My approach to the financial aspect of business is best summed up by the oxymoron “Aggressive Conservatism”. I aggressively approach the financial well being of the company in a conservative manner. Let me better explain:
- I pay bills faster than terms. This is not what most people would teach because it has the potential to negatively impacts your rate of return on investment, however, it creates a safety valve that you may need to employ. Consider this situation: If I typically pay my bills within 15 days of 30 day terms, my business becomes accustomed to it. If cash becomes tight, I could slow down my payments and pay within 30 days and boost my cashflow without violating my vendor terms. Benefits of the quick pay approach are potential discounts, usually between 1 and 3%. So this conservative approach can actually create more aggressive returns.
- The company needs protection, not my lifestyle. The company needs to be protected and strengthened. Many people bleed their company of its earnings and to support a consuming lifestyle. If that business faces a downturn, the business becomes exponentially more at risk of closing down. This can become extremely stressful, which only makes failure even more likely. I believe in building the business and keeping it financially strong. I do not think of the company’s money as money for my own personal use.
- I build a safety net. Many companies take on added risk and use their safety net to do so. This compounds the risk the company takes on. When I add risk, I want to make sure I strengthen my safety net. I am not always able to do so, but I recognize it and try to get to my comfort level as quickly as possible.
These three points may not be glamorous, but they have helped me weather a couple of storms. I almost went out of business because I did not have a safety net in plan in the first few years. I worked hard to position Resicom to be financially stable. We are now in the position of leveraging our financial position to take advantage of this dire economic climate.