The Upside of No Cash

The lack of cash most entrepreneurs face does have a silver lining. It makes you a good negotiator. After all, you have few other options. Here’s our story on negotiation when you have no cash:

The dot com world was all the rage. Companies in Silicon Valley and all over the country were popping up with Ā crazy Ā valuations Ā on a daily Ā basis. Ā One of those companies, Ā Netcentives, Ā was not going after Ā the consumer like most dot coms of the day. They were going to provide an Internet-based platform to run the big loyalty programs in the country. They approached us about being their gift card reward partner. It was Ā good fit because we had no interest in the loyalty market. Netcentives started running some of the largest loyalty programs in the country like programs for airlines, credit card companies and banks. They had garnered Ā a huge valuation Ā and Ā hired thousands Ā of employees. Ā Individuals in their programs earned a lot of gift cards and as their reward partner we would ship gift cards directly to the individuals. Ā They were doing close to one million dollars in gift cards per month. As a result, at any time they might owe us north of $500,000, a huge amount for a company like ours.

“Lack of cash makes you bold.ā€Ā 

Like many other dot coms, their day of reckoning came. They had grown to three thousand employees and the press release came out that they were laying Ā oļ¬€ a third of their staļ¬€. I got a call from their CFO assuring us that this was merely a ā€œcost correctionā€ and that it would result in a more rational Ā cost structure. This is generally finance speak for ā€œThe shit is hitting the fan and we canā€™t cut staļ¬€ quick enough.ā€ I thanked him for the call, and candidly communicated that while I understood Ā he was calling to reassure us, we had to interpret the information that they were having financial Ā trouble. I communicated that their outstanding balance would be immediately due and until we received payment, we would suspend shipping gift cards. He said, ā€œI donā€™t control the accounts payable department.ā€ I pushed back and said, ā€œI donā€™t ship the gift cards, but I can get someone who does to stop shipping them.ā€

Part of this was prudent judgment on our part. Part of it was if they defaulted, it would be a huge blow to our cash flow. Lack of cash makes you bold. Without cash you donā€™t have options.

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