Burning Benjamins: Why Money Matters

Posted by Chuck Kocher
On January 13, 2015

BurningBenjamins-WhyMoney-MattersIf you’re familiar with the Rockefeller Habits, you know that they are based on mastering four key elements of business: People, Strategy, Execution, and Cash. Every one of these elements are essential for ensuring business success. Often, however, our dealings with cash get short shrift. Often business leaders don’t want to talk about cash—much less spend a lot of time focusing on it.

That, however, is a dangerous position to take. Why? Even if you have a good handle on your people, have a great business strategy, and are executing well in your business, not having cash can kill your business. And if you’re trying to grow your business, it’s even more critical because growth sucks up cash faster than a vacuum sucks dirt.

How important is having enough cash? Great companies are so committed to the concept that they choose to keep between three to 10 times more cash on hand than their competitors do.

Here are just a couple of reasons why it’s so important.

  • You need cash to retain quality people. Sure, we want to hire people who are motivated by more than money, but passion for a product or an idea won’t put bread on the table. People may be willing to make some sacrifices, but they need to be able to depend on an income. Missing payroll will suck the life out of your employees—and dry up their creativity. It’s hard to be creative if you’re worried about getting paid.
  • You need cash to be able to move quickly. I’m not telling you anything new when I say that business moves quickly today. But you know who doesn’t move quickly? Banks. If you want to remain nimble and be able to respond to opportunities quickly, you don’t want to be filling out loan forms and waiting for a banker to get back to you.
  • You need cash to maintain control. You’ve heard the twist on the Old Golden Rule: “The one who has the gold makes the rules.” Often people or businesses that loan money want something in return. Often that’s control. Do you really want to relinquish control of your business to someone who doesn’t share your vision? It can slow you down—or completely handcuff your efforts.

Because he knew how important it was to have adequate cash on hand, Bill Gates mandated from the very start that Microsoft would always maintain at least a one-year supply of operational cash on hand. That was a big reason for Microsoft’s success.

Don’t let the lack of cash derail the successes you have with people, strategy, and execution. Do what it takes to get your cash under control. Leave me a note in the comment section and let me know what your biggest challenges are when it comes to managing the cash for your business!