Why Being Strapped For Cash Can Help Your Business

I’m here for dinner and came across this car. Check out the license plate. Porsche 911, license plate says, “Get prenup.” I thought, “That’s pretty cool.”

And it got me thinking about something that happened in my business years ago when I first started my business online. This was probably around 2007. I was looking to do some PR, and so I didn’t have a lot of money at the time, and I said, “Hey, I’m looking for investors.” Because I was smart, right? So I had a friend introduce me to someone he knew, who did that kind of stuff. We had a conversation and I said I was looking for $15,000 and in exchange he wanted 20% of my company. Oh, man. Talk about the deal of a century had that gone through.

Parksinson’s Law

I’m really happy that it didn’t because it would’ve been a real big waste of equity. But here’s the thing. Whether we’re talking about getting a prenup or partnerships or getting people to invest in your business, listen, I think, quite honestly, it’s wasteful. You get so much more creativity and innovation when you are strapped for cash.

You’ve heard of Parkinson’s law, right? So Parkinson’s law talks about, whatever amount of time you have, that’s how much time you need to get it done. But the same also applies to demand and supply. So when there is a lot of supply and the demand goes up. Right? So if you have a lot of cash hanging around, the demand for more cash or to use that cash goes up rapidly. But as soon as demand goes down, supply also goes down. Which means that when, let’s say, in your business, you have less money, it can actually force you to be a lot smarter because you have to think and innovate and be more creative than if you had tons of money to throw in a nine hole golf course or ping pong tables in the head office. Right?

It’s not about having resources, it’s about being resourceful.

So I want you to think about this. Regardless of what position you’re in business, let’s say you’re relatively new, not new, but maybe you’re not crushing it, when you’re not making millions of dollars a month. Maybe you’re just making a couple hundred bucks here and there. Embrace that. Embrace the suck, as the Navy Seal say, because that’s a great opportunity for you to really start to get innovative. It’s not about having resources, it’s about being resourceful.

And I’ve seen this happen a lot when companies, and I’ve made this mistake a few times in my life. The more money you make, the more money you spend. And I’m all for that. If you’re spending on advertising and that’s going to further generate business for you, but you’ll find yourself, the more money you make, the more supply there is, the more demand there is, which means you have more money to blow. And we see that, not just in our industry, but in any aspect of life. Right? %hey talk about, Jeff Bezos, he recently got divorced I think, and his wife that just divorced him got $37 billion. What are you possibly going to do with $37 billion? I promise, you would find ways to spend $37 billion, just in the same way you’d find ways to spend $37,000. Right? We adjust. We are creatures of our environments and we adapt very quickly.

Managing Cashflow

So my suggestion to you is this. Is learn how to manage your cashflow, learn how to manage your money so that even when you’re making a lot, it seems like you’re not. And one of the ways you can do that is by setting a strict budget for your operating expenses. So, for instance, you would say 50% of everything that comes into my company is going to operating expenses. And if there’s anything more, like let’s say operating expenses ended up being 50%, that was the goal, but you had to spend more than that to meet your operating expenses. Now your business is working at a red line, you’re not going to be able to sustain that. So you have to figure out either how do I make more money or how do I cut my expenses?

When you have this level of fiscal discipline, it doesn’t matter how much money you make because you’re disciplined and you’re not going to blow stuff. So this is one of the lessons that I’ve learned over the past couple years, and I’m super grateful I did, because I was terrible at managing my money when I was a little bit younger.

So anyways, hope that makes sense for you. There’s a couple lessons in there. But manage your money well. When you don’t have a lot of resources, be resourceful and embrace the suck. When things aren’t going well in terms of the amount of money you’re making, use that as an opportunity to be creative, innovative, and things will happen in an awesome way for you.