Cash Speaks Volumes
- The underlying message communicated by cash, that doesn’t show up in the numbers on the balance sheet or P&L, is that management is above average, more than solid, has vision, strength, lots of engagement by buyers and employees, good ideas. It is quick to take advantage of new opportunities and quick to shut down things that aren’t working. Cash communicates a huge amount of information about the whole company.
- Your company can take advantage of new opportunities without hesitation. You do your due diligence and know that money is not going to be the reason to say yes or no. Taking advantage of new opportunities builds business wealth and owner wealth.
- A lot of money shows bankers and other lenders that you know how to run your business to create cash. Bankers like to do business with companies that know how to create cash, because that ensures that they get paid back.
- Cash is appealing is to business buyers. If you’re thinking about exiting your company after many years, cash will help you sell your business for the highest possible value with the least number of restrictions, limitations, and indemnities. Nothing says “solid business investment” to a buyer like a lot of cash. If you’re the owner of a younger company and you have other ideas you want to pursue, cash will help you sell that company so you can move on to the other ideas, to make even more cash.
Money speaks loudly and favorably.
What if your business is short on cash?
- You’ll find that you hide in a corner, keep your P&L under wraps, and max out credit cards, which is most costly way of financing. Stress is very high.
- No cash forces you to say no to future opportunities. Because you don’t have the money to pursue them, money becomes the deciding factor, not the quality and value of the idea. When your default is to say no, you won’t even know the opportunity cost.
- When you don’t have money, you can’t hire the best people.
- When you don’t have money, you try to do everything yourself. DIY is always expensive, because while you’re an expert in what your company does, you’re not an expert in all the other things companies do to make them strong and successful. Yet you shy away from outside experts because you can’t afford them.
- Lack of cash means you’re struggling with cash flow. You spend too much time managing the timing of your payables and your receivables. Time that you, as the owner, should spend creating and developing relationships with buyers and prospects. Cash flow struggles consume your financial management team as well, taking them away from forecasts and future thinking. Instead of visionary thoughts they’re working to get 10 cents in today so you can pay out 9 cents tomorrow.
You’re Not Alone
During the past 20 years that Trivers Consulting Group has been working with business owners to increase profitable revenue and create owner wealth, we’ve seen too many companies teeter on the edge due to lack of cash. We have been there a time or two as well and now we know how to prevent it from happening again.
“We have lots of revenue, but not profits” one owner told me. No profits means no cash.
“We can’t responsibly commit to work with you, due to our cash situation” said a CEO. He knows that they got themselves into their current situation and need help to get out of it, but lack of cash is keeping them stuck.
“We just don’t know how to price,” one of the partners of another company told me. They are struggling to gain confidence in how they price their offerings. No pricing confidence, no cash. And no cash, no willingness to bring in an outside advisor to help them understand pricing for profit.
Build Your Cash and Your Voice
Every company can create an extreme focus on increasing cash, if they choose. Choice is the key: the owner needs to talk about it constantly, with every manager, employee and advisor. Put anything that doesn’t generate cash or contribute directly to generating cash on the back burner for a bit.
For each sale ask, “How does this sale contribute to cash?” Is it a profitable sale?
For each marketing effort ask, “How does this marketing contribute to cash?” Will it generate profitable sales.
For every networking event, sponsorship, trade show, industry conference and public appearance, ask “How does this contribute to cash?” Will these efforts lead to profitable sales?
These are not rhetorical questions. Ask the questions and make a list of the answers. If there are fewer than 3 answers, don’t do it. If there are fewer than 5 answers, think twice about doing it.
That’s what focus is: only doing and investing in your attention and your specific activities that will move you towards the goal. The goal is cash. Money talks and leads to everything else you want.
If you’re ready to create extreme focus on increasing cash, I am ready to help. We have offerings at various fee levels. Give me a call. 703-801-0345.