In a business world where the weak are exploited mercilessly by the strong, Cash is your ally – not assets. Get attached to it…and stay that way, says Mario Pretorius. A satisfactory level of operating and risk funds “will greatly enhance the sleeping pattern of owners and management,” he avers. GK
Never get attached to your assets. Get attached to your cash.
Is this only a phrase or a proper business concept? The day your cash is in a headlock, you may remember this. Call me old-fashioned, but I am wary, apprehensive and downright allergic to leverage. Life is uncertain, business more so and temptations conspire against us on a daily basis, disguised as blue-eyed, loving deals. Cash is the buffer.
One of our trite principles is ‘Cash is King”. This underpins a deeper philosophy of business, that the measure of success is the size of dividends distributed. On our bourse, the Johannesburg Securities Exchange, TeleMasters is the only company that reports quarterly and pays quarterly dividends. We pay those dividends BEFORE the end of every quarter – of course we know our cash position on a daily basis. It helps the accounting too.
This means we need to prove our acumen in cash. We keep at least 6 months’ worth of overheads in accessible cash, and there were times we needed that in a transition phase to new technology. We could self-fund the transition, ride it out and get into a higher gear once it was successfully implemented.
As CEO, the 6 month forecast of cash is a daily metric that must be studied, planned around and vigorously tested and verified. Achieving a stable forecast and a satisfactory level of operating and risk funds will greatly enhance the sleeping pattern of owners and management.
At the same time you may note from the financial statements
of your opposition that they may not be so intent on gathering like the ant and show more grasshopper tendencies. Which of course makes them vulnerable to a swoop on their best salesman, undercutting the price to their largest client and foisting all manner of hell on their deliveries by concluding sole supply status from their vendors?
Of such situations many fortunes are made and the weak are exploited mercilessly by the strong in the way of all Nature. Cash is your ally, not assets. Get attached to it and stay that way.
This tip is an extract from the manuscript of “The Unconventional CEO: Common sense outside of conventional Management thinking” (by Mario Pretorius).
