In Year 1 the model shows a $7,712 profit but −$32,038 operating cash flow. The difference? The business spent ~$41,000 building inventory. Profit and cash are not the same thing.
The three cash buckets
- Operating — cash from actually running the business (net income, adjusted for non-cash items and changes in inventory/receivables).
- Investing — buying long-term assets (here, ~$6,000 of testing bench & shelving).
- Financing — money in/out from loans and owners (the $75,000 loan proceeds, then principal repayments).
| Year 1 cash flow | |
| Net income | $7,712 |
| + Depreciation | $1,200 |
| − Increase in inventory | ($40,950) |
| Operating cash flow | ($32,038) |
| Investing (build-out) | ($6,000) |
| Financing (loan − repay) | $71,198 |
| Net change in cash | $33,160 |
Inventory turn: the cash lever
Inventory turn = how many times a year you sell through your average stock. Higher turn = the same sales tie up less cash. The model assumes a conservative 4.0x. Slide to see how much cash your inventory ties up at different turn rates (at Year-1 COGS of $163,800).
$0avg inventory (cash tied up)
$0cash freed vs 4.0×
Average inventory = annual COGS ÷ turns. Consumer-electronics resellers often run 6–12× — every extra turn releases cash you can redeploy into more inventory instead of borrowing.
How to stay cash-positive while growing
- Turn inventory faster — test/list/ship quickly; don't let stock sit.
- Lean on consignment — the "Sell Yours" channel earns fees with no inventory cash outlay, which is why it drives margin later.
- Match financing to the ramp — the interest-only period exists precisely to bridge this Year-1 cash dip.
- Keep a cushion — working-capital reserve (15% of the loan here) covers the gap between buying stock and selling it.
Figures from the FactorDrones pro-forma cash flow statement (indirect method). Turn-rate benchmarks per consumer-electronics resale references cited in the plan. Educational only.
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