Welcome back to this series. I’m writing about cash flow and net worth. Article 1 was two weeks ago. If you missed it, you can read it here. In that first article, I dove into my personal finance journey and how it has shifted over the last year.
When I started learning about money, my focus was on building long-term net worth. I was playing the traditional path: work hard, invest consistently, grow your portfolio, and eventually reach financial independence. But this past year, my short-term goal has shifted. Now, I’m focused on acquiring more cash-flowing businesses. In the previous article, I mentioned that both cash flow and net worth matter, but their importance can change depending on the season of life you’re in. And in the season I’m in right now, my priority is buying back time. To maintain our investing goals and our lifestyle while working fewer clinical shifts, I need to increase cash flow in other ways.
So in this article, I want to zoom in on cash flow and answer a few questions:
What is cash flow, really?
What counts as “good” cash flow?
How do I evaluate cash-flowing businesses to see if they’re worth it?
And what else am I looking for beyond just monthly profit?
What is Cash Flow
Cash flow is a term most of us are familiar with. It’s the difference between the gross revenue (all the money the business makes) and the business’s operating expenses. If that number is positive, the business is “net positive.” If it’s negative, it’s “net negative.” You’ll hear the term cash flow in regard to businesses, rental properties, and even stocks (cash-flowing assets). But I’ve realized that not all cash flow is the same, and not all cash flow serves the same purpose.
Rental property cash flow can be minimal, maybe $200–$500 per month, but most people aren’t buying single-family rentals purely for the cash flow. They’re playing the long game: mortgage paydown, appreciation, depreciation, and tax savings. Some businesses’ cash flow is negative for a few years, then grows exponentially once debt is paid down, and the company grows. Others generate cash flow immediately but may never become a massive “exit” opportunity.
My laundromat cash flowed from day one, but not in a way that could have changed my life. It was a small amount, so I decided to delay taking profits to reinvest in the business and grow it over time. And I’ve also learned that cash flow isn’t just about how much money a business produces.
Some cash-flowing businesses will complicate your life and act more like another job. If a business is super owner-operator heavy, that’s not passive cash flow, and it won’t simplify your life in the way I’m looking for. Cash flow tells you a lot about a business and how it’s run, but it’s not the whole picture. The number matters, but it’s not life or death in any deal. It’s just one piece of the puzzle.
If you’re in a season like me, trying to buy back your time with cash-flowing businesses or assets, you start to realize something: Cash flow is more than just monthly profit. It actually has jobs.
4 Jobs of Cash Flow
Stability
My priority for wanting cash-flowing assets is to reduce the need and pressure for me to continue working clinically. So cash flow’s first job for me is stability. If I just wanted to work my job until retirement, the long play would be safe and fine. I would continue working clinically, invest in stocks, maximize retirement accounts, and eventually have enough money in my IRA, 401k, and brokerage account to live the rest of my life.
But I don’t want to be tied to clinical work as much. I’m the primary breadwinner of my family, and I don’t want to compromise our financial future by cutting back too early. That’s where cash flow steps in. Cash flow creates stability in a different way. It prevents me from feeling trapped in a job. It gives me flexibility to work less, travel more, or work more and invest more. It gives me options. I’m not taking any cash flow from my laundromat yet, but knowing it’s making money gave me confidence when I left my full-time job last October. Stability matters to me because my life is chaos: raising three kids, homeschooling, traveling, owning a business, and still working 6–10 days a month.
Optionality
Right after stability, cash flow’s second job for me is optionality. I want the option to say no to certain opportunities, certain job offers, certain business ventures, certain shifts. I don’t want the feeling of “I need money now,” or the pressure that if I don’t do this or buy this, I’ll be in a rough spot.
Optionality is the difference between needing to work and wanting to work. It’s also the difference between chasing every deal that looks good on paper versus walking away from something that would drain my time and attention. Optionality means I can turn down a deal that “works” financially but uses too much bandwidth.
Optionality also means I can take a month off with my family to travel and make memories. As I’m growing financially, I’m realizing that being financially “successful” isn’t just earning more money. It’s protecting your time and energy, and keeping space for what matters most.
Margin
In business, cash flow’s job is margin. For me, this is two-fold. When I bought the laundromat, the cash flow margin was thin. I knew it had potential to be optimized, and the goal was to grow it. I wasn’t buying it to be a home run deal from the jump.
But I did want to make sure I wasn’t buying a problem. I knew I would need to put money into the business, but I needed it to be self-sustaining. I didn’t want to fund it for months or years. I wasn’t trying to buy a long-term negative deal. I was trying to build cash flow.
Margin is your breathing room. A thin margin means the business is fragile.
What about a big repair? What about seasonality? What about unexpected expenses? What if revenue dips for a month or two?
This is an important job of cash flow for me because I’m trying to create time freedom, not create another stressor that forces me to work extra shifts just to keep the business afloat.
Scale
The longer-term job of cash flow for me is scale. For me to quit working clinically, I would need a cash-flowing asset (or multiple assets) producing around $8,000–$9,000 per month.
Small cash flow, like one rental property or a thin deal, won’t replace my shifts or buy real freedom in the short term. That route might build net worth over time, but it doesn’t solve the problem I’m trying to solve right now. My goal is to stack multiple businesses that generate meaningful monthly cash flow, keep scaling cash-flowing assets, and continue buying time freedom, reducing shifts and mental load. Small cash flow deals won’t work for what I’m trying to do in this season.
How I evaluate cash-flowing businesses
Right now, I’m evaluating multiple cash-flowing businesses every day.
My evaluation process is two-fold. First, thanks to ChatGPT, I have a plug-and-play Excel sheet that allows me to quickly enter the numbers that show up in most business listings. This gives me a quick glance at whether a deal is truly cash flow-positive or not. Here is a copy of a deal analyzer you can do that isn’t specific to laundromats.
Cash Flowing Asset Deal Analyzer
Most of the businesses I’m looking at are laundromats and car washes, and I’ve gotten familiar enough to spot red flags early. For example, I can usually tell based on utility costs whether the revenue numbers make sense. If those numbers are off, it’s a red flag from the jump. It’s also very possible that sellers will overstate cash flow. A business can look “net positive” on paper and still not be real.
After I look at the numbers, I ask different questions than I used to.
How owner-dependent is it?
Do I have to manage people?
Do I have to physically go to the business weekly?
Is the margin safe?
Is the net positive enough to make this worth my time?
Can I delegate management?
How stable is the demand?
Where is the competition?
Will I need to take on debt quickly to retool it?
For me, net positive is not enough. Thin margins are not enough. High margins with high time requirements also aren’t enough. My time, mental space, and energy cost money too. I also have very little interest in managing multiple employees. I recently turned down an opportunity with high cash flow potential, but it also had a high time requirement and a lot of employee management. The attention cost was too high, and I didn’t want to be on the hook if something went wrong. Positive cash flow is not always better.
Seasonality
I’m in the trenches of raising three small kids and trying to be as involved in their lives as possible. Our kids don’t go to daycare. We homeschool them. We want to be influential in their lives and present for the day-to-day.
This is my priority right now. I know my season will shift again in a few years after (hopefully) other cash-flowing business assets enter the equation. Also, to be clear, I am not fully neglecting long-term investing. I still contribute to my Roth IRA and brokerage account most months. That’s what I’ll dive into in Article 3 of this series: why net worth still matters, why boring wealth still matters, and why I don’t want to neglect long-term investing. Cash flow is attractive because it buys things now, but it can also be spent as quickly as it’s made if you’re not careful.
And cash flow alone won’t build anything generational unless it’s paired with a long-term strategy.
Conclusion
To accomplish my goal in this season, I’m focusing on acquiring more cash-flowing businesses over the next 2–3 years. To make that happen, the cash flow has to be reliable, and the attention requirement has to be realistic. I’m focused on cash flow that can do all four jobs I need it to do: stability, optionality, margin, and scale. Because right now, I’m not chasing cash flow for fun. I’m chasing it to buy back time.
Stay tuned next week when I’ll make my defense for net worth and explain why boring wealth still matters. Long-term investing is still future-protective, and I’m learning to balance cash flow and net worth.
This series is me walking through the process of proving to myself that I’m growing up financially. Hopefully someone is learning something, somewhere.