One of the most important lessons I’ve had to learn the hard way is this:
“How you run your business in the good times will determine how well you manage the bad times.”
And speaking honestly, I’ve likened the last ~12 months of running AA to feasting at the dinner table over Christmas – food was aplenty (so we overate), and the wine was flowing (so we had too much fun).
Everything was in surplus, so we were pretty relaxed with our decisions. In hindsight, some of those decisions have led to us having less cash in our accounts than I would like…
One of the big a-ha moments of the last three months was just how impactful membership holds would be in Dec/Jan/Feb… we lost 100k+ in cash flow over that period due to holds, despite expenses staying the same since my team are all employed… plus we had a second facility to manage, too.
Now you might shake your head and say, how irresponsible of me… because I should have known.
And yes, you’re right… I should have had a finger closer to the pulse.
But I didn’t know (since I’d never experienced it) the impact that a much larger workforce would have on our net cash flow when all of a sudden, our revenue drops by 60%+ for an extended period of time, but our costs stay the same.
Our workforce was the big difference from this year to last, and it’s the variable I hadn’t accounted for.
I mention all this because men much more intelligent than me have found themselves in WAY worse positions…
In 2018, Elon Musk got down to just one month’s payroll in the bank during the Model 3 Rollout. In his own words: “Bankruptcy was imminent. It was hell.”
In the early 90s, Apple ran out of cash, laying off thousands of employees, closing huge facilities, and skirting the edge of total bankruptcy. They were, by all reports, f*cked.
Two weeks before the dot com crash, Bezos secured a financing deal for Amazon, ultimately saving him from insolvency. If his team had waited just two weeks longer, the dot com crash would have occurred, and Amazon would have sunk because no tech company could secure capital once their stocks had tanked 80%.
I say that to give you perspective – if shit can get real for the best operators on the planet, it can get real for all of us (including you and me).
So in times when you can’t be fast and loose with your business decisions, fundamentals matter more.
You need a good framework for how to act, which is what I’ve been talking about this month, and it’s been the theme of all my emails.
To give you perspective, one of the frameworks I teach in this month’s Alley-Oop newsletter is the “expenses purge”. It’s a strategy that accounts for expenses creep in your business and ensures you stay lean and lethal because so much money is lost in tiny, little transactions that add and multiply over time.
And earlier this week, when I did this for AA, I uncovered just under $108,000 of annualized profits lost to unnecessary expenses that had ‘crept’ into our business over the past 3-6 months (the last time I did this was October, I had January off this year and didn’t do it… which is entirely my fault).
Within four hours, I had pinpointed all the tiny, little decisions that add up over time. And while none of them was massive in isolation, it’s certainly true that:
“The little things make the big things.”
I go over the exact step-by-step process in this month’s Alley-Oop so you can do this process yourself (because most people miss the most important step).
After writing it, re-reading it, and editing it, I can confidently say it’s the most important newsletter you’ll ever read from me.
The newsletter goes to print four days on May 1st, so the time to get your hands on this must-read edition is ending.
You’ll have to decide soon whether you want to get off the ‘maybe fence’ and either say:
“Yes, I want to get a grip on my numbers, financing and cash flow for what comes out to $3.23 a day”, or
“No, I don’t need it, because I got more cash than sense.”
You can sign up here:
– Karl Goodman
