In 1996 I nervously approached day 1 of investment banking in New York. The training program would last about a month and we were all bright-eyed, anxious, committed, and less than humble. The trainer for the program was Paul Kushel, but he went by “Cash” and he managed to make even the most mundane accounting topics crazy fun and exciting (I know, I have issues). You can read about how he got the name Cash here but it wasn’t because his wife’s name was Flo (that’s run of the mill accounting humor). Cash left a big impression on me and an impression I want to leave on you. When it comes to business, CASH IS KING. Know it. Love it. Lean into it.
The Language of Love
A lot of business owners want to build a business but loathe accounting. But accounting is a language everyone needs to understand. If you drive around without a dashboard panel on your car, you’d have no idea when you’re about to run out of gas or a light went out or the oil needs changing.
It’s a River
Yes, cash is a snapshot. You can look at your bank account today and see how much cash you have at this very moment. But cash flows like a river, there are inlets and outlets and unknown waterfalls and downstream obstacles. The ins and outs of cash show up on a cash flow statement. It’s cool to see how the river flows. Understand how it moves is an advantage.
Book it Baby!
Early stage companies are often hungry for cash, for the river to flow. The problem is that the riverbeds can be a little dry. Getting cash into the system to sustain the business can come from closing a sale and getting paid up-front. You will not recognize it all on your income statement but you got the cash. You booked it!
Unlock the Value!
Your Company is valued based on the cash that flows in and out of your business. Companies buy other companies based on the amount and timing of those expected flows. What a Company is willing to pay today for those future cash flows is based on a calculation that looks at the future and asks, “What would I be willing to pay today for that future flow?” The better your business is at demonstrating control over your cash flow (and being able to help a buyer understand how it will grow), the more valuable you will be.
I see a lot of entrepreneurs struggling to build their businesses because they don’t have a good handle on the flows in and out of their business. Seemingly great businesses hit rocks they could easily avoid simply because they lost sight of the panel on the dashboard, or never really had one in the first place. Don’t be that business.
I learned a lot on Wall Street (like what it’s like to sleep under my desk), but arguably nothing more important than what I learned from the famous Cash Kushel. Cash is King Baby!