It was an interesting meeting to me. When I suggested a number for the 6/30 cash balance of the company (having reviewed the financial statements) he immediately corrected me. From memory he gave me the correct number, then grabbed a report from his desk and added a few more significant digits.As we talked about the valuation of his business, he was in tune with every nuance that would influence the value and every thing that the value would influence. He knew numbers cold. He knew revenue and profit projections, the economic structure and the full financial model. In sum, he had the numbers down cold. Why is this noteworthy? I've only known one other CEO in recent years that knew the numbers so well. With our help, he raised $12 million for his young business.
Suggesting that knowing the numbers is THE key to success would be folly, but let me suggest that a CEO that has the complete package will understand finance and accounting, will care about today's cash balance and will know what the business needs to do to generate more. And she'll have a plan for doing it.
In contrast, a CEO who thinks it is someone else's job to worry about the cash or figure the numbers, lacks the key information required to actually lead. The cash balance, the burn rate, the projections are not random bits of information to a quality CEO. They are the keys to understanding the efficacy of strategy and tactics.
Now for an impromptu quiz for the entrepreneurs reading this post: write down how much cash is in the bank right now. Go check your answer. Were you right? Close?
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