So I’ve decided to share my coolest business magic trick with you. I can create a million dollars in cash flow out of thin air – and valuable as a million dollars is, there’s nothing like magically creating extra time.
Now, now, I know that a magician isn’t supposed to go revealing the way his tricks are done. It’s bad for business, and where’s the money in that!?
But what’s good for you is good for business, so I’ve decided to share.
Now You Owe 4 Million . . .
First, let’s suppose that you have 30 day terms with your vendors and a million dollars in payables every month. Imagine that we’re just looking at the first four months of the year, January through April.
Over the course of those four months, then, the total payments are 4 million dollars.
Check out this picture:
So how do I create a million dollars?
And Now You Owe 3
All I have to do is extend normal trade terms from 30 to 60 days and suddenly you owe nothing in January!
That means that the million dollars walking out the door in January is still in your pocket. A million dollars has just been added to the positive side of your cash flow.
That’s right: in the four month period of January through April you’re now paying only 3 million dollars! You still owe that million, but by changing the timing of your payments, it’s been pushed back every month going forward.
Don’t Try This at Home
So why have I told you one of my greatest magic tricks and one of the best strategies of my turnaround success? Because the secret’s in the sauce!
My real talent is playing, “Let’s Make a Deal.” They don’t call me Monty Hall for nothing. The key – and hard part – to this magic trick is doing the right financial assessment and then successfully renegotiating with vendors to obtain extended terms and create that improved cash flow.
When businesses try to get vendors to give them an extra 30 days to pay a million dollars, vendors get agitated and concerned. My job is knowing what vendors need to hear, what makes them comfortable, providing them with the proper assurances and then making sure that those 30 days are used in the best possible way to ensure things get back on track by the second month.
Remember, you have to keep to your negotiated deals. You don’t want this to blow up on you, and it takes a professional to see this process through because generally this trick is one piece of a larger successful turnaround and restructuring strategy.
In business there’s hardly anything so valuable as creating time, and if you can make money come out of that time to boot, you’re in great shape. My skills lie in putting people into great shape.
My golden formula is time + energy = value. I create the time and bring the energy, and with those two pieces in place I can provide value.
Have you ever tried to renegotiate your terms? If so, what happened? Have you ever tried this trick yourself?