You cannot discuss finance when you are too optimistic

 

In today´s lecture this quote was made by the finance professor @HECParis. Again, there is this perception that there is a kind of “solid” world ruled by careful and risk averse people. On the other side stand the “dreamers” that don’t see the upcoming dark clouds.

We have gone through a case study of a very profitable company in a heavy growth situation running out of cash due to the increase of working capital. The founder and his wife were still owning >50% of their company but they had to look for either for new shareholders or to borrow more money. The conclusion was that for the founder it would be best to buy himself some time by borrowing money and to use the won time to sell his company.

Let´s imagine this founder was a product driven person (actually his company was in the software business). Let´s further imagine that all his fantasy doesn’t really help his company in the light of the upcoming cash bottleneck. A fantasy about great new products finding many users who are willing to pay. But the original product visionary is busy optimizing his cash cycle. He can´t build great products. Would this be the moment to hire a Product Manager?

In other words: does the CEO have to be careful by nature and the Product Manager is the optimist by definition? How do they come to conclusions? What is best for the company?

The only way to avoid this kind of situation is to plan very far ahead. Observe carefully early signs of issues and react appropriately. And don’t listen too much to the optimists (aka the Product Managers  ) in your company…

By Jörg Malang

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