In early 2008, the group coalesced under the name Cash Cash, with members Jean Paul Makhlouf, Alexander Makhlouf, and Samuel Frisch. They came up with the name Cash Cash due to legal issues that arose from not trademarking their previous name "The Consequence." In an interview Jean Paul stated, "Basically we were in a previous group growing up and never thought to copyright the name because when you're a young local garage band, you don't have the money and don't think it really matters. Well after we signed our first record deal, it kind of did matter. We got hit with a ton of legal notices about it from the person who owned the name, and had this old agent trying to screw us over, so when putting the new group together out of frustration, I was like, we should just name this group 'Cash Cash' because every one is after our cash, and we don't have any yet."[10][11]
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For most of my time investing The Fool's money, I found myself sitting on a considerable amount of "dry powder." If you happen to be a private equity firm -- which pockets fees even on money that's not invested -- that may not be such a bad thing. If you're trying to outpace the S&P 500, it's not a great play. Though my stock picks on average beat the market, when you considered the drag that the cash provided, my overall portfolio trailed the S&P.
Sure, in retrospect we can look at certain time periods and say, "It would've been much better to be sitting on cash then!" And that, plus a roll of quarters, might get you through a New Jersey toll booth. But are many (any?) of us really any good at figuring out those particularly good or particularly bad times to invest as they're happening?
Now step back and look at the S&P over long time frames. Time that you spend with your cash on the sidelines is time that you're not earning returns. As my Motley Fool buddy Morgan Housel has pointed out on countless occasions, the best investing is often just being boring and consistently investing.
This is a guide intended on helping you make the quickest profits possible, most relevant in early game decisions to give you the best start possible. From cheap but effective animal produce, strategic mission choices, and useful mods, click the link below to get a detailed breakdown of the best methods for quick cash!
SaaS businesses face significant losses in the early years (and often an associated cash flow problem). This is because they have to invest heavily upfront to acquire the customer, but recover the profits from that investment over a long period of time. The faster the business decides to grow, the worse the losses become. Many investors/board members have a problem understanding this, and want to hit the brakes at precisely the moment when they should be hitting the accelerator.
In many SaaS businesses, this also translates into a cash flow problem, as they may only be able to get the customer to pay them month by month. To illustrate the problem, we built a simple Excel model which can be found here. In that model, we are spending $6,000 to acquire the customer, and billing them at the rate of $500 per month. Take a look at these two graphs from that model:
If we experience a cash flow trough for one customer, then what will happen if we start to do really well and acquire many customers at the same time? The model shows that the P&L/cash flow trough gets deeper if we increase the growth rate for the bookings.
If plans go well, you may decide it is time to hit the accelerator (increasing spending on lead generation, hiring additional sales reps, adding data center capacity, etc.) in order to pick-up the pace of customer acquisition. The thing that surprises many investors and boards of directors about the SaaS model is that, even with perfect execution, an acceleration of growth will often be accompanied by a squeeze on profitability and cash flow.
As soon as the product starts to see some significant uptake, investors expect that the losses / cash drain should narrow, right? Instead, this is the perfect time to increase investment in the business. which will cause losses to deepen again. The graph below illustrates the problem:
The second guideline (Months to Recover CAC) is all about time to profitability and cash flow. Larger businesses, such as wireless carriers and credit card companies, can afford to have a longer time to recover CAC, as they have access to tons of cheap capital. Startups, on the other hand, typically find that capital is expensive in the early days. However even if capital is cheap, it turns out that Months to recover CAC is a very good predictor of how well a SaaS business will perform. Take a look at the graph below, which comes from the same model used earlier. It shows how the profitability is anemic if the time to recover CAC extends beyond 12 months.
Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover the cash problem that we described earlier in the article. It is often worth providing good financial incentives in the form of discounts to encourage this behavior. The metric that we use to track how well your sales force is doing in this area is Months up Front. 2ff7e9595c
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