Cash Is King Or You Are Dead

@JMMuscarello Thanks John!

Yeah, Cash is Emperor. Glad to hear you go through the though times. I used to get through tough cash times by creating or promoting products but now I never seem to have the time with our company's current client roster. We definitely need to hire someone.

Your honesty is really refreshing here Gini. It is the absolute truth, even a few months can kill a successful business.

This was a really good blog post. Thanks for sharing your insights on this. 

One of the best pieces of business advice I've read online in a long, long time Gini. If only more folks discussed "reality" the way you do.

Thanks so much,

Marcus

Gini, Thanks for another great post that I can relate all too closely with.

Your transparency is admirable. I always had two months of payroll around and roughly six months of billables out, plus credit. When the market crashed in 2008 this let me keep staff on for six months, even though we lost 80% of our retainer business.  I still really freak out when I think about those times, but feel like I went above and beyond my obligations to keep people employed as we weathered the storm.

@econwriter5 Wasn't that post from @ginidietrich terrific. Both a great example of transparency & good advice.

@airport_girl Thanks!

Cash is always squeezed when you are growing...I always try to keep at least 180 days and make sure I can survive a worst case 24 month rolling cash projection.

Hi Gini... cash is king?  You bet it is!  I read this book by Dave Ramsey two years ago and it change my life... and my business.

The Total Money Makeover

http://www.amazon.com/The-Total-Money-Makeover-Financial/dp/159555078X/ref=sr_1_1?ie=UTF8&qid=1332196383&sr=8-1

He also has a book on starting and running a business... great stuff!

EntreLeadership

http://www.amazon.com/EntreLeadership-Practical-Business-Wisdom-Trenches/dp/1451617852/ref=pd_sim_b_5

--Tony Gnau

I must have missed that post about you nearly going bankrupt.  I'm glad I did, it would have really upset me.  Even this one, which has a happy ending, was painful to read.  I'm so pleased you made it through.

You are right, cash is king.  I've been living for years on as little as I possibly can.  I save up just enough to hire an editor, and then I'm broke again.  Still, I'm much happier than when I was making 75K per year, because I get to write and it is fun.

I fell into nearly 8K of inheritance and it allowed me to finish my last book and publish.  I have a little left over for my  next book, but then I'll be out of money.  It is okay, though.  I'm following my dream and there is a lot of value in that.  Your advice is important and hasn't fallen on deaf ears.  The first thing I will do when the day comes that I'm selling a pile of books, isn't buy a car, it is build a cushion.

And now I know why you insisted on paying for dinner :)

@seanmcginnis That was a good one from @ginidietrich wasn't it? She's so good at making a biz situation personal.

I wish I had some big "business" example where I can say, "________ me too." I don't. But I've experienced it on a very much smaller consultant-business side and in my personal-business side. Playing banker to clients, even small and friends, even best -- never works out. I speak from experience, and learned through many "please clear please clear" prayers that cash really is king @ginidietrich . That $120 what-the-hell-did-I-do-night ... no matter how fun, would never be more fun than a i-am-so-glad-i-planned-for-this-90-fund.

Gini is the bestest. Even if she doesn't respond to my text same day. She'll respond. And she's always unfairly smart and uncommonly kind. Great post, and I say that because it's a real post, about real problems from a real person. (not because people say great post _____ in comments)

Sorry about Creighton. But they did win the game I picked them to. So ha!

I second your opinion. The thing I liked more about Microsoft is that they routinely had and I think have one year of cash put aside so that whatever happens they have a full year to work on it. Not that with this economic crisis, which isn't near its middle, that's enough but it's a wise tactic.

Glad things are fine now. :)

Gini;

You aren't alone - as I wrote in my newsletter last week we are seeing a lot of this right now. And not just from skittish clients, growing companies can experience a cash crunch too. As sales grow, so do receivables and pretty soon you've loaned your clients so much money you can't pay your bills. (see more here: http://www.anchoradvisors.com/pages/article_view/22.php?aid=91)

In the meantime there's nothing that warms my heart more than money in the bank!

Brad 

Nifty timing on this post as today Apple decided to spend part of it's $100 billion cash hoard on dividends and stock buy back (*yawn*). Now there is a company that  is good at keeping a good amount of cash on hand.

I particularly like this post for its practical applications to our personal lives, in which saving a few months of expenses is often overlooked by so many. Dave Ramsey does a great job of hammering this home and its a message echoed here in your post. Thanks for the important reminder.

and thank goodness you made it, but had you not I am sure you would have rebounded and done something equally amazing... 

I used to live by the cash is king philosophy I always aimed for 2 years of reserves and was down to 1 when the recession hit. Had I not I would have lost everything in 2009. Really, really happy that things have improved for you since the bottom fell out! I've enjoyed watching many of my friends and clients rebounding from the crap that has been our economic reality in recent years. Let's all not leave anything to chance now and really go out and kick some butt.

Oh girl, did I EVER learn that lesson the hard way and it makes me feel so much better to know that I'm not alone here on Spin Sucks.  At my last company, where I was managing director for a European team, I was filled with dread and loathing every time we got close to payroll time and even though it wasn't my company, I was first to step forward and sacrifice my own pay in order to take care of others.  Oh the glamour! I suffered from every physical ailment from migraines, to interminable colds to stomach problems to depression.  With amazing support and mentoring from our accountants we got out of the hole, but not before a lot of collateral damage and restructuring took place.  When my business partner (who went through that hell with me) and I started our own company, I declared loudly "AS GOD AS MY WITNESS, WE WILL NEVER HAVE CASH FLOW PROBLEMS AGAIN!"  And although we operate on what some would deem conservative principles, our cash flow now runs like clockwork and I have never been less stressed.  It starts with being very selective about with whom we do business and being very, very clear up front about payment terms and our need to get paid within terms.   A lot of getting paid on time is in the details; making sure we have the right accounting contacts, the right information on our invoices, including clear detail of activities so there are no questions that hold up payment.  Accountants can be a great source of support when it comes to managing cash flow and I would encourage other business owners to tap into their knowledge and experience.