Managing Cashflow

When you watch a video on YouTube, you sometimes realize that your computer connection is too inconsistent for streaming video; a few seconds in, the video suddenly stops, and you get a little loading symbol. The solution to this, as everyone knows, is to pause the video for a bit, while the “loading” bar gets ahead of you. You don’t have to let it load the entire video before you start; you just have to let it get far enough ahead of you that when the internet suddenly slows to zero, you still have enough video loaded in buffer to carry you through until the internet picks back up again.

When you listen to music online, through Pandora or your favorite radio station’s website, the program automatically does the same thing. In fact, that’s what takes up most of the time while you wait for Pandora to start: it’s getting enough of the song loaded in buffer that you can listen to your music uninterrupted.

Most electronic devices these days have a capacitor built in, so that if the power coming from the outlet drops suddenly, the computer/stereo/whatever isn’t harmed.

It Averages Out

What all of these have in common is that the stream is on average powerful enough to run whatever it’s supposed to do. If your internet connection is slower than the video, you do have to wait for the whole video to load; if you’re in the middle of a brown-out, the electricity coming from you wall won’t power the computer at all. But usually the problem is just how much is coming at any given time; you have peaks and dips, but they even out to enough to do what you want it to.

So you make a little “pool” — the electricity goes into the pool, and you pull your electricity from the pool rather than directly from the wall. When the quantity of electricity drops, the level of the pool drops, but the amount of electricity you pull from the pool can stay the same. When you get a power surge it puts extra electricity in the pool, but the amount of electricity you pull from the pool can stay the same.

How Capacitors and Buffers Apply to Business

If you’re going to self-monetize through non-employment, you’ll have to handle the one disadvantage that all other methods of monetization share: the money doesn’t come in nice, even, equal amounts on a regular basis. You’ll have months when you get only $100, and months when you get $5,000. So you need to be prepared to deal with this.

Step 1: Make yourself a buffer
The solution that works really well for other situations like this, as we’ve seen, is to make a “pool”. Maybe a savings account, or keep your checking account at a certain level, or whatever works for you. But you need to put the income from your business into this pool, and pull your paycheck from the business out of this pool, at the same amount each month.

Step 2: Make sure your averages are OK.
This is hard to do before you set up your business, but keep an eye on how much you seem to be getting in. If your monthly expenses are higher than your average income, then you’re in the same situation as the video on a slow internet connection: you may seem OK for a while, but there will come a point when you just stop dead. So be prepared to be flexible on your expenses, until you have a good idea of what your average will come out to be.