We often hear this cliché but what does it mean exactly? It means that to run a successful business, one of your main objectives should be to preserve cash in the business. How do you do that? Short answer is lease as opposed to buy and whenever a project can be done in-house as opposed the farming it out, choose in-house. It’s inside dollars and using employees you are already paying.
“Always remember “Cash is King” and do whatever you can to preserve cash in your business.”
A few years ago, a close friend of mine who has run businesses throughout the globe, was visiting our offices. First thing he said is “Nice new carpeting. Did you buy it or lease it?” I said I bought it of course. Why would I pay the extra to lease? He said to me “Always remember “Cash is King” and do whatever you can to preserve cash in your business.” Now I would normally just say sure and carry on. But here was the advice coming directly from a guy who had global business experience and had successfully survived not one, but two Venture Capitalists takeovers and ended up making those VC’s a lot of money.
I always kept his advice in the back of my mind. Then when we made the decision to expand the business, due to increased customer demand, I took his advice to heart and have never regretted it. We had enough cash in the business to implement all the necessary capital expenditures. However, to do so, would have depleted the cash reserves substantially. When you have money in the bank, everyone is your friend – both the banks, and the leasing companies. Loans and leases are never a problem when you have money in the bank. When you have no money in the bank you have no financial friends or partners. From the early days of the business I remember…. Been there. Done that. Got the T-shirt. I know what it’s like.
So what have I learned? Lease and you preserve cash. Sure it costs you slightly more in carrying charges but, you can sleep nights when you have money in the bank. And what’s that worth?… It’s PRICELESS!