đź“šLearn 3 Secrets of becoming Financially Smart with best known Corporate Finance Expert, CA Vishal Thakkar.
Good evening friends uh my name is vishal and i am live again as per my promise to all of you friends uh it’s quite overwhelming to get so much of response from all of you the love the affection that you have shown the interest that you have taken in this subject called finance makes me feel that yes you guys are motivating me to deliver my best the fact stands
Revealed today that for my tomorrow’s upcoming webinar where i am going to share the three secrets of unlocking cash blockages in your business i have got more than 700 registrations already so if you haven’t registered for that i request you with folded hands to register for the same friends unlike other business coaches we don’t make tall promises we are here
To genuinely help you address the financial challenges faced by you and your company trust me it begins with a simple mindset of learning once you decide to take the matters in your hand let me assure you no force in the universe can stop you from becoming wealthy you just need to put your mind on it if you have stumbled across any of my creatives my videos my
Blogs my books my television shows the message is loud and clear the universe now wants you to take charge of finances in your hand and in the process we want you to succeed in life and if you wish to succeed in life there is no greater success than financial success let me start today’s session by sharing a very interesting story the story is of mr malhotra
Mr malhotra is a senior business owner into a business of printing basically on pharma cartons so whatever creams or other pharmaceutical products or medicines that we use they are packed in a carton and those cartons are printed so mr malodra for more than three decades is into this business now recently he is joined by his son who has studied abroad completed
His management education and has joined his father lately on speaking with mr malhotra he told me that vishal we are doing very well for ourselves we have got almost about 400 percent sales growth which is four times in last two years we have got 200 percent profit growth which is two times profit growth and our assets have also grown by 50 percent so i said
Congratulations mr malhotra i think your son is really a lucky charm and he is spearheading this business towards next level of growth but he said that mr tucker i have one problem and i would like to share that problem with you if you come down to meet us i said sir with forex profit with forex sales growth 2x profit growth and 50 asset growth you don’t need
Somebody like me you are already on a financial highway why do you need me he said no vishal you have to come down so that i can discuss it is slightly confidential so i took a flight to delhi i went i met him and in his office he said that you know vishal we are running short of cash every month i said what you’re running short of what he said cash i said how
Is it possible i mean you are riding a success wave where you are getting so much of sales your pharma customers are doing so well so how is it that you are struggling for cash i don’t understand can you explain so he said my son will explain i said fair so i looked at junior mr malhotra he said that you know i started this business two years ago i joined my
Father till two years ago all the pharma boxes were plain boring white me and my friends participated a year and a half ago in a printing machinery exhibition happening in munich germany and there we saw interesting 3d printing machines 3d embossing machines and variety of stuff that we could print on cartons i lapped upon that idea and i knew i have got my secret
Recipe of success and growth the moment we brought back some samples into india and started showing to pharma companies we were showered with orders we looked no beyond and ordered one machine and now today whatever sales growth profit growth asset growth that has been reported is due to the machinery that we got phenomenal growth amazing times we are very very
Happy only this small cash problem needs to be resolved otherwise we are on track so then i asked him that dear uh what is the cost of the machine so he said 15 crores so 15 crores worth machinery he has got and i asked him how much did you make the down payment so he said four crores all our savings whatever we had accumulated for last seven years are invested
There and then i said what did you do where did you get the balance money from so he said okay we have a cc limit of around 20 crores it was lying unutilized we were only using seven eight crores so used it so i said okay you use cc limit to fund 11 crores four crores you made down payment from your own equity and you got the machine so i asked him how much is
Interest outflow every month he said sir interest outflow for machinery alone is 11 lakhs and for other normal cc we are paying almost 8 lakh so 20 lakh is interest outflow alone now also i had to hire skilled labour who could work on the machine and i have to pay salary to them so wage wheel has also gone up and the machine is massive it consumes electricity
Like a hogger and it is hogging electricity which has resulted into another five lakh per month cash outflow so what is happening is that net net i am 35 lakhs down and out every month which i have to pay and i asked him that so how and when do your pharma clients pay that is where senior mr malotra intervened and said vishal you know you have been writing books
For pharma companies after four books and around two three lakh copies distributed freely to doctors by all the famous pharma companies in your name you know that the earliest they will pay you is 90 days and average 120 days and if the times are not good maybe 180 days so given this food situation last two years our payments have fluctuated anywhere between 120
To 180 days now month on month we are going cash negative so i told mr malhotra that don’t you feel that the decision of buying that machinery was taken a bit too soon and you hurried into it by parking all your savings all the more you also utilized your cc limit for paying the balance part of the money which you didn’t have i feel this has resulted into the
Cash crunch because we never anticipated that beyond 15 crores it will entail further cash flows in terms of interest payments in terms of hiring technical people and in terms of increase electricity bill since we did not factor all of this we are running short of working capital every month even the increased orders and the increased margin in those orders
Are not helping us because the money is coming late now you may argue that it becomes a cycle after a point in time but payout cycle is also a cycle long because payout cycle is 30 days and pain cycle is 120 to 180 days also i wonder how your suppliers are continuing to supply money to you because i am sure that the only place where you would have borrowed
Money from would be from suppliers by holding back the raw material uh payment that you make to them senior malhotra got up from his chair at that point and said vishal that is killing us you know the paper market does not offer any credit to anyone based on my goodwill my paper companies have been supplying paper to me but they are saying now no more i have no
Place to go bank has refused to enhance any further cc limit i do not know how long can i sustain if this goes on like this i think in two months from now i will have no money left to pay salaries also what can you do so i told him that mr malhotra i am sorry to say but we have landed up by taking a wrong decision at which point junior mr malhotra lost patience
And said dad i have been telling you that you have been talking to wrong consultants you know this gentleman here does not understand that the entire growth story of our company started from the time i came in and i got that machine before that machine where was the increased sales where was the increased profit and you are saying i did something wrong with all
Due respect mr tucker but i did not go to germany to spend my money on booze and on drugs i went there to work hard to grow my company if you don’t have solution to my cash issues you cannot blame me for taking wrong decision i didn’t move i wasn’t kind of not expecting such a reaction i was but senior mr malhotra intervened and said pardon my son from saying
So he’s naive fresh blood and very enthusiastic to grow but he doesn’t realize that for growth we need fuel called cash mr tucker kindly suggest if you have a solution so i told him that mr malhotra first of all you need to do two or three things which you can do to make your company come back on track firstly oxygen is missing talk to your banker and convert
Your 11 lakh interest outflow which is going due to machinery into a wctl loan working capital term load immediately mr molotra said but that would result into an emi which means principal repayment i am already struggling with cash and you are asking me to further fuel cash to the banker i said hold on think what you can sell think what you can mortgage if you
Have any additional investments in land gold fixed deposits or personal savings the time has come to break them and infuse them as equity in business second if you can mortgage it and convert this machinery into a term loan the interest outflow will come down the interest outflow will get replaced by principal repayment and eventually your burden will come down
Third apart from pharma industry talk to food industry talk to other industries where your packaging is required printing is required and see which all customers can pay money upfront offer cash discount and start collecting upfront money at least 20 to 25 percent on order and another 20 25 percent on delivery that will ease out your cash flow issues even though
Margins may be compromised a little bit but even at compromised margins we will get the so-called important life blood oxygen or liquidity in business so mr malhotra thanked me for my advice and i came back to mumbai so friends do you resonate to this story or any part of it have you ever taken decision without considering the total cash flow impact of it have
You invested money in growth without realizing that what would be the total investment what would be the monthly recurring outflows and how those outflows would be funded for the gestation period for which your asset would become productive and also after that have you reconsidered the timing mismatches that happen between your cash coming from the customer and
You paying to the other stakeholders if you have very good if you haven’t time has come when you start looking at these areas of your business now unless you start looking at these areas of business it will be very difficult for you to keep your head above the water so friends we at contretra help you to map your cash flows of business help you to make business
Cases for all the investments that you are making for growth of your company help you to tide over the cash crunch that you may be facing and educate you to do it yourself every time next time so that you don’t have to depend upon my advice or my team’s advice for life the best thing is to learn how to do fishing rather than expecting a business coach like me to
Catch a fish for you so if you want to learn fishing and how to fish money talk to us today and yes don’t miss out my webinar happening tomorrow sharp at 4 pm if you have registered please set a reminder for 4 pm tomorrow if you haven’t registered i will paste the registration link in the comment section of this live video once uploaded as a recording and i am
Looking forward to seeing you tomorrow at 4 p.m till that time be safe on money
Transcribed from video
How to Become Financially Smart? By Finance TubeliveBroadcastDetails{isLiveNowfalsestartTimestamp2021-08-06T112923+0000endTimestamp2021-08-06T114552+0000}
