Warren Buffett Is Proof That Cash Is Your Savior
Your cash position gives you the option to play offense or ride out the storm
Cash. Financial reserves. Liquidity.
It’s the one thing that is essential to every business and its long-term survival. Having excess liquidity is especially important during times of panic, when the normal flow of cash is being disrupted. As Bill Gates once said: “I got this incredibly conservative approach that I wanted to have enough money in the bank to pay a year’s worth of payroll even if we didn’t get any payments coming in.” Gates stuck to this advice throughout his entire career at Microsoft, currently the most valuable company in the United States.
When the economy is healthy, deciding how much cash to have on hand at a small business, or startup, can be a difficult decision. Every dollar you have sitting idle at a bank is a dollar that isn’t being spent to grow your business. But having excess financial reserves puts any business in a position of strength, especially when faced with a recession. This preparation is best demonstrated by the legendary investor Warren Buffett. While you may know Buffett for his stock-picking prowess, he is also considered one of the most reputable lenders during financial panics due to his flush cash reserves.
