Lead with Cash: Achieve Great Results by Identifying the Right Target - Economics Assignment Help

Assignment Task:

Task:

A man walked into his office one day and found a team of movers carrying out his desk. “Where are you going with that?” he screamed. A tall guy with tattoos and a shaved head smirked at him and replied, “The new owners are auctioning everything off.” “What new owners?” the man asked, “I thought I could work out my company’s troubles.”
The fictitious scenario depicted above can befall any business. Today your company is successful. Tomorrow it is gone. Chaotic change is rampant and its effects are pervasive. Few companies fail, but many others undergo rapid sales declines and a loss in profitabil-ity. The survivors may eventually perish too unless they learn to man- age their business better. Your business is at risk unless you fix it! The furniture movers, in the metaphor above, may not walk out with your company’s computers tomorrow, but be assured that your competi- tors are actively trying to steal your customers today. Management styles from even a few years ago are anachronistic. Today’s situa- tion demands a new approach, a more inclusive business model. The task of survival must be transmitted throughout the organization. Everyone must participate if your company is going to survive. Not long ago, unhealthy companies traveled a longer and safer path. This path had numerous perpendicular branches that led to safety. The course that companies follow today is shorter and more dangerous. An unhealthy company’s descent once began by the com- pany getting sick, then consulting a number of different doctors(turnaround agents), and finally with it entering a hospice setting (bankruptcy court). However, things have changed. Sympathetic creditors willing to compromise and forgive are figments of the past. Today’s credit adversary is likely to be a hardnosed, Ivy League- trained MBA who carries a BlackBerry and two cell phones and who cares very little about the human cost of corporate death. Lost jobs, ruined communities, and wiped out stockholders matter little to these wizards of Wall Street.Sudden corporate demise afflicts large and small companies alike.

Size alone is not a safety net. Longevity is no defense. When a com- pany finds itself in trouble, it must either quickly find a path to recovery or it will vanish. Living in a fast-paced world has many advantages that improve the way we live, but it also destroys the value of financial relationships and business friendships. You can no longer walk down the street to the local bank and talk with someone who attends your church and lives in your neighborhood. Companies fail today because of what they did yesterday. Creditors are proba- bly investors who bought the loan from a distressed bank or hedge fund and are only interested in making a quick dollar. The number of steps leading up to the guillotine is very small compared to historic times when companies had greater power to renegotiate terms with lenders, who wanted companies to survive so long as they received waiver fees and a small boost in the interest rate they earned. The key to survival in the new world is to lead with cash flow.

Cash flow is the target. Everything a company does should be aimed at improving its cash flow. The first principle in finance, one that every business student learns like a mantra, is that the value of a firm equals the current value of its future cash flows. Cash flow is a company’s life blood. Everybody who works in an organization needs to understand what cash flow is and, more importantly, how to man- age their part of the business with an eye on cash flow. By making decisions that improve cash flow, you keep your creditors from having anything to say about your company’s future. Creditors have never been known for being compassionate, but now they have become downright avaricious. They are as willing to pull the rug out from under a company as they are to put sugar in their coffee. The key to survival is to stay out of the clutches of creditors. Moreover, the key to successful growth, as opposed to growth that actually leads to trouble, is to grow cash flow. Companies and their managers and employees need to learn what cash flow is, and how to manage the organization while making constant reference to how things impact cash flow.
 

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