Most businesses do not fail because the idea was wrong. They fail because the cash was
not there when it mattered. That truth is obvious only in hindsight. At the time, the warning
signs are usually disguised as confidence, momentum, and ambition. The plan looks
sensible. The forecasts are neat. The leadership team is aligned. And yet embedded
within many business plans is a quiet assumption that everything will go broadly to plan.
That assumption is the real danger.
Optimistic business plans are not dishonest. They are often created by intelligent, well-
meaning people who believe deeply in what they are building. But they are aspirational
narratives disguised as control mechanisms. Over time, the instruction to “put your best
foot forward” edits realism out of the numbers. Revenue ramps smoothly. Costs behave
politely. Timing works out. Problems resolve themselves. None of this feels reckless. It
feels professional. It is also how the cash-flow death spiral begins.
Once an optimistic plan is approved, behaviour changes. Leadership starts managing
towards the story rather than the reality. Variance is explained away instead of acted on.
Shortfalls are treated as timing issues rather than structural signals. Cash gaps are
rationalised as temporary. The business waits for performance to catch up with the
spreadsheet. It rarely does. Aspiration quietly replaces control, and by the time reality
asserts itself, optionality has already narrowed.
This problem is compounded by an over-reliance on P&Ls. I fundamentally distrust them.
Always have. Not because they are wrong, but because they are abstract. P&Ls reward
narrative, timing, and accounting judgement, not survival. A business does not fail
because its profit and loss statement looked bad. It fails because it ran out of cash. Yet
leadership teams routinely take comfort from a P&L while the bank balance tells a very
different story.
P&Ls are retrospective and malleable. They can flatter performance through accruals,
capitalisation, deferred costs, and timing differences that have no bearing on whether
salaries can be paid or suppliers settled. Cash-flow forecasts, by contrast, are unforgiving.
They expose reality. They force assumptions into the open. That is why I always work from
a cash-flow forecast and management plan first, not as a supplement to the P&L, but as
the primary control mechanism. Only once cash behaviour is understood do P&Ls become
useful diagnostic tools rather than sources of false comfort.
I once flew to Kuwait to sit face-to-face with a principal investor backing a series of
acquisitions I had just completed. On paper, the deal worked. In practice, something felt
off. Holding his attention was always difficult. He had what I think of as toxic optimism: a
belief that money somehow appears when required. Not because he was reckless, but
because he had never personally faced the consequences of it not being there. My
reputation was tied to the deal, so I asked him to put his phone away and walked him
through the numbers slowly. We needed a defined amount of cash in September, and a
further clearly specified amount over the following twelve months to honour the terms we
had just signed. I asked one simple question: did he actually have that cash available to
invest? I received confident assurances. When September arrived, the money was not
there. Treating intent as liquidity is not leadership. It is hope wearing a suit.

The early stages of a cash-flow crisis rarely feel like a crisis. Activity is high. Deals are
being done. The business is busy. Leadership attention shifts to growth, brand, and
opportunity. Cash becomes something finance “keeps an eye on.” That is a serious error.
Cash is not an accounting concept. It is an operational reality. If you do not understand
precisely when money leaves the business and when it returns, you are not running the
company. You are hoping it works. Optimistic plans hide fragility behind momentum.
In another case, a founder had just closed a significant fundraise. Confidence was high.
The logic was simple and partly correct: get the deals done and the cash will follow. The
deals did generate revenue, but not quite as forecast. Timelines slipped. Margins were
thinner. Investors noticed. Controls tightened. Questions multiplied. Decision-making
slowed as boards moved to protect capital. Disaster was avoided, but trust was rattled and
progress slowed. Fresh capital does not buy forgiveness. It buys scrutiny. Optimistic plans
assume patience. Investors rarely are.
The most dangerous moment in the cash-flow death spiral is when leadership still believes
the situation can be fixed without structural change. This is when bridging finance is raised
to “buy time,” costs are deferred rather than removed, and complexity increases at exactly
the moment simplicity is required. Debt is used not to fund growth, but to delay reality.
Being cash poor is expensive. It always has been. If you only have enough money to buy
cheap shoes, you buy the cheapest pair available. They wear out quickly, so you buy
another pair, and then another. Over time, you spend more than if you had been able to
afford the better shoes in the first place. But when cash is tight, long-term logic is
irrelevant. The priority is surviving the week. Business behaves in exactly the same way.
When a company is cash poor, it cannot afford to make good long-term decisions. It
chooses suboptimal partners because better ones take time. It accepts expensive capital
because cheaper capital requires credibility and patience. Capital raises struggle because
the business cannot afford top-tier partners to take them to market, and failure only
reinforces the problem. Cash buys time and space to do the right thing. Lack of it turns
leadership into a constant scramble for the basics.
The worst example I have seen was driven by pure illusion. The strategy was to open
flagship brand locations at four to five million pounds per site and manage payments in the
meantime. Revenue would follow. It did not. When the locations underperformed, salaries
were delayed and reputations damaged. A high-interest loan was taken to bridge the
business until performance improved. It never did. The loan only accelerated the decline.
The business was wound down. Assets were sold at a loss. Everyone lost. At every stage,
optimistic plans had justified the next step forward, right up to the end.
This is not an argument for pessimism. It is an argument for discipline. Put your best foot
forward, by all means, but do not confuse confidence with control. Build plans that assume
friction, delay, underperformance, and human error. Stress cash, not sentiment. If the
business only works when everything goes right, it does not work.
Before believing your own plan, ask some uncomfortable questions:
 What happens to cash if revenue is twenty per cent lower than forecast for six
months?
 Which costs will not fall when revenue does?
 What assumptions absolutely must be true for this plan to hold together?
 Where have reassurance and intent been mistaken for committed cash?
 If the plan fails, how quickly will you know, and what would you cut immediately?

 Would you back this plan if it were your own money?
Cash-flow crises are rarely caused by incompetence. They are caused by belief. Belief
that money will appear. Belief that performance will improve. Belief that leadership can
out-think arithmetic. It cannot. Cash does not kill businesses. Optimistic leaders do.