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Cash Flow and Destiny

bhorowitz.com

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Re: Cash Flow and Destiny

#11

Post by ImprovedSilence »

badave wrote: post #6
programminggeek wrote: post #3

Cash means controlling your own destiny. This is as important in your personal finances as it is in business. With enough cash, you can decide for yourself what you want to do and when you want to do it. I call it buying my time, but in reality, you are buying your freedom to choose. For both people and businesses, it is about getting to the point where your income, assets, and liabilities are in line such that you h…

Oh yes. We do live in slavery. Money is the only key to our chains.

is money the key, or is money the chain that binds us? The only good that comes out of this is that you get to decide which of these worldviews you want to live in, then make the best of it.

Re: Cash Flow and Destiny

#12

Post by kyro »

Implied here are the feelings of obligation and the guilt that can come with it that are often incredibly influential and stressful factors in the decisions we make, whether it's obligation felt to an investor whose money you're living off of or to a friend who stood up for you.

Re: Cash Flow and Destiny

#13

Post by gregpilling »

"Happiness is positive cash flow" read the bumper sticker on the back of a customers custom truck. It was twenty years ago, but the rules are still the same. Positive cash flow puts you on a different footing than negative cash flow. I have had to run my manufacturing business through both and the positive years were much more fun.

The article also speaks of the headache of layoffs. Neither employees or bosses like the experience, and managing of cash flow can help you avoid that. Many people look at their P&L but ignore the Statement of Cash Flows. It can be a fatal mistake to find out you have assets but no cash, and the walls come crumbling in. Money coming in 90 days doesn't pay your bills today.

Re: Cash Flow and Destiny

#14

Post by JumpCrisscross »

A 2009 study, "Why Do U.S. Firms Hold So Much More Cash than They Used To" [1], investigated the doubling of U.S. cash-to-asset ratios between 1980 and 2006.

Similar to Ben, they find that "firms hold cash to better cope with adverse shocks when access to capital markets is costly. Consistent with this perspective, OPSW find that firms with riskier cash flows and poor access to external capital hold more cash. The precautionary motive also suggests that firms with better investment opportunities hold more cash because adverse shocks and financial distress are more costly for them."

Tech moves quickly. This means tech firms are more (1) ephemeral and (2) dependent on properly timing bold moves. (1) makes markets, and thus capital availability, more jittery in the face of adverse information. (2) makes firms less tolerant of aforementioned jitteriness. Hence Apple's $150 billion cash balance.

[1] http://118.96.136.31/ejurnal/journal%20of%20finance%202009_v... Bates, Kahle and Stulz (2009)

Re: Cash Flow and Destiny

#15

Post by ekanes »

bennyg wrote: post #2

This is why it always feels funky to me for companies to raise money at insanely large valuations. To me it should only be enough money to cover expenses (employees, office space if necessary, business deals, salary for the founders, r&d costs) for just long enough to where you can afford those things without outside money after. For instance, if you do everything by the business plan, and your business plan says you…

Often yes, but "To me it should only be enough money to cover... for just long enough to where you can afford those things without outside money after" assumes you know what is long enough. If you raise money, raise enough that you have some time/room to figure it out, and make sure.

Re: Cash Flow and Destiny

#17

Post by psgibbs »

programminggeek wrote: post #3

Cash means controlling your own destiny. This is as important in your personal finances as it is in business. With enough cash, you can decide for yourself what you want to do and when you want to do it. I call it buying my time, but in reality, you are buying your freedom to choose. For both people and businesses, it is about getting to the point where your income, assets, and liabilities are in line such that you h…

While I agree with this statement in general, it is a bit of a tautology - do cash reserves come from success, or cause it?

I agree that cash reserves help, but I think it's hard to ascertain how big a driver of success it is, given that it is also the result of success.

Re: Cash Flow and Destiny

#18

Post by badclient »

What does this post mean for His portfolio companies? That VCs are sharks and you should find a way to not need them asap?

A part of me really liked this post; another chuckles at the irony that his own firm is famous for making some of the largest bets with the least proven companies(ie. lyft).

Re: Cash Flow and Destiny

#19

Post by [deleted] »

bennyg wrote: post #2

This is why it always feels funky to me for companies to raise money at insanely large valuations. To me it should only be enough money to cover expenses (employees, office space if necessary, business deals, salary for the founders, r&d costs) for just long enough to where you can afford those things without outside money after. For instance, if you do everything by the business plan, and your business plan says you…

[deleted]

Re: Cash Flow and Destiny

#20

Post by [deleted] »

JumpCrisscross wrote: post #14

A 2009 study, "Why Do U.S. Firms Hold So Much More Cash than They Used To" [1], investigated the doubling of U.S. cash-to-asset ratios between 1980 and 2006. Similar to Ben, they find that "firms hold cash to better cope with adverse shocks when access to capital markets is costly. Consistent with this perspective, OPSW find that firms with riskier cash flows and poor access to external capital hold more cash. The pr…

[deleted]
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