My favorite professor from B-School (Wake Forest University Babcock Graduate School of Management, in case you were curious) was Bern Beatty. Dr. Beatty was a “Hah-Vahd” man who impacted my graduate education in two important ways. First, he looked at accounting in such a way that, for me, ruined T-Accounts. This wasn’t such a bad thing by the way. It taught us to look at accounting transactions the way they really are—part of the “story of your business.” T-Accounts aren’t necessarily bad, but for a corporate finance guy who wasn’t an accountant, Dr. Beatty’s approach just made more sense. The other impact for me, and I would argue for all entrepreneurs, was the first question he asked as we discussed each case: “Where’s the cash?”
The old adage “cash is the lifeblood of your company” is nearing (or has already achieved) much deserved cliché-hood. However, as Dr. Beatty would explain, without cash, not much else is possible. Inventing the ‘next big thing’ is hard—getting it into customer’s hands can be really expensive. Taking steps to conserve cash so that it can be invested in the right activities at the right time isn’t easy, but it’s critically important. I’m not an advocate for draconian budget cuts. But I am an advocate for spending on the right things. For me, a good rule of thumb is asking the question “will this advance our game?” If the answer is “no” or “not sure,” figure out what will and do that instead.
As you work on your business model, what is your answer to the question “where’s the cash?”