Cash is Oxygen

This article is part of a series called Things I learned by failing at Green Fox.

“Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent… if you don’t have it, you don’t get to play the next day.”

Warren Buffett

You would think this is common sense; at the same time, it’s fairly easy to forget about validating the cash flow forecast when there are so many things going on in your organization.

Set aside time for the big picture

As a leader of a company, you receive several bad news each day, and sometimes a few good ones on better days. There are problems to solve continuously, obstacles to tackle, and days fly by just with firefighting instead of observing the company from a birds-eye perspective.

This, I found, is one of the biggest challenges of a top-level executive: setting time aside from the daily operations to take a look at the big picture:

  • Will we have enough cash in the next few quarters?
  • Are we still heading in the right direction?
    • Are we aligned with current market trends, and do we need to adjust our strategy?
    • Do we still serve our core purpose?
  • What have been our recent successes and failures, and what can we learn from them?

P&L vs. Cash flow forecast

Based on my observation, investors tend to focus more on P&L instead of the cash flow, and it makes sense from their perspective, as that correlates more with the company valuation.

At the same time, after failing at Green Fox, I definitely say that as an executive you must focus more on cash flow than anything else.

You can have a great product that helped thousands of people, or you can have an amazing team of dedicated people.

At the end of the day, if you can’t pay your employees and vendors any more, it’s game over.