Cash matters

As part of an email to a client negotiating a deal I mentioned:

Cash matters. We might contemplate equity arrangements as making us fortunes, making sure that you are swimming in cash along the way is a much surer way to build a fortune.

He is putting it on the wall. Maybe I should too, awkward English included.

To explain:

For founders and owners it means making sure that not every penny is invested in company growth, but that you are, once sustainable, taking something out along they way in salary and dividends. The prospect of a huge pile of cash in 10 years time is worth delaying for one year if you can have great lives along the way.

For doing deals or becoming an employee it’s the same – insist on a minimum cash arrangement that provides healthy return for you, and treat any upside equity or bonus arrangements as completely unreliable (that’s why it’s a “bonus”).

For advisors (like me) it’s also the same. While equity is a lot of fun, the clients that necessarily rank highest today are those who feed you today. The legal profession in particular understands this, and seldom deal in anything but dollars. They will however simply waive fees for worthy “pro bono” clients.

About Lance Wiggs

@lancewiggs
Aside | This entry was posted in NZ Business. Bookmark the permalink.

One Response to Cash matters

  1. No one should work for free. It’s a tragic Americanism that encourages exploitation of the sorts of people not confident enough to negotiate cash+equity deals like you talk about.
    As for only paying out cash when sustainable, surely if you can’t take a reasonable salary you’re capital is being inefficiently allocated?
    You’re gambling for a buyout instead of focusing on profitability?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s