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MB Partners Zrt.
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MAGÁN
BANKÁR
PARTNERS
UNDER
CAPITALIZED
COMPANIES?
WITH THE DEEPENING OF THE ECONOMIC CRISIS,
WE HEAR MORE AND MORE ABOUT THOSE POOR, UNDERCAPITALISED COMPANIES.
A partner of ours, who distributes household goods,
complained to me the other day that he could perform
well, even these days, only if his company wasn’t undercapitalised.
If he had enough capital, he could stock an
appropriate selection for his customers, who will order
from him if they get 60-90 days credit. “If we had
enough capital, our banks wouldn’t take all our profits”
– he argued. “What a competitive advantage capitalrich
multinational companies have against cashstarved
Hungarian entrepreneurs…” – He would have
added, had he been sure of a sympathetic reaction.
I have no objection against capitalising companies;
after all I make a living by arranging such and similar
transactions. However, this capital-shortage problem
reminds me of the penniless little men. Recently a café
waiter explained to me, in response to a courtesy
question about their post-crisis business, that success
may only be achieved by people who were already rich,
which position could only be attained through theft,
inheritance or lottery”. (Poor soul was ignorant of the
dismal statistics, that the 95% of lottery winners lose
their winnings in 12 months or less.)
entrepreneureye
I believe that this “capital-shortage” problem, in most
cases, arise when people misunderstand or misinterpret
the cause and effect relationship. Let’s look more
closely what is causing this damned lack of capital:
ITS BETTER TO BUILD A BUSINESS
MODEL ON CREATIVITY THAN IT’S CASH
Inventory management. The Japanese solved this
problem after WWII, when – with the help of an
American statistician, W. Edwards Deming - introduced
the concept of Just-in-Time inventory management.
This meant simply that stocks, instead of being stored,
should be received as and when needed. Of course,
just-in time-delivery is only possible for those who
produce based on precise plans, with discipline and
without rejects. It also helps if your product or service is
differentiated, as commodities may be purchased
anywhere. Only suppliers of exceptional quality and
elsewhere unavailable products may continuously
produce to order, rather then for the warehouse. Ferrari
need not keep an inventory of its wait-listed models.
m&a hungary letter
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