Ahh, the dreaded Cash Conversion Cycle (or "Succeeding yourself to death") I'm a wearable device founder, and it's AMAZING watching how often this happens to my hardware friends. Especially once they begin raising serious amounts of capital.

I had a friend who got into Walmart -- he was ECSTATIC. His product was a smart electronics product, and quickly shot up to being a heavy seller.

It sold so well---that he was bankrupt within six months.

Why? Because he paid his supplier upfront. Walmart didn't pay him until 60 or 90 days after sell-through. After the first run, Walmart wanted more, his P&L (accrual) showed profit, so he took a loan. Then another. Then suddenly he couldn't get any more loans. And he couldn't get a hold of product. And because of his fixed costs, there was no way to future payables could save him.

So common, and no one seems to know about it.

What should he have done? Negotiated a 60-90 day payment cycle with his supplier?

Turn down the Walmart offer...

Accepting the offer is selling your car for gas money.

seeing "got into Walmart" used like "got into Yale" is so weird and strange to me that it reminds me how increasingly clumpy and centralized everything is becoming in the world.

Instead of a mesh network of equal nodes, we have a tree of exponentially larger nodes (from bottom to top)

Sorry, why wouldn't you use invoice factoring to solve this problem? Unless margins are so low that the factoring fees would put him into a loss. You'd get very competitive rates against someone like Walmart.

I just read by the Nike founder and he describes how for many years they had massive problems keeping the business afloat despite growing like crazy.

Right, we would define what you're pointing to as a subset of cash flow - you are specifically highlighting "liquidity" when you talk about the lag there, but I agree we could have been more clear. 82% is referring to failure for financial reasons vs. management, regulatory, etc.