Cash can be one of the toughest challenge for growing companies. The first law of entrepreneurial gravity is “Growth Sucks Cash.” We encourage companies to calculate their Cash Conversion Cycle (CCC) which measures companywide how long it takes between when you spend a dollar (marketing, design, rent, wages, etc.) until you get that dollar back.
In the early days of Dell, the CCC was running 63 days and caused Michael Dell to almost run out of cash. By focusing on decreasing this cycle, today they are running close to minus 35 days. This means they generate more cash the faster they grow, which is why they have over $9 billion in the bank, up from $6 billion when they got in trouble. We believe all growth firsm can accomplish this or at least dramatically improve their CCC giving them sufficient internal cash to fuel their growth.
Gazelles has a One Page Cash Tool which outlines the cash cycle and helps you for work through concrete ways to double operating cash flow in the next twelve months.
Included in your Cash Decisions, your team will discuss and work through:
- Cash Conversion Cycle (CCC). Ways to reduce time, eliminate mistakes and change your business model in order to speed up your CCC.
- Labor Efficiency Ratio. A new way of looking at your financials that will enable your company to better manage gross profits and labor, resulting in stronger profits.