Ray Zinn: Hi Rob.
Rob Artigo: Today we’re talking about one of the most fundamental truths in business, cash is king. We’ll contrast the hype-driven growth at all success mentality with a disciplined approach that let Micrel stay profitable for 36 out of 37 years. So Ray, let’s start here. Why is cash truly king for enduring companies? And how does that differ from the grow fast model that we’re often seeing today?
Ray Zinn: Companies don’t go out of business because they have cash. They go out of business because they don’t have cash. Your company doesn’t run on thin air. It’s not a breatharian, it requires cash to sustain itself. And so, managing your cash is king. Why we refer to something as king is because king is number one in the definition of what king is. Having ample amount of cash to run your business is king.
Rob Artigo: You had remarkable success at Micrel. Can you walk us through an example? The ones you lived by as the leader at Micrel really can apply immediately today for business leaders out there who are actively engaged in trying to be successful.
Ray Zinn: The belief that you can lose money and then recover it is really a falsehood. If you plan to lose money, you plan to fail. So we’re going to get some hate mail on this one maybe from some companies that will throw cash at the wall and thinking that it’ll recover, it’ll come back. It’s like catching a cold. You try to avoid a cold, you don’t try to catch a cold. And so the thought that, oh, I’m going to spend this money because I plan to invest it and it’s going to come back, is just a falsehood. And I said, we’re probably going to get some negative comments on it.
But running your company as though cash were king, you’re going to have a more profitable view in the way you spend your money. And I know that in my industry, the semiconductor industry, that these companies that start up are spending tens of millions of dollars and developing products without ever expecting any return for a few years. But because things change so quick, because the economy changes, the economics of the world change, that banking on the future is really a bad solution to running your company.
Run your company for profitability, not for future, but for the present. As they say, yesterday is history, tomorrow’s a mystery, today’s the present, that’s why they call it a gift. So don’t run your company as though you’re going to recover in the future.
Rob Artigo: There’s a gambling analogy that goes along with this too is the people get into their… Not to mention, it’s probably not a good idea to gamble anyway. The gambling addict gets into their head that if I bet a little bit more, I can win the money I lost back.
Ray Zinn: It’s called doubling down and that’s-
Rob Artigo: Yeah. Recipe for disaster.
Ray Zinn: Exactly. So I know we’re probably going to get some hate mail in this. But I don’t believe that you should start your company by saying, “Well, but I’ll make money in the future. I’ll spend it now and it’ll come back.” That’s just a recipe for disaster.
Rob Artigo: In a world that still celebrates hype and massive burn rates and doesn’t listen to advice like that, why does the cash is king philosophy remain the smarter path for building something that really lasts like Mike Rowe?
Ray Zinn: As I said, if we go into that business or that opportunity with a thought of making money as opposed to spending money, the chances of you succeeding are greater. Nine out of 10 companies fail within the first three years because they didn’t believe cash was king. Money doesn’t grow on trees, even though some people think it does. Our government often believes money grows on trees or something because they spend it before they have it. If you spend the money that you don’t have, you’re going to be borrowing until you die, as you would. So you know-
Rob Artigo: The government’s always arguing that the dividends will come later on down the road. Spend it now and the savings will come later, because the dividends will pay for themselves. And I have yet to see that come to fruition in government decision making.
Ray Zinn: That’s true. And as we were talking about, it’s those companies that don’t believe cash is king are the ones that are going to… the nine out of 10 that are going to fail.
Rob Artigo: Yeah. I hope we don’t fail as a country in that way we’re thinking about that.
Ray Zinn: But the way we’re spending a $39 trillion in debt, that doesn’t sound like a winning solution.
Rob Artigo: Yeah. And then when you’re doing that and you have the ability to print cash, the two are potentially harmful bedfellows as they say. So Ray, thanks there. Let me let the listeners know cash is really king. They could take a hard look at their own finances this week. Are you managing cash with discipline, or are you chasing growth at the expense of sustainability?
So you can pick one principle from today’s conversation and just apply it immediately. I mean, come on, don’t gamble with your money. And also remember cash is king. Thanks for listening to the Tough Things First podcast. Subscribe, leave a review, and share this episode with leaders who need to hear it, even if they send us a message and complain about it. We’ll be back soon with another tough topic. Until next time, do the tough things first, right Ray?
Ray Zinn: And get our books.
Rob Artigo: And get the books, Tough Things First. The Zen of Zen Series and Zen of Zen Daily, as well as The Essential Leader. Thanks, Ray.
Ray Zinn: Thank you, Rob.
