“We have a cash flow problem”

That title is a tidbit and snippet of family lore from my Father in Law, Kenneth Gibson.

He was a commercial realtor for Grover Bauer in Tulsa in the 1970s-80s, and he told me a story once about selling a commercial property for a client. The client was being a bit slow on paying him his commission.  So he felt compelled to drive by the guy’s house — one of the imposing mansions on Utica between Terwiliger and 28th — and confront him just as he was loading up the car to go to his weekend lake home.

As the client was hemming and hawing about being unable to pay him, his wife got out of their car and said, “We have a cash flow problem.”

Kenneth was flummoxed by this — giant house, nice car, and weekend lake home, when he was just trying to provide for his family.  Clearly they had assets but nothing liquid to easily and quickly pay a realtor’s commission, which was obviously not handled at closing like they normally do it today.

As an IT consultant who did more than just technology I was often called upon to render opinion on the more mundane items of business process, often for startups or businesses who were running their operations on thin cash, credit, or the equity of their financial backers.  Now I even have the chance to see similar activities from clients of companies I hang out with, which makes me want to lay down the law:

StartUp Commandment #1: your first order of business should be to break even as soon as possible.  It’s a great thing to want to grow your business to be the next Twitter, but for most of us who aren’t sucking on the teat of venture capital, you gotta cover your costs and FAST to keep the doors open.

StartUp Commandment #2: price your product according to your market.  Did no one play that online business game in college, where you produce X quantity of lemon-lime soda and price it?  You sell against other teams in your class, and there’s no brand loyalty or cachet…just price.  It’s a great example of market elasticity that everyone who sells stuff should keep in mind.

StartUp Commandment #3: keep business hours for your customers — not you.  Friends, if you are a consumer-oriented enterprise who depends on people walking in the door, you gotta be open when THEY want to show up, not when it’s convenient for you.  The corollary to that:  DECIDE up-front if you’re going to be a wholesaler or a consumer-facing enterprise.  That will determine what you do in StartUp Commandments 1 and 2.

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