Excerpt from the May 2008 Mackey Advisors Newsletter

Take care of your business and your business will take care of you.

Obvious?  Of course.  Sounds like common sense.  But this simple concept is not always easy to practice and here’s why:  Putting the business first often means putting you, the business owner, last. 

I was advising a manufacturing client as they negotiated a contract to grow their business by 50% over the next twelve months.  Cash was already tight, and this new growth would stretch their vendor relationships even tighter.  Our cash flow forecast indicated an increasingly negative cash flow for the next five months.

The business had one owner, a woman who had purchased the business fifteen years ago.  She had invested heavily into the business over the years, both in terms of stock and loans, and like most entrepreneurs, the business was her primary asset and source of cash flow.  She had her eye on an oceanfront condo and needed cash for a down payment and increased cash flow for the mortgage.

We were in the process of negotiating with two banks for an increase in the line of credit and to restructure current debt obligations to provide cash flow for the new contract.  If we factored in an increase in salary or dividends for the owner to meet her goals, we would stretch the business’ ability to service the debt.   Additionally, her bank would likely frown on this cash drain for personal use, as their objective was to fund business growth.

So who was going to get to the top of the priority list?  The business or the business owner?  After talking with her it was clear that the business had to come first.  This new contract was going to, at a minimum, quadruple business profits.  In the long term, it would increase both her cash flow and the value of her largest asset, her business.  In the short term however, plans for the new beach house would have to be put on hold.

Expanding our concept a bit:  If you take care of the business, it will take care of you… and the other stakeholders, your team, vendors and creditors.

Example:  Business is tight due to increased price pressure and competition.  You have an under-performing employee.  Do you keep the employee or free him up for a new opportunity? 

Let’s go back to our original premise.  If you take care of the business, it will take care of you and the other stakeholders.   Keeping a non-performing employee puts the paychecks of your high-performing employees at risk.  The greater good is the heath and wealth of the business.  The under performer has to go.

Successful entrepreneurs adopt this mantra, knowing that the business always comes first.  Be bold enough to be wildly successful.  Your business is the center of your personal wealth creation and accumulation.  When the decisions get tough, stay focused and keep your eye on the greater good…a business that is healthy and growing.  The business, in turn, will provide generously for all the stakeholders.