The two words that define a healthy business—large and small.

I was 19 years old, writing software on my computer, when I heard my dad’s voice booming from the other side of the house. He was laughing with a new friend I had never seen before. Tall, slinky, light-skinned fellow with large eyes and a sharp nose.

This became my first mentor, who would give me two magic words that define a business. Looking back 20 years, following his advice would have saved me a world of trouble. Sadly, I did not take it seriously until it proved its weight. Today, all my business decisions revolve around these two words in one way or another.

One afternoon, we sat in his lounge at his home in Sandton. Large shiny marble tiles with glass panels revealing the infinity pool outside. White couches. Spotless. He asked, “What makes a healthy business?” I rambled for a few minutes, and he listened patiently until I stopped.

The room became momentarily silent as I waited for his approval. “You’re on the right path,” he said, “but there are only two words to keep in mind. Working Capital. Unless you have working capital, everything falls apart regardless of the size of your business”

He proceeded by saying that working capital does not imply having your own money; you just need to have access to it. Working capital is to all businesses what air is to all animals. Even with broken bones, if air still courses through our lungs, then each day brings within it an opportunity to heal, fix mistakes and pursue new opportunities.

Likewise, if a business has working capital, then it can afford to make mistakes. For instance, in 1985, Coca-Cola was losing the blind taste test to Pepsi, which was sweeter. With Pepsi breathing down its neck with advertising campaigns proving that when people are blindfolded, they preferred Pepsi, and with market share slipping away, the executives at Coke decided to launch a new, sweeter version.

However, there was an uproar. Customers hated the sweeter Coke, so much so that they reversed the decision and reinstated the classic flavour that we all enjoy today. But what if they did not have working capital? We would not have Coca-Cola today.

So, in your business endeavours, large or small, keep an eye on those two words that make the world go round.

Working Capital.
Make things happen