“I Can’t Think Long-Term Because I Need Cash Flow Now” – Grow Great Daily Brief #87 – October 22, 2018

"I Can't Think Long-Term Because I Need Cash Flow Now" – Grow Great Daily Brief #87 – October 22, 2018

We understand cash-flow pinches. We’re entrepreneurs. And most of us don’t have major funding. Some of us don’t have any outside funding. We bootstrap every step of the way. There’s no judgment here against or for outside funding. To each her own. 

Business owners have to chase business. That means we have to pursue customers. Sometimes it also means we have to chase cash. It’s not a sign of poor management or leadership. Building, growing and even maintaining a business sometimes demand it. The pinch happens for any number of reasons. No point wasting time on those today. Rather, I’m focused on how cash-flow needs today can tempt us to think only short-term.

Whenever I hear an entrepreneur or CEO say something like the title of today’s brief it makes me think of how every single person embraces short-term and long-term thinking no matter what happens to us. Well, we do if we want to exercise wisdom. Foolishness ensues whenever we neglect long-term thinking. 

At lunchtime we’re hungry. What are we gonna eat? Are we gonna think about what we eat and how it may impact us later today? Or tonight?

During a late night meeting, my guest is avoiding caffeine. “I can’t drink it after 6pm or I won’t be able to sleep,” he says. There’s a guy who is thinking ahead. Long-term. Longer-term. He’s not just fixated on here and now. 

A friend has me drive him to the airport in his car so he can use my place to park his car while he’s away. I hop in behind the wheel. The “check engine” light is on. I mention it. He says, “Oh, it’s been on for months. There’s nothing wrong.” I worry anyway, hoping I’ll make it back to my house. Hope is a poor strategy, but it’s his car. 

There is evidence daily – in our lives and in the lives of others close to us – of short-term and long-term strategies. The comment that provides today’s daily brief title speaks to the reality of every entrepreneur to manage today and tomorrow.

Short-term needs don’t have to cause the forfeiture of long-term objectives. 

We can and must manage both. Simultaneously.

I’ve been forced to chase plenty of cash in my career. And I know it can be done while still thinking about the longer view. When we need food, we eat. But when we know we’ve got a big meal tonight, we should go light at lunch. All bets are off when we’re starving though. Survival first. That’s why I’ve spent no time talking about the variety of things that might create our cash crunch. Context matters and there are simply too many variables to talk about. 

If your cash crunch is severe enough to put your enterprise at risk (merely missing a single payroll could do it), then you have to stop the bleeding. Going to the ER isn’t a good long-term strategy for healthcare, but it’s the best option when your life is on the line. Rule one for cash flow management is simple – get out of trouble!

You don’t serve anybody by staying in danger. Just like a visit to the ER though, we have to diagnose why we’re in danger. It’s “fix and figure out” at the same time. Both are necessary and can’t be separated. As with your physical health, you likely have some idea of what may be wrong. Besides, as business people, we’re more acquainted with a possible diagnosis than we may be with our body. We’re not a doctor with that expertise. 

Accounts receivables is a major culprit for many entrepreneurs. Slow paying or late paying customers is up near the top of the list for many small business owners. Show me a leader/manager who doesn’t pay close attention to AR aging reports and I’ll show you somebody headed toward a cash crunch. Collect the money owed to you. Get the money, get the money, get the money. Otherwise, you’ll be chasing cash.

Spending cash you don’t yet have is another major culprit. We land a big deal by booking a major piece of business. Feeling pretty good about ourselves we move forward on some purchases (maybe a truck or two, a new forklift, etc.). Problem, the deal ain’t done until we’ve been paid. We felt so confident in the forthcoming cash that we spent money we don’t yet have. Cash crunch.

I’m not saying there can’t be sudden and unexpected causes of cash crunches, but mostly they’re self-induced problems that stem from a sheer lack of discipline. When we don’t pay attention to the details of operating the business today, we pay for it tomorrow. And today. 

Stop the madness. Do what you must to meet payroll, or get past your immediate cash crunch. But make sure you figure out why it happened so you can stop it. Using yourself as a bank (loaning money to your own company) is sometimes necessary. Just don’t make it a habit because it’s bad business unless you’re doing to fund growth. It’s not good if you’re constantly needing to bail out your company from a cash crisis. Long-term, it won’t work out well for you personally, or your company. 

Cash flow is vital. Ramp up your efforts and knowledge in being better at it. It’s sorta like taking care of our arteries so our blood flow isn’t impeded. When we don’t, bad things happen. Grow your expertise in cash flow management because it will pay off bigtime today, and down the line, too. And like your arterial health, the devil is in the details. 

Don’t ignore the problems. Don’t be ashamed to ask for some expert help either. No need to make hard lessons any harder.

Be well. Do good. Grow great!

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