Chapter 18 – Never Get Attached to Your Assets. Get Attached to Your Cash
Is this only a phrase, or is it a proper business concept? The day your cash is in a headlock, you may remember it. 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 seemingly trite principles is: Cash is King. This underpins a deeper philosophy of business, which says that the true measure of business success is in the size of dividends you distribute. On our bourse, the Johannesburg’s Stock Exchange, TeleMasters is presently the only company that 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 with the accounting, too.
This means we need to prove our acumen in cash terms. We keep at least six months’ worth of overheads in accessible cash and there were times we needed that access during 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, I believe that the six-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 patterns of owners and management alike.
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 may instead show grasshopper tendencies. This makes your opposition vulnerable to a swoop on their best salesperson, the undercutting of the price to their largest customer and the foisting of all manner of Hell on their deliveries if you can secure sole-supplier status with their vendors.
In such situations, many fortunes are made and the weak are exploited mercilessly by the strong. It’s the way of all nature. Stock, debtors, fancy furniture? None of these is cash. Cash is your ally. Not assets. Get attached to it and stay attached to it.
The Unconventional CEO offers succinct, compelling advice from one successful CEO Mario Pretorius, to you The Cape Messenger reader.
The book is also available to purchase in full from the Amazon store.