The serial entrepreneur said; "The one thing I always find is people underestimate the length of time it takes people to pay them; they think if I do the job on day one I'll get the money off them on day 28 - and they underestimate the amount of cash the business will need.
"Entrepreneurs are optimistic and believe everything will work out, but they consistently underestimate cashflow."
"Nobody mentioned cashflow when I started out 22 years ago.
"Even with there being much more awareness of cashflow, people still focus too much on profit. Potentially, this could be a big mistake, especially in your first year of trading. My golden rule is: you can never be complacent about cashflow at any stage of your business, even if you are an experienced entrepreneur. Cash really is king!"
"We work with a lot of start-up businesses and our top piece of advice is that you can’t manage what you don’t measure.
"Many small businesses think that checking their bank account every now and then is enough to manage their cash effectively. It isn’t. To do this properly, you’ll need to create a cashflow forecast and review it regularly. Remember, money in your bank is a lag indicator (an indicator of events that have already taken place). It is leading indicators you need to watch, as these will give you an idea of what is going to happen in the future.
"A good example of a leading indicator is the value of your sales pipeline, when you expect the orders to arrive and what the payment terms are going to be. Predicting your sales pipeline can be difficult, especially if you are dealing with over-optimistic salespeople. However, getting good at this will help you see potential trouble ahead early, so that you can plan to cope with it.
"Also, set yourself cash targets. This is not only important, but can be good fun too. Working hard to accumulate cash in the bank requires discipline and focus, and it often all starts with a simple target. Perhaps it is a specific amount of cash you’d like to reach, or it might be based on a formula, e.g. x months of overheads in the bank. Pick something that works for your business."
Deborah Meaden also feels passionately that young businesses are in desperate need of more than just funding help - they need guidance and mentoring to get them through the first few tricky years.
"It's always been the case that once businesses get through their first year, they've got through the great expectations and the momentum's kept them going; but when it comes to the second year when they're supposed to be delivering on their business plan, and they're supposed to be getting into profit, it's now that they start to come under pressure," she told Huff Post UK.
"For me, it's about making sure that these people are given the absolute best chance possible to make sure their business comes through this extremely vulnerable period."
This is why Meaden is fronting the Local Business Accelerators campaign for the second year running - the competition invites businesses between one and five years old to enter their details for the chance to win £10,000 worth of advertising in the local press, thanks to a partnership with more than 500 local newspapers.
Around 1,500 businesses will receive support and mentoring from local business leaders through the initiative, but the ultimate winner will also receive mentoring from Meaden for a whole year on everything from developing and delivering a business plan, marketing and public relations, distribution and more.
Any business aged between one and five years can enter the LBA competition by visiting www.accelerateme.co.uk – the closing date for entries is 16 November.
To read Deborah Meaden original article, click here