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I don't think he's presenting a dichotomy at all, false or otherwise. To paraphrase heavily, he's delving into the fact that these are simply different things. Profit, free cash, EBITDA, etc. These have different implications. Particularly, they translate into capital very differently. Ability to borrow. Ability to raise equity. Pay dividends. This translates into radically different trajectories and outcomes. In 2020 terms, you might also include growth rate, MAUs or the current trendiness of the startup. This also, essentially, translates into real world effects. Big ones. Most people, including many "business people" don't quite realize the implications of a positive or negative float. The difference between a -20 day float to a +20. With a positive float, growing itself is cash generative. With a negative float, growing is cash consuming. A business might grow, produce less profit but more cash. Outside of accounting, there's a tendency to dismiss this nuance as trivial and convergent in the long term. In reality, the future never comes. It's always the present. |
So long as you're running a profitable business, cash flow management does seem to be a pretty trivial problem. The difference between positive and negative float is just a loan. And, if you can show a bank that cash is guaranteed to come in at a future date, you will have no problem bridging the gap with a loan or line of credit.