(originally published on DontBuyAds.com, Oct. 28 2010.) Cash Flow Trumps Revenue The worst 30 minutes I’ve ever experienced in this industry wasn’t in a gym. It was on a comfortable couch in a shareholder’s office. I was there to ask for money. Three years in. Beyond the original investment – only $16,000 – I’d never asked for money from these guys. My goal, only a few months before, had been to buy their shares back, and take 100% control of the company where I was spending 80 hours every week. And here I was, hat in hand, asking for a cash contribution to make payroll. Even worse, the share structure meant a leveraged short-term loan: for every $250 contributed by the shareholders, I’d have to come up with $750 myself. All I could pry from my partners was $500, because I didn’t have the cash to match their piece of the pie. “How are sales?” they asked, sympathetic. “Strong,” I said, “but we have huge accounts receivable.” To the tune of around $12,000, I didn’t add. In fact, if even one or two of the larger accounts paid their bill, I wouldn’t have had a problem at all. “Have you been paid this week?” one asked. “No.” I quickly replied. They knew they were unlikely to make their commission that month, too. An hour later, after discussing a few ideas that I didn’t want to pursue – calling clients to demand payment, offering a discount for immediate payment, adding an interest charge to accounts, selling the debt for 20% of its actual value – they gave me $500 between them, and I left, broke and doubting my future in business. A week later, I was sitting at a buddy’s kitchen table. Nick owns an auto body. He’s fifty-five, had two heart attacks, and put two daughters through school. I was bemoaning my credit problems. “Yeah, I know a guy who had ...
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