Ken Uchikura Newsletter Vol. 392 Thumbnail
Don’t Wait Until Your Bank Account Hits Zero
In the business world, the moment you realize you’re out of money shouldn’t be when the bank account actually hits zero. It sounds obvious, but you’d be surprised how many business owners only start to panic once the well has run dry. By that point, it’s often too late. You can’t instantly secure a loan when you're in a pinch, and even if you land a big new contract today, it takes time for that work to turn into physical cash.
I don’t consider myself an exceptional businessperson, nor am I an expert in accounting or finance. I’m not particularly skilled at analyzing financial statements or complicated reports. However, there are two things I have always paid close attention to while running a company.
The first is how much cash the company currently has in the bank. The second is how much money the company needs to run.
If you know these two things, you can calculate exactly how long your company can survive—even if your revenue drops to zero tomorrow. I’ve operated with this mindset since the day I founded my business.
Thankfully, I’ve been running my company for 38 years, and during that time, I’ve never relied on business debt. Of course, I’m not against debt as a concept; many successful leaders use borrowed capital to scale their businesses, and that’s a perfectly valid strategic choice.
However, I never felt confident enough to manage that kind of leverage effectively. Instead, I aimed for a debt-free model from the start. Even when sales increased, I tried not to increase fixed expenses immediately. I avoided spending money based on future sales that hadn’t materialized yet. I always try to leave some margin just to be safe.
Just like the Shinkansen (bullet train) doesn’t run at full speed all the time, a company doesn’t need to operate at 100% capacity with no room to spare. In fact, having some margin is what lets a business respond when unexpected situations arise.
I have always stayed aware of two things: cash on hand and monthly operating expenses.
In business, profit is important, but cash is what keeps the heart beating. Don’t wait until the money is gone to wake up to the reality of your situation. Be the leader who always knows exactly how many months your company has to live.
That has been the cornerstone of my philosophy for 38 years.
Kenichi Uchikura
President / CEO
Pacific Software Publishing, Inc.
ken.uchikura＠pspinc.com
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