There are a few things that most privately held mid-sized companies in Germany have in common; one is the avoidance of deficit spending wherever possible.
At the end of 2007, I decided to make it a strategic goal to fund operations purely out of our operational cash flow. That’s a very mid-sized company kind of thing to do. At that point, we’d been using our overdraft; however, I always had a bad feeling about spending money I don’t actually have.
So what could I do? I decided to cut costs significantly and outsourced all areas outside of our core business. I decided that each and every project had to be cash flow positive from day one. Additionally, I re-negotiated the payment terms with our suppliers. Now we have forty five days for payment, in many cases even ninety days.
It worked. Right now we avoid debt like the plague. Our company rarely uses our overdraft and we finance ourselves exclusively out of our operative business. We’re a financially healthy company.
When I look at other companies, big and small, we’ve done everything right. Many of them are in debt now and are having a hard time re-financing. They might still get credit but the conditions are lousy. Some are even on the verge of bankruptcy.
Lesson learned: Live within your means. This is a business principle to which ECT adheres religiously. It is the philosophy that is the basis of our success. It also forces us to do sound, good business because customer satisfaction and a portfolio of reliable products and services which are in line with market requirements are the only guarantees for a company’s success.
Apart from that, we’re not dependent on any bank. In times of crisis, banks only want to lend money if they have zero risk and a huge profit, but that’s another story…