How to Build a Business Fortress: Liquidity, Cash Flow, and Exit Readiness with David Barnett Build a Business Fortress: Why Liquidity Beats Leverage and Most Businesses Never Sell Most owners assume the big payoff will come when they finally sell the business. The hard truth is that roughly 80 percent of small businesses listed for sale never actually sell as going concerns. The real payoff is in the years of ownership: the cash flow you extract, the wealth you build outside the business,...
How to Build a Business Fortress: Liquidity, Cash Flow, and Exit Readiness with David Barnett
Build a Business Fortress: Why Liquidity Beats Leverage and Most Businesses Never Sell
Most owners assume the big payoff will come when they finally sell the business. The hard truth is that roughly 80 percent of small businesses listed for sale never actually sell as going concerns. The real payoff is in the years of ownership: the cash flow you extract, the wealth you build outside the business, and the resilience you create so you can survive the next punch in the face. In this episode of Profit Answer Man, David Barnett, author of The Business Fortress, joins me to talk about how to make your company stronger, safer, and more valuable long before you ever talk to a buyer.
In This Episode, You'll Learn:
- Cash Flow Problems Are Symptoms, Not Causes. Owners often shout "I have a cash flow problem" and immediately reach for more sales or more debt. David reminds us that cash flow pain is usually a symptom of a broken model: mispriced services, hidden payroll costs, or not truly knowing what it costs to deliver your product. A missing 4–5 percent in labor burden or benefits can wipe out half your planned profit before you even notice.
- Liquidity Is More Powerful Than Leverage. Everyone celebrates "other people's money." David flips the script: leverage depends on someone else's lending decision; liquidity is under your control. Lines of credit can be cut, termed out, or called just when you need them most. A healthy cash reserve inside your business lets you ride out downturns and seize opportunities when competitors stumble.
- Growth Can Quietly Crush Your Cash. On paper, growth looks amazing. In reality, fast growth often demands a massive "investment in accounts receivable." You hire staff, buy equipment, and deliver work long before you get paid. Without a plan for the cash gap, owners end up borrowing heavily just to float receivables, which weakens the balance sheet and increases risk.
- The Real Risk: Will Cash Flow Continue After You Leave? Buyers ask two questions: "What is the cash flow?" and "Will this cash flow continue after I become the owner?" The second question determines whether they do the deal at all and what terms they demand. If all the goodwill lives in you as the owner, or in a few concentrated customers, the risk to the buyer skyrockets and the value of the business drops.
- Most Businesses Never Actually Sell. David shares a sobering statistic: about 80 percent of businesses listed on the big marketplaces never sell as operating companies. Some equipment may get sold off, but the business itself doesn't transfer. That's why he urges owners to build wealth both inside and outside the business, treat the company as a cash-flowing asset, and have a plan B that does not depend on a big exit check.
Key Takeaway:
Treat your business like a fortress you're slowly building over time: strengthen cash flow, build liquidity, reduce dependence on debt, and design the company so cash flow continues even after you step away.
Bio:
Barnett loves to say that it took him 10 years to un-learn what he was taught in business school. University had trained him to be a middle-manager in big enterprises, he was totally unprepared for the realities of small business.
After a career in advertising sales, Barnett started several businesses including a commercial debt brokerage house. Helping to finance small and medium sized businesses led to the field of business brokerage. Over several years, Barnett sold dozens of businesses for others while also managing his own portfolio of income properties and starting his career as a local private investor.
Barnett regularly consults with professionals and banks on business and asset values. Presently he also works with entrepreneurs and would-be entrepreneurs around the world who are buying, selling or trying to improve their businesses.
Links:
Blog: www.DavidCBarnett.com
LinkedIn: http://ca.linkedin.com/in/davidbarnettmoncton
Facebook: https://www.facebook.com/DBarnettMoncton/
YouTube: https://www.SmallBusinessAndDealMakingPodcast.com
Soundcloud: https://soundcloud.com/dbarnettmoncton
Instagram: https://www.instagram.com/dbarnettmoncton/
Twitter: https://twitter.com/DBarnettMoncton
Email List Signup: https://www.DavidCBarnettList.com
Conclusion:
Building a Business Fortress isn't about chasing bigger numbers or hoping for a heroic exit someday. It's about creating a company that produces steady cash flow, protects you when the economy tightens, and gives you real options for the future. As David Barnett reminds us, the real payoff is in the years you own the business—not in a sale that may or may not happen. When you prioritize liquidity, understand your true costs, reduce dependence on debt, and build wealth outside the business, you create a fortress that can withstand storms and deliver lasting freedom. The question isn't whether your business will sell someday—it's whether it's strong enough to support the life you want today.
#ProfitAnswerMan #BusinessFortress #CashFlow #SmallBusinessFinance #Liquidity #ExitPlanning #BusinessSale #Entrepreneurship #BusinessOwner #FinancialFreedom
Watch the full episode on YouTube: https://www.youtube.com/@profitanswerman
Sign up to be notified when the next cohort of the Profit First Experience Course is available!
Free Copy of the Profit Blueprint Book: https://lp.profitcomesfirst.com/landing-page-page
Monthly Newsletter signup: https://lp.profitcomesfirst.com/newsletter-signup
Relay Bank (affiliate link): https://relayfi.com/?referralcode=profitcomesfirst
Profit Answer Man Facebook group: https://www.facebook.com/groups/profitanswerman/
My podcast about living a richer more meaningful life: http://richersoul.com/
Music provided by Junan from Junan Podcast
Any financial advice is for educational purposes only and you should consult with an expert for your specific needs.
