Recently, once of our lenders rug pulled us, forcing us to quickly create liquidity. I was surprised by how well some of the changes worked and how we were able to create cash.
An illustrative example:
I moved payroll from weekly to 2x a month, and it freed up $$$. We had originally moved to weekly payroll because it helped attract production/warehouse employees during the shortages of 2020/2021...but never moved back because we thought people would be upset & quit. Turns out nobody cared.
We run pretty lean at this specific co. Cofounder and I have done a ton of turnarounds, so I like to think we are cash efficient.
But, then I found ~5 - 8 initiatives like the one above!
This has actually happened a handful of times in my career, and I am always shocked by some of the places we are able to dig into to unlock wins.
Because of this, it makes me wonder how lazy we might get if the company was running very light on leverage...and the lazy operator thing is even worse with management hires that do not have the same incentive (own the cap table). Makes me think we should be running with at least 2 turns at most of our companies all the time...even if we dont necessarily need to pull the cash.
The discipline that debt brings was a popular thesis in the 80s/90s but I dont see it discussed much now. What do you guys think?
For color, we're an independent sponsor, but we own the cap table outright between my cofounder and I of some of our companies, and others we will shortly...so we don't really have board oversight. I think if we had a board, that might help keep up disciplined, but I am not sure that is the right move.
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