“The man on top of the mountain didn’t fall there.” – Vince Lombardi
“A mid-nine figure sale to a publicly traded company”, my business mentor said to me around the spring of 2013. My favorite and closest business mentor and one of my life-long friends and teachers sold his company for almost $500 million that he built from the ground up and operated for over 11-years. It was the end result of a very storied and volatile path from one telephone in his living room to over 100+ employees and a generous and well-timed exit (business sale).
Well, just what was the success there? Was it the “f*ck you money” that he received? The clout? The fist pump at the culmination? The relief, the time for celebration with friends and family, the perfect timing, the “make or break” financing deal that went through years earlier, the first or second round of private equity, the ”luck”, the ability to not have to sacrifice any longer, the achievement of the sale, the avoidance of failure, the reputation, the track record, the relationships gained (and lost), the perseverance, his intelligence, his schooling, the new doors and next level opened, the furious “failures” before the “success”…?
[WHAT IS BUSINESS SUCCESS?]
The success was (and is) the continued operation of the business. Simply, the operating and cash flowing business. The business still operates today, and is in the hands of a new owner with new management and governance.
What is success in business besides it actively cash flowing and not having closed its doors? A business that is cash flowing and that has liquidity (ability to meet payment obligations that are due in the near and long-term) is a successful business. Everything else is solely a collateral effect.
Of course, every business has its stages or its health or its current status. But what makes a business successful, at its core, is that customers are paying and cash is flowing into the business. That is business success, active cash flow, just as blood is flowing and pumping through the business’ body by the work of the heart (management and ownership team). It’s either that or the business has failed and cash flow has stopped, or its heart has stopped and the business is closed (no longer cash flowing).
Is your business generating cash flow? Yes? Then it is a success… at the moment.
No more cash flow = no more business, or failure.
This is why cash flow is literally the life blood of any business.
Now of course, every business can be in various states, stages or statuses, while generating cash flow from operations and being successful. Profit and loss is a separate measurement, and we are only speaking about top line cash flow here.
[WHAT STAGE IS YOUR BUSINESS IN?]
From my experience, a business is basically in one of four stages at any given point:
1) Business Growth
2) Business Maintenance
3) Business Decline
4) Business Exit (sale, IPO, wind down, closure, etc)
If it’s not in one or more of these stages, the business has either not started operating yet or it is closed.
What stage is your business in? Sometimes it can be hard to tell. Sometimes you need outside eyes to take a look under the hood and to diagnose your business. That is part of what we do at my business consulting firm Bernarsky Advisors. We diagnose current business issues and help our business clients solve challenges they are facing and achieve goals that they are striving to accomplish.
Let’s step back to cash flow. I cannot write or emphasize that word and concept enough. Cash flow. Cash flow. Cash flow. If you are into repetitive writing affirmations in a journal like some experts suggest, then write it 15+ times per day, tattoo it on your forehead, repeat it in your mind, put it on your cellphone background… whatever you do to remember (and remember to remember) important things.
As Steve Jobs so simply and eloquently said in the book I, Steve: “You don’t need to take notes. If its important, you’ll remember it.”
Cash flow is the most important baseline business need, the only business necessity.
I want your business to be successful, and success means above all else, keep the cash flowing.
Keep your business’ heart (the team) pumping blood (cash flow).
Yes. I know. We all know that we live in an ever-changing world (and life) which means business is always changing --- both expectedly and unexpectedly.
The best time is always now to prepare for what you expect and be ready to react properly with informed decisions to the unexpected that comes your way.
So for those of you whose business is currently:
THRIVING What’s next?
LOSING MONEY How do we stop it?
LOW ON CASH How do we change this and quickly?
IN NEED OF FINANCING Where do you get the best loans, debt, investment, etc?
SLUMPING SALES What is the best plan to increase them?
STRUGGLING WITH BUSINESS DEBT What is the best path and plan? What is next?
BEHIND ON ACCOUNTS PAYABLE What is the best solution and best steps?
COLLECTING RECEIVABLES TOO SLOWLY What is the plan and strategy to speed this up?
EXCESSIVE PERSONAL CONTRIBUTIONS OF CASH How do we stop this?NEGATIVE CASH FLOW What is the new plan? How do we pivot?
REORGANIZING OPERATIONS At what cost and effect? Over what time period?
DOWNSIZING How much? How fast? Why and when?
WINDING DOWN When to start? Over what period of time?
FIGHTING FINANCIAL DISTRESS What are the quickest and best solutions?
LOOKING TO AVOID BANKRUPTCY Is the right team of advisors in place to do this?
RESTRUCTURE EXISTING DEBT OVERLOAD What is the restructuring plan?
REFINANCING OF EXISTING BUSINESS DEBT Bank? Private investor? Costs? Timeline?
These are some of the scenarios that our clients are facing when they engage with us as their business financial & strategy advisor. Many of them are experiencing multiple situations all at once.
In every business scenario, swift and properly informed decisions, then actions (or no actions) are paramount to the positive future of your business.
So when a business “fails” its because cash has stopped flowing and the business has died.
So why does a business fail or stop cash flowing?
Well, most importantly, it does not have to!
A business can continue on and on and on, much longer than it should, and this happens much more than one would reason and wish (with its failure in the rearview mirror of course).
A business can survive and remain cash flowing (successful) or maintain its liquidity, in many different ways.
Generating top line revenue, obtaining financing (debt, loans, receivable sales, business revenue advances, equity investments, etc), selling assets, acquiring another business and folding it in, etc…
Businesses can be cash flowing yet losing money on a profit and loss basis.
Just because a business is cash flowing doesn’t mean that it is profiting.
And just because a business is cash flowing, it does not mean that it has positive cash flow, meaning sales or top line revenue supports all outflows of cash without use of financing or supplementing cash flow with business debt or funding.
Furthermore, just because a business is making a profit does not mean that it is cash flow positive.
Cash flow and profits are two totally different measures of business health. “You can’t eat profits,” has been said many times before so I pick positive cash flow, better yet positive free cash flow over profits any day of the week!
How is your business’ cash flow? How is its profit?
The good news is that both profit-loss and cash flow can be drastically affected over a short period of time by making minor and major adjustments to your business. A tune-up of sorts.
There are many solutions and strategies available to your business when you are facing financial and operational challenges.
Your business does not have to fail!
It isn’t even required to struggle so let’s have a conversation over a consultation call and take steps to start fixing and solving your current business challenges and issues whether they be financial or operational, or both!
Businesses do not have to fail (stop cash flowing), even if they are heading towards failure. Getting sound and seasoned business advice is the smartest thing that a business owner can do to prevent and save their business from the risk of failure.
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If you would like to discuss your business issues to be fixed or goals to be achieved on a video or phone meeting, setup a free consultation call.
I look forward to meeting with you.
Until then... Keep pushing!
Godspeed.
Stefan Bernarsky
BERNARSKY ADVISORS
Business Financial & Strategy Consultants
Refinance. Restructure. Reorganize.
bernarskyadvisors.com
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