Cash is King

Rachel looked at me and grinned.

“Okay, out with it,” she said. “I know you’ve got some big idea cooking, what is it?”

I smiled. I did have a new idea, though it wasn’t mine , per se. I’d long been a student of leaders like Warren Buffett, who espoused the idea of amassing cash for any number of strategic reasons.

“I’d like us to put a plan in place, now that we’re through this crisis, to save up enough cash to be able to pay our employees for a year with no income coming into the business.”

“That sounds really interesting,” she said. “But please remember, we’re not through this crisis yet. Even though we’re back to work, there will still be ramifications going forward.”

“Yep, good point, and one that I’ll make to the team in our next Huddle,” I said. “But back to the idea, what do you think?”

“Well, I’m a finance and operations person, so yes, that sounds fantastic, but give me some reasons why. We’d obviously be restricting our growth a bit by doing that, taking money we’d normally invest in efforts like marketing, sales, and new services so we could save it up for a rainy day,” she said.

“Right, that would be the trade-off. My thought is first, if we’re building a forever company, which we are, then our survival is first and foremost. The idea that we have to hit fifty percent growth next year instead of ten percent doesn’t really matter when you think about the company from that long-term standpoint. A hundred years from now, it won’t matter that we had more or less growth, only that we grew...and survived.”

Rachel nodded, so I continued, “So that’s the first reason. Also, imagine what we could do during a crisis or recession if we had that kind of stability. We could invest in building products that we don’t normally have the time for. We could look at acquisitions of other companies to bolster our services and add new talent. We could help more of our nonprofit partners, helping them provide their services to the people that really need it. We could literally come out of the crisis being stronger for it.”

“Okay, you don’t have to convince me anymore,” she said. “You had me at ‘save cash.’ I’ll work up a plan.”

This approach would be a big change for our company. We’ve been wired for growth since day one, and we had big plans for spinning up new service lines and investing in growth. But coming through this crisis helped me to see a new path forward, one that gave us the freedom to think about the long-term health of the company, and I was sure going to take advantage of it.

Key point: If you are building a forever-business or even a business that you don’t expect to sell for at least five years, then consider building up a massive cash reserve. More and more, we are a global society, one where any number of forces happening in any number of places could wildly disrupt your business. The next crisis is likely around the corner, and the more cash you have on hand, the more confident you can be that you’ll survive it.