How much cash does the business actually generate?
The cash left after running the business and investing in it. It is what is genuinely available to pay the owners, repay debt or fund growth, and it can look very different from profit.
Get a finance reviewOperating cash flow − Capital expenditure
Healthy service businesses typically convert 70% to 100% of operating profit into free cash flow. Consistently lower conversion needs explaining.
Cash generated from operations, after tax and changes in working capital, less spending on equipment, software development and other capital investment. It is measured over a period, usually monthly and annually.
Profit is an accounting measure; free cash flow is what arrives in the bank. The gap between them comes from timing, stock, unpaid invoices and investment. Investors and buyers often value businesses on free cash flow for exactly this reason. For an owner, it answers the practical question of how much can be taken out, or reinvested, without putting the business under strain.
Reconcile it to profit each quarter so you understand what explains the difference. Separate one-off investments from recurring ones, as a single large purchase can make one year look weak. Include owner drawings or dividends as a use of free cash flow, not as an operating cost, so you can see whether the business could sustain them.
Most owner-managed businesses don't, or they work it out in a way that flatters the result. We'll calculate it from your own numbers and show you what it's telling you.
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