. Andy's proven track record of transforming big ideas into industry-leading solutions. From driving growth to fostering innovation, Andy’s insights will help you elevate your game.
Epsiode 221: Lolly Spindler, a marketing powerhouse and brand strategist who’s redefining content and community building in the digital world. With her expertise in driving engagement and amplifying brand presence, Lolly’s wisdom will inspire leaders to think bigger and act smarter.
Epsiode 222: Rishi Khanna, a business strategist and digital transformation expert who’s redefining how companies scale, optimize operations, and build high-performing remote teams. With his expertise in leveraging technology for sustainable growth, Rishi’s wisdom will challenge entrepreneurs to think strategically and execute with precision.
Epsiode 223: Nicole Donnelly, a marketing innovator and customer experience expert who’s revolutionizing how brands connect, engage, and build lasting relationships. With her deep expertise in content strategy and automation, Nicole’s wisdom will empower entrepreneurs to create authentic, high-impact marketing that drives real results.
Stay connected with Paper Napkin Wisdom on Apple, YouTube, and Spotify to be the first to hear these incredible episodes!
Understanding Finance: Why Profit Must Be Baked Into Every Plan
One of the Biggest Constraints in Business: Capital & Cash Flow
One of the top four constraints in any business is capital and cash flow—and it’s often the one that entrepreneurs struggle with the most. You can have the best product, the best service, or the most innovative idea, but if you don’t have the cash to sustain and grow your business, you’ll eventually hit a wall.
Too many business owners believe profit is whatever’s left over after all the expenses are paid. The problem? If you don’t intentionally bake profit into your financial plans, there’s never anything left over. That’s why you need a strategy for managing cash flow—one that ensures profitability rather than hoping for it.
So, how do we shift the mindset and build businesses that generate sustainable profits? It starts with understanding key financial principles and applying them with intention. Let’s break it down with some powerful frameworks from financial thought leaders and tie it all together with Focus-Align-Act to make it work for your business.
Capital Constraint: Do We Have the Resources to Fix the Problem?
Every business problem comes with a price tag. The question is: do we have the resources to fix it? Entrepreneurs often operate in a reactive financial mode, dealing with cash flow challenges as they arise instead of proactively planning for them. But when capital is constrained, every decision carries more weight.
If capital is one of your primary constraints, ask yourself:
- Will investing in better tools or training improve revenue?
- Are we optimizing existing resources before seeking additional funding?
- How do we ensure that profit is part of the equation from the start?
How Planning Can Help Manage Cash Flow: Alan Miltz’s Seven Levers
Alan Miltz, a financial strategist and co-author of Scaling Up, introduced the seven levers of cash flow—a framework that helps businesses understand and control their financial health. These levers allow you to fine-tune your operations, leading to significant improvements in cash flow and profitability.
The seven levers include:
- Price: Can you increase prices without losing customers?
- Volume: Can you sell more products or services?
- Cost of Goods Sold (COGS): Can you lower costs while maintaining quality?
- Overheads: Can you reduce unnecessary expenses?
- Accounts Receivable Days: Can you collect money faster?
- Accounts Payable Days: Can you extend payment terms with suppliers?
- Inventory Days: Can you reduce inventory without impacting service?
The Power of 1% or 1 Day principle is key here. A 1% change in pricing, costs, or overheads, or a 1-day change in receivables, payables, or inventory can significantly impact cash flow. For example:
- A 1% increase in pricing, if managed correctly, can flow straight to your bottom line.
- Reducing accounts receivable days by even 1 day improves liquidity, reducing reliance on debt.
- Extending accounts payable by 1 day increases working capital without borrowing.
Applying these levers incrementally allows businesses to grow efficiently without hitting capital constraints.
Understanding the Four Forces of Cash Flow from Greg Crabtree
Greg Crabtree, author of Simple Numbers, Straight Talk, Big Profits, teaches that cash flow is driven by four key forces:
- Profitability – The ability to generate consistent revenue beyond expenses.
- Tax Burden – Managing tax obligations to ensure business sustainability.
- Core Capital Target – Maintaining a financial buffer to weather downturns.
- Debt Structure – Understanding how debt affects cash flow and decision-making.
Each force influences the others. If your profitability is too low, you struggle to meet your core capital target. If you take on too much debt, your cash flow becomes strained. Understanding these forces helps businesses make smarter decisions:
- Avoid using all profits for growth—maintain a core capital buffer of two months of operating expenses.
- Keep taxes in mind—profit is meaningless if it’s eaten by unplanned tax burdens.
- Use debt strategically—only take on debt that directly drives revenue growth.
Business owners who grasp these forces stop making reactive financial decisions and start planning for financial health proactively.
The Profit-First Approach: Revenue – Profit = Expenses
Mike Michalowicz, author of Profit First, flips the traditional accounting formula on its head. Instead of the usual Revenue – Expenses = Profit, he proposes a game-changing approach:
Revenue – Profit = Expenses
By taking profit first, you force yourself to operate within what’s left for expenses. It’s a psychological shift that makes profitability a non-negotiable instead of an afterthought. Implementing a profit-first system means:
- Allocating a fixed percentage of revenue to profit before paying expenses.
- Managing operational costs within the remaining budget.
- Creating a sustainable system that ensures consistent profitability.
Michalowicz also introduces the concept of “small plates” for finances—separating money into different accounts (Profit, Owner’s Pay, Tax, and Operating Expenses) to control spending and ensure financial stability.
This method works because it forces discipline. It aligns spending with revenue rather than letting expenses dictate your financial outcomes.
The Power of Educating Your Team on Finances
One of the most overlooked aspects of financial success is educating your team about finances. When employees understand how cash flow, profitability, and expenses impact the business, they make smarter decisions.
Why financial literacy among your team matters:
- Employees become cost-conscious, reducing waste and unnecessary spending.
- Teams align around revenue-generating activities, driving productivity.
- A financially savvy team can spot inefficiencies and suggest improvements.
- Profit-sharing programs can drive engagement when employees understand the numbers.
When your whole team is financially literate, they work with the company’s financial goals rather than against them. It’s not just about increasing revenue—it’s about creating a culture of financial responsibility that fuels long-term growth.
Tying It All Together: Focus-Align-Act
At Paper Napkin Wisdom, we talk about Focus-Align-Act as a fundamental principle for leadership and success. How does this apply to financial strategy?
- FOCUS: Identify your financial constraints—where is your biggest cash flow challenge? Is it pricing, overhead, or accounts receivable?
- ALIGN: Apply frameworks like Miltz’s seven levers, Crabtree’s four forces, or Michalowicz’s profit-first approach to create a financial plan that prioritizes profit.
- ACT: Implement changes, track results, and iterate. Small, consistent adjustments in financial habits compound into long-term success.
If you want to build a financially sustainable business, you must take action. Profit can’t be an afterthought—it has to be baked into every decision, every plan, and every investment you make.
Your Next Step:
Take five minutes today to assess your business:
- Are you proactively managing cash flow, or just reacting?
- Which of the seven levers of cash flow can you improve?
- How can you implement the profit-first formula in your business?
The Profit Blueprint (an e-book) gives you a simple, battle-tested system to take control of your finances—whether in your business or your household. With small, actionable steps and a four week plan, this guide will help you stop running out of money and start building financial freedom. The Profit Blueprint is usually $9.99 but as a Paper Napkin Wisdom subscriber you save 50%. For just $5, you’ll get a clear, step-by-step roadmap to turn profit into a habit, not an accident.
Because the truth is—profit doesn’t just happen. It’s planned. It’s intentional. And it’s the foundation of a thriving business.
Week in review
This week on the Paper Napkin Wisdom podcast, we explored two transformative episodes that tackled impactful themes of leadership, resilience, and harnessing potential.
In Episode 216, Max Zaharenkov, an entrepreneur and business strategist, shares how taking decisive action, simplifying complex processes, and building trust are the keys to unlocking sustainable growth. He emphasizes the power of focusing on what truly moves the needle rather than getting lost in unnecessary complexity. Max also highlights how trust—both within teams and with customers—creates the foundation for long-term success. Whether you're scaling a startup or refining an established business, his insights will challenge you to streamline operations, lead with clarity, and take action with confidence. Listen now on Apple.
In Episode 217, Robin Phillips, a leadership expert and business strategist, reveals how advocacy is a game-changer for growth, influence, and impact. She explains why having the right champions in your corner—both inside and outside your organization—can accelerate success in ways that traditional marketing or networking can’t. Robin dives into how genuine relationships, strategic storytelling, and trust create powerful advocates who amplify your message and open doors to new opportunities. Whether you're leading a team or growing a business, her insights will inspire you to build meaningful connections and harness the power of advocacy to scale your influence. Listen now on Apple.
Check them out here:
