I recently attended the National Entrepreneurs Convention, where Nigel Botterill gave an excellent session that hit home—even for me, an accountant who ‘knows’ this stuff. We’ve all heard the saying, ‘Turnover is vanity, profit is sanity,’ but Nigel took it a step further: both are vanity metrics. The real measures of success are free cash and equity. Hearing it put this way really made me think about how we communicate financial performance to business owners.

Revenue and Profit Aren’t the Full Picture

As an accountant, I spend a lot of time talking to clients about revenue and profit. And while both are important, Nigel made a great point: neither revenue nor profit can be used to pay the bills or grow your business. It’s free cash that actually drives your business forward.

Free cash is what’s left after all your expenses, VAT, taxes, loans, and other commitments have been paid. It’s the money that’s genuinely available to reinvest in your business—or, better yet, to pay yourself. This is something I often talk to clients about, but hearing it from Nigel, phrased in such a straightforward way, was a great reminder of its importance.

Tracking Free Cash: A Fresh Perspective

Nigel’s explanation of free cash was spot on. Even businesses with strong revenue growth and profits can find themselves short of cash if they’re not keeping a close eye on where that money is going. That’s where a good cash flow statement comes in. I talk to clients all the time about cash flow forecasts and statements, but it was refreshing to hear Nigel emphasise just how crucial these tools are.

At Jon Davies Accountants, we’ve always been big on cash flow management, but Nigel’s session reminded me how small the margin for error can be. It’s one thing to see healthy revenue and profit on a profit and loss statement, but if that cash is tied up in VAT, taxes, or loan repayments, it’s not really free cash. That small sliver of free cash is what keeps your business moving forward and lets you sleep better at night.

Equity: The Real Measure of Long-Term Health

The other key takeaway was about equity. As accountants, we’re all familiar with the concept of equity, but Nigel framed it in a way that made it feel even more tangible. Equity isn’t just a number on a balance sheet; it’s the true value of what you own in the business after liabilities are accounted for.

For business owners, tracking equity growth is essential. It’s not just about building value in the business—it’s about seeing measurable progress over time. Nigel’s phrase, ‘measurable progress in reasonable time,’ really stuck with me. Whether it’s for my business or my clients’ businesses, equity is a key indicator of long-term health.

The Importance of Cash and Equity for Business Owners

This session reaffirmed something I’ve always known but was great to hear in a new way: cash is king. Free cash is what enables you to grow your business, and equity is what reflects the real value you’re building over time. If you’re not already keeping a close eye on these metrics, it’s time to start.

It was a great reminder to bring these discussions to the forefront with my clients. If you need help understanding your cash flow or equity position, feel free to get in touch. As always, I’m here to help you make sense of your numbers and grow your business in a sustainable way.

I’ve been a member of Entrepreneurs Circle since 2012, running the monthly Liverpool meetings. Nigel Botterill, the founder, has been mentoring me in his Mastermind groups since 2016, and the National Entrepreneurs Convention never fails to deliver. If you haven’t attended yet, I highly recommend it for next year!