Archive for the ‘Finance (not Investors)’ Category

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Cash is King!

July 31, 2007

by John Finlay

“Cash is King!” I heard this phrase for the first time this week. The phrase references the fact that at the end of the day, what matters most to the survival of your business is how much cash is left in your account at the end of every day. It doesn’t matter how much your revenues could be tomorrow, if your cash is negative today. It seems so obvious, yet businesses often fail because they forget this.

Take Eastwind Trading (a Harvard Business case) as an example. Their company encumbered a large amount of debt and investor equity to start up the business. The business opportunity had potential to be very profitable, but they could never get to that point because in the beginning they depleted their cash reserves so much faster than they received their revenues. Instead of trying to cut costs, they tried to get more investor funding. In the end they went bankrupt because they didn’t manage their cash flow.

Contrast this with the example of the Baby Einsten company (related article can be found here). They funded their business with $10k from their personal savings with the goal to never accrue debt or be under the thumb of an investor. They kept costs to a minimum, and often had to forgo releasing new product or advertising campaigns because they didn’t yet have the cash to fund them. Cash was more than “king” to them, cash was “god”.

Many people feel that they can supplement a negative cash flow with debt not realizing that the end of the heavy chain of debt and credit cards is held by the grim reaper of bankruptcy.

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The Proper Categories for this Blog – Simple vs. Complete

July 11, 2007

If you had to boil every entrepreneurial topic and every entrepreneurial issue down to ten categories, what would they be? Could you reduce the list to five instead of ten? At what point does simplifying categories have a noticeably negative effect on clarity?

I would like to keep the comments on this blog focused on all topic entrepreneurial but I would also like to keep things simple and organized. I am going to begin by posting roughly 15 categories that should be broad enough to cover most things entrepreneurial. Over the next few months I will monitor the various postings on this site and use your feedback to shift and consolidate where appropriate. I would like to eventually narrow down the topic list to roughly ten and then find one contributing blogger that will be responsible for each specific category (although I would still like to see five or more contributing bloggers working in each category).

Take a minute to review the categories currently in place on this site and please send me your thoughts and suggestions on what should be added / removed / changed etc. Also, when you are posting your blogs, please try to limit the number of categories you choose for your postings to one or two.

Now…let’s get to work!