There are some days you leave work feeling like you are floating out on Cloud 9. The deals are rolling in, customers are happy, targets have been surpassed and progress has been a doddle. For times like I recommend cranking up the volume of...
And kicking back in a setting like this:
These are marvellous moments and should be cherished very dearly. Generally speaking, they can be like ephemeral ghosts; few and far between. Typically, leaving on a Friday feels as though there are not enough hours in the day. And one can look as if they have been shagged through a hedge backward and be in desperate need of a glass of plonk. It's a look I demonstrate well in this pic of me hungover on a flight, sandwiched as usual, and off to get a bollocking from an agent in North Carolina.
Although for many this might look and sound awful, the alternative perspective is that you have never felt more alive. After all, problem-solving for most is rewarding. Life at a start-up is not too dissimilar to the crystal maze on a little dousing of crack. Everyone is a little jittery, doing individual tasks that test you on various levels. It is only as a team that you will get your mitts on those much-needed gold tokens. Never has the quote “another day, another dollar” been more apt. It is my experience that when the chips are down, it gives you an edge over others as there is no option but to be creative, decisive and to push beyond the status quo.
This exhilarating trilogy will touch on three major areas where Tala has faced adversity – finance, supply and demand. I must take the opportunity to say that these thoughts are my own and do not reflect the views and opinions of Tala and friends, yada yada yada…
They were not telling porkies when they said "cash is king". Tight financial control on the surface feels like an easy concept to grasp but in fact is far harder to execute. It requires dedicated human capital and rigorous systems. Smaller companies are usually undercapitalised; need the most control, yet are spending money like it's going out of fashion. More often than not you raise your seed round and feel pretty flush – this, my friends, is an illusion. Raise the money you need and then raise extra capital as a buffer. A buffer is a buffer - not to be spent on gold Lincoln Navigators and trips to Vegas. You will likely encounter unforeseen shocks to the business, whether this is over-egging your sales pipeline or undercooking your operational costs.
So buckle up, guys and gals, because no founder wants to be continuously bent over the barrel and dishing out equity willy-nilly when there are other ways to milk the cow. The following is a list of a few musings and easy wins to try and address said uncomfortable barrel.
1. "In Lord Sutton we trust” - get a solid Financial Director!
2. Much of good financing feels a little like you are stealing from Peter to pay Paul
This, of course, does not insinuate there is any stealing at Tala, but more that one should be moving money at the right time, through the right instruments, in order to achieve a specific goal. Aside from your internal capital, you need to create other pots of gold in order to mature your business and make the money work for you.
Take for example invoice factoring. This is essentially where you sell your accounts receivable to a third party at a discount. For all the laypeople - instead of waiting for a retailer to pay you on their 30-/60-day terms, you can get all the dough upon delivery for an agreed percentage. In the early days we used Market Invoice - a cracking service for a larger company, but one strike and you are out. There is no wiggle room for mistakes. We wiggled. In the latter stages we used Ebury - credit to our man Duncan for seeing us through the tough times. You can also use their Forex service to obtain forward contracts if you want to hedge currency risk. Note to pre-Brexit self… hedge the dollar!
The next stage is to get trade finance. This really makes or breaks you. Essentially, the bank or third party finances your activities relating to commerce or international trade for an agreed fee. In our case, they pay for all of our manufacturing runs upfront and then give us a number of days to pay it back. If you play your cards right, you’ll have a situation whereby a third party trade finances your manufacturing runs. Tala as a business goes and sells our product to retail, we then invoice factor our sales order and Bob's your uncle, Fanny’s your aunt. Theoretically, you have not touched your own capital and there should be a profit at the end of the rainbow. However, I will leave that for another monologue...
3. "Treat your cash flow like it is your first born"
There is there is an ongoing debate as to whether people should be allowed to breastfeed in public. In my eyes, a parent must feed their child as and when necessarily and, within reason, the more the better. This is the same as your cash position – it is never good to be stingy with the milk, so let it flow.
The retail buyer puts pressure on their financial team to pay. High fives and a 'how’s your father?', the company has been PAID!!!!
I could rabbit on about a few other operational processes but, to be honest, it’s all pretty bleak. As my partner Joshua would say, “I have not been put on this planet to save the money but only to spend the money”. We there fore leave these intricacies to the weird and wonderful ways of the finance world.
The next part of the trilogy will focus on supply, its conundrums and how playing with feathers will always get your arse tickled.
Until next time,