Around 6 years ago, I had a conversation I never forgot.
A conversation about business cash.
It went like this:
- Friend: “Olly, how much cash do you keep in your business bank account?”
- Olly: “Right now we have about $XXX.” (it was a lot)
- Friend: “Oh, you keep a lot too? Glad I’m not the only one!”
Now here’s the bit I remember:
I felt smug.
That’s right – I distinctly remember feeling smug that we were holding so much cash.
Today, this horrifies me!
Not because it’s rather distasteful to feel smug, but because…
I was so clueless about money!
At the time, we were holding equivalent to our annual revenue in cash.
For a growing business that is pure insanity.
I think my business would be 5-10X the size if I had learned to use cash properly back then. (Because growth compounds over time.)
So I imagine I go back in time and give younger Olly a pep talk…
Here’s how it would go…
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Look, Olly…
Here’s why you’re feeling smug about having cash:
It makes you feel safe.
You never had any money before.
So seeing 000s in your account gives you a sense of security. You won’t be sleeping under a bridge any time soon!
But you’ve got to evolve.
You’ve got to move from scarcity to abundance… to learn how to utilise cash.
Here are some of your options:
- Invest back into the business
- Spend on education / mentorship
- Put into an investment vehicle
- Create an emergency op-ex fund
- Distribute and invest personally
- Fund available annual tax breaks & allowances
- Generate a return on the cash
Spending cash on any of these things will make you more money further down the line.
A lot more.
Oh wait – you don’t know how to do these things?
Then go figure it out, dammit!
But don’t just hoard cash, and let it sit there like a snowman in a sauna, losing 5-10% a year to inflation…
Money is like water – it needs to flow. If it doesn’t flow, it will find ways to escape… and cause you way more problems in the future.
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Namaste,
Olly