. . . to running a successful business
This is a great rant on iPad vs Android for tablet development. But what really puts me over the top isÂ this insight on one of Apple’s core competitive advantages:
When a vendor needs to retool for a new manufacturing process Apple has developed or needs to increase their output capacity, Apple shows up with a wad of cash in hand. They don’t have to liquidate any assets or get a loan or seek permission of shareholders. They just play Daddy Warbucks and pull out a wad of million dollar bills. Apple’s partners, in addition to getting large-volume contracts, can get working capital as part of their arrangment with Apple without taking out loans. A definite part of the reason you were able to buy an iPad for only $499 is because Apple didn’t follow conventional wisdom about cash on hand.
You see, over the years Apple has built up over $60 billion in cash reserves. Many harshly criticize Apple for not doing what the rest of Wall Street does: Spend it, buy back stock (pushing up the stock price), or throw it off to shareholders as dividends. Apple refuses this conventional wisdom – with great result.
As a micro-business owner, I don’t even bother arguing this point with my MBA friends anymore. They’re all about leverage (which is a fancy word for ‘risk’). I’m all about finding a better deal and not being tied to my mistakes for the next 3 years.
My take-away: Cash-on-hand is the indication that you’re doing something right with your business. Upgrades, new hardware, new software, should all come from the cash you’ve saved while doing business.
If you don’t have the cash to buy what you want? Re-evaluate your business and alter it. And keep altering it until you find an angle that starts throwing off extra money that can be used to re-invest in your business and yourself.
(HT Tim Wilson)