Over the holidays we were asked by an investor to examine a company and determine if it could survive. We reviewed the financial records and met with management. At the end of our review both we and management agreed that we were about a year too late in saving the company! What difference does a year make?
What was different one year ago? The company had a profitable business surrounded by money losing products and high overhead. Action could have been taken to shed the unprofitable business, reduce expenses and grow the profitable sales. Unfortunately, time had run out!
One year ago the company had positive working capital and a good relationship with their vendors. Over the past year, they consumed their cash and disappointed their vendors to the point that no one was willing to work with them. The best analogy would be to imagine you are flying an airplane and the engine stops. As the plane plummets toward the earth you don’t wait until 1000 feet over the ground to bring it out of a dive! Same thing with a company!
Rule #1: Don’t Lose Money!
Rule #2: See Rule #1!
Don’t let your business lose money for too long! If you are seeking more ways to make a big impact in your company, download the free 25 Ways To Improve Cash Flow whitepaper to find other ways to improve your cash flow within 24 hours.
[box]Strategic CFO Lab Member Extra
Access your Cash Flow Tuneup Execution Plan in SCFO Lab. This tool enables you to quantify the cash unlocked in your company.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]