This is Why Cash is King
A lot of businesses out there overestimate the cash coming in and they underestimate the expenses going out. It’s critical to have that cash growing in the business account – making sure you’ve got something tucked away for when things get dark and stormy.
Things can go up and down in your business. You can’t foresee what’s going to happen next week, next month, at the end of the year. You know, is there going to be a new election? Is there going to be a huge tsunami coming through? You just don’t know.
So it’s always good to have cash banked up. Don’t think about ways of always trying to spend it on stupid new gimmicks that come out. When you own a business, people are always coming at you saying:
- ‘Hey, I can do this for your website’
- ‘I can do this and increase your marketing’
- ‘We can give you new uniforms’
- ‘We can change your logo’.
People are always coming at you trying to get you to spend money. I’m telling you to play it safe. Don’t go spending all your money every week, every month. Build up a cash cow. You want to have enough money there so, if no business came in for the next three weeks, you could keep paying wages and all your overheads – without any sort of stress or sleepless nights.
Build Up a Cash Cow
Trust me, it’s the best feeling in the world when you have that cash cow sitting there. Don’t touch it, just leave it there. It’s like a feeling of peace where you can rest assured that if anything ever happens to you, you’re sweet for the next three or four weeks.
It gives you leverage, so you can make smarter, clearer decisions instead of reacting from a state of scarcity and vulnerability. One of the main secrets to my success was I grew up my kitty. I had a bit of cash in there and was able to do what’s called business acquisition.
I was able to purchase other businesses and absorb them. Absorb their:
- Marketing teams
- Sales teams
- Install teams.
Then I was able to grow, grow, grow. It’s kind of like on a smaller scale what Google and Facebook do – where they’re acquiring assets and other businesses to plug themselves in and turbo-charge themselves to grow bigger.
Securing Your Cash Flow
Another main reason why you wanna have cash in the bank is for cash flow. The major reason why businesses fail is because they underestimate those expenses coming in and they flop overnight. They can’t pay their invoices.
Positive cash flow is also gonna help you for growth. There are crazy times when a business is going from half a million to a million, to three million, all the way up to twenty million. It can be quite scary and daunting when you’re making those steps. You might need to:
- Buy extra resources
- Purchase more trucks
- Fork out a heap of money on recruitment
I can tell you right now, I just spent about $18k recruiting a new internal accountant. That sum probably blew your socks off – how the hell could anyone ever spend eighteen thousand dollars to just find someone. This is the sort of stuff I’m talking about. That’s why it’s important to have cash banked up in the bank account, because there’s always something that you’re going to need to spend money on – in terms of growth, acquisition and cash flow.
That’s why cash is king.