The nice thing about going broke when you run a big company is that the government just might bail you out. The Big Three automakers who didn't hedge against rising oil prices by cranking out smaller, more fuel-efficient cars (to name just a few examples).
When small-business owners run out of cash, the game's over. You know your company is liquid when you have the ability to continually fund your business in a variety of ways. For a smaller company, liquidity could change immediately by something as simple as one large customer missing a payment or filing bankruptcy. You need a variety of funding sources: cash, available equity and lines of credit."
The one your banker will take when deciding whether to put his hide on the line and award you a line of credit.
Bankers don't like surprises, and neither should you. If you think sales will ebb or margins will shrink, then adjust--now. The greater your foresight, the more time you will have to triage and the more credible you will be in a lender's eye.
Better yet, run your business as if it were already governed by loan covenants. Minding your cash doesn't mean stuffing it under your mattress. It means making sure you have enough to keep playing through the hard times--because there's no one waiting with outstretched arms when you fall.
Gene Marks is owner of Marks Group, a technology consulting firm, and author of The Streetwise Small Business Book of Lists.
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