Fall 2013 Issue of Horizons

CHAIRMAN'S CORNER

Lessons Learned by Jim Castellano, CPA

N ow that some green shoots are beginning to sprout from the earth scorched by the horrid global financial crisis, I hope that we have all learned lessons that will make us stronger, more likely to survive (maybe even prosper) when the next crisis arrives. History does have a way of repeating itself and wise business people make a point to learn from our past in order to succeed in the future. Here are some of my thoughts on lessons learned. Focus on Cash Flow So many businesses that were prospering in the early part of the new millennium suffered during the crisis because they focused on revenues, net income or some metric other than cash flow. Inventories were built in anticipation of continued growth and prosperity, land was acquired with the expectation that the demand for new housing would never end, plants were constructed to increase capacity, and on and on. Making cash flow a key indicator is a wise decision in light of history. We learned that we cannot pay salaries with inventory, banks do not want our land in payment of our borrowings, and creditors don’t care about our excess capacity. Manage and Minimize Fixed Commitments A wise person once told me, “never build a building without a back door.” The point being, flexibility in managing fixed obligations is worth something. Of course, we have to make long-term commitments at times for real estate or supply contracts, but do so with thought to provisions that might be negotiable to minimize the impact of adverse events. Take Extraordinary Care of Existing Clients While Seeking New Opportunities RubinBrown’s existing clients provide the capital in the form of ongoing business to enable us to pursue new opportunities. Always keeping the existing clients in mind, doing all that is necessary to continue to earn their confidence and loyalty, will increase the chances of achieving new goals and surviving, if not prospering, in difficult times.

Jim Castellano, CPA Chairman

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