This is another offering in my ongoing series on understanding the fundamentals of business as we become better business managers. Remember, fundamentals are like natural laws: they don’t change; they’re the same for everyone, and you can’t succeed without understanding and respecting them. The fundamentals today are all about funding growth.
Consider the following scenario that plays out on Main Street every day:
“Finally, my business is growing,” a small business owner confides to his friend, “but why is it creating so much negative cash?” And then, with that deer-in-the-headlights look, he completes his report, “I thought by now, with increased sales, cash would be the least of my worries. I used to be afraid I couldn’t grow my business; now I’m worried it will collapse from growth.”
This entrepreneur’s lament is one of the great ironies of the marketplace: a small business in danger of succeeding itself right out of business.
Beware Blasingame’s 2nd Law of Small Business: It’s redundant to say, “undercapitalized small business.” This maxim is especially true for fast-growing companies because revenue growth depletes cash in two dramatic but predictable ways.
Imagine that. Having conducted literally thousands of sales calls on multiple continents, in front of decision-makers from the towering C-Suites of Fortune 100 CEOs to bell-over-the-door Main Street mom-and-pops, perhaps the greatest professional salesperson of all time struggles with…making first contact. But when you look at the numbers of his body of work, it’s obvious that the man known as JB to colleagues and “The Force” to competitors, didn’t allow his “condition” to cost him success.