When Cash Really is King

If cash is king, is your business a member of the royal family, or a pauper standing outside the castle gates?  Securing, preserving and growing our company’s cash position can neutralize many of today’s economic challenges. As vetrepreneurs we tend to be more acutely aware of our surroundings than other business owners, and although we like to think we’re action-oriented, too often we struggle with analysis-paralysis when uncertain how to proceed. Sound the trumpets and summons your knights (executives) because here are seven ways to get out and stay out of the cash crunch. 

1. Cash may be buried — in your own backyard. Cash has a way of hiding in odd corners of our businesses.  Use a fresh set of eyes to identify extra inventory sitting on your shelves, or pieces of equipment that will never be used, which can be sold to generate real cash dollars.

2. Track and meter cash constantly — so you can monitor the inflow of cash from your customers, and measure the cash outflow to your suppliers.  All top executives must see daily cash reports to track cash, and to develop contingency plans for emergency situations.  Conduct short weekly stand-up (no chairs) Situation Report meetings with those who have direct impact on cash.

3. Fire your check-signer — at least for the short term, and sign all checks yourself until you get through the cash crunch.  Some business owners and CEOs conduct surprise check-signings from time-to-time to reacquaint themselves with their business, but this will really help you get your brain around where cash is going and who is spending it during this critical period.

4. Growth devours cash — so be aware of your rate of growth.  Avoid growing too fast, and determine an appropriate rate of growth for your industry and cash position.

5. Love on your lenders and investors — prior to really needing them.  It is much easier to get help from those who know and respect you, than from strangers who can only judge you by your financial statement. 

6. Buttress cash (both equity and debt) — leave equity in your company as you grow so that needed borrowing can grow without increasing your debt-equity ratio.  If cash shortfalls are already a problem, seriously consider bringing in outside equity.

Owning 20 percent of success is better than 100 percent of failure.  Too often, type-A, gung-ho, control-freaks have clung to 100 percent ownership of their failing companies right into bankruptcy.  Consider possible equity partners carefully, and remember you can control your business with 1 percent ownership with a properly formed legal corporate entity. 

7. These could be the worst of times, or the best of times — largely depending on the cash position of our businesses.  Be creative and courageous in seeking varying viewpoints, and look outside your normal network for advice and assistance.  Be the King of your own court and live to fight another day by seeking wise counsel from trusted advisors—by doing so we are much more likely to survive, thrive and grow during these turbulent times. 

Written by Larry Broughton, 2008 Vetrepreneur^® of the Year 

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