HOW A NIGHT OF TRICK OR TREAT TURNED INTO A LESSON IN CASH MANAGEMENT - 10 LESSONS
10/31/2001 - Baris Karadogan
What I am about to tell you is all true except for places where I have embellished. Tonight, or about 2 hours ago began my first trick or treat experience in America. To be completely truthful it was the second trick or treat. The first one was when my parents were in the U.S. for two years between 1977 and 1978. I was 5 years old then and the only thing I remember is that I was “Casper the Friendly Ghost”. I also remember sticking my head in a bucket with apples in it. Years later I found out that that was called ‘bobbing for apples.’ Well they don’t bob for apples anymore and Casper, friendly as he may have been is now replaced by power rangers and Arachnaman, or was it Spiderman, I don’t remember.
Anyway, this was the first trick or treat with our twins Sofia and Lara. Our nanny Danielle was with us, and so was my brother, Yalin visiting from London. The week before I had promptly bought a bag of candy thinking that this little bag would be more than enough for the entire evening. I thought about 4-5 groups of kids would visit. Little did I realize what was to happen.
So here is the cash flow analogy. Imagine we are running a business and the candy I have at home is cash. When kids come I give out cash and when my daughters collect we receive cash. Those are my payables and receivables. In the end our product is, shall we say, “a happy Halloween.” The more kids come, the happier they leave because they get candy, and that’s the business we are in.
It started very well. The business plan was simple. My wife Susana, my brother, our nanny and the twins would go out in the neighborhood collecting and I would stay home to give the candy and join them occasionally. Lesson 1) Simple in theory doesn’t mean simple in practice.
So it took a while before Sofia and Lara, our sales force, was convinced to wear the chicken outfits that we made for them. Their sales training took longer than expected. Lesson 2) A sales force takes longer than expected to become profitable. In the meantime our doorbell kept ringing and I began to give out candy. Still grossly underestimating demand, I was hanging out Butterfingers and Hershey’s kisses faster than free food disappearing in a company kitchen. I wasn’t giving one piece of candy to each ghoul either; they were getting them in two’s and threes. Lesson number 3) It is easy to spend cash when you have lots of it.
So the evening continued. Slowly I noticed that our cash (candy) supplies began to run low. My sales force was knocking on doors left and right, but the candy they collected was in their cute little buckets. They were booking orders but I wasn’t realizing them until somehow they were brought back to our home. Lesson 4) Bookings don’t generate cash until you collect.
Enter my brother Yalin, who was dressed as a Jedi Knight. I gave him the orders to bring the candy from Sofia and Lara’s bucket back to our house. In a way he became my collection agent. During the night he kept bringing back the candy Sofia and Lara collected and I kept giving the same candy out. This worked just fine and I started accumulating cash. We were collecting faster than we were paying. Lesson 5) Days receivable < Days Payable generates cash. Thank God for Michael Dell.
Well there was a problem growing here. Now that we were rolling in cash, the CEO of this whole scheme, myself, engaged in funneling cash into his pocket. In this case, into my belly, because I was giving out black licorice candy and eating the Nestle Crunch Bars. Lesson 6) When things are going well, management gets fat!
And then the troubled times hit. Since Sofia and Lara were so cutely dressed as chicken they started spending more and more time at every house. This affected our cash position. While our neighbors/customers were asking intelligent questions like “are they twins?” and saying how cute they were, my brother was qoting Star Wars saying “May the Force be with you” and “Hello young Padawan!” If only he looked in the eye of our neighbors and waving his hand said “you will give me all your candy now” we’d have no problems. But that didn’t happen. Our sales force started to drag their feet. Our sales cycle got longer! Lesson 7) Sooner or later the sales cycle gets longer, keep your sales force properly motivated.
By this time my sales force was expanding internationally wondering into the side streets and I no longer had control over them. What’s worse the demand kept growing. Mermaids started showing up at my doorstep in schools, and superheroes, witches, teddy bears and ghosts snuck up on me from every direction. I was scared. Halloween had really begun. Soon enough I ran out of candy and in desperation started giving out donuts from the Entenmann’s pack Yalin had bought earlier. Later I was told that giving donuts is a big no no around here. The candy has to be wrapped. There is a parent out there who may just be discovering crushed donuts in their son/daughters loot. Sorry. Oh well, the neighborhood goblins took the donuts nonetheless. Lesson 8) When in desperation a company will sell anything including damaged goods in order to make money.
It was time for a reorganization in this company. My brother the Jedi master was now relegated to a quota carrying sales guy. He also got candy for every ring. 20 month old twins and a 26 year old Jedi were my salesforce now and the Jedi was using The Force and meeting his quota. Lesson 9) When survival is at stake everybody sells.
However, even that was not enough. Our payables exceeded our receivables so much that I ran out of even the donuts. I was going to offer them rice and meatballs but even a desperate CEO must not cross every line. So I turned off the lights in our business, which means that our house wasn’t participating in Halloween and I joined my now bankrupt Halloween crew.
It was wonderful walking around the neighborhood and meeting the people that in the usual hustle of the week I never make the effort to get to know. Everybody was friendly. Everybody was smiling. Despite the troubled times we were in, there was magic around and that magic was the sense of community. While I was two continents and an ocean away from my homeland I found a similar sense of security and friendship. So here is the final lesson. Lesson 10) No matter how difficult things may get, no matter how far away you may be from your comfort zone, when you make the effort there are always friends around. Tonight was the celebration of the human spirit and I am very happy that my first Halloween in the U.S. ended in such a good note. Next year, I am decorating my house.