In lean times, build a cash moat

In lean times, build a cash moat

Jeff Bezos letter to shareholders 2000 
Key message 4/22

Jeff Bezos has been writing a letter to shareholders since 1997 and looking at all if them gives an insight to the organisation and a masterclass in leadership. This is a series of short blogs  that gives you a snap shot / key takes outs of each letter, along with links to them all.

“The year 2001 will be an important one in our development. Like 2000, this year will be a year of focus and execution. As a first step, we’ve set the goal of achieving a pro forma operating profit in the fourth quarter. While we have a tremendous amount of work to do and there can be no guarantees, we have a plan to get there, it’s our top priority, and every person in this company is committed to helping with that goal. I look forward to reporting to you our progress in the coming year.”


Focusing on free cash flow or otherwise giving your business some form of cash moat (whether through outside equity, debt stakes, or tight operations) will help ride out difficult times when customers aren’t buying and/or financing has dried up.

If you’re able to maintain composure while others fall, you have the opportunity to come out ahead and capture a much bigger market share.


The dot-com bubble took down a slew of internet companies, including and fashion site Amazon, too, nearly went bankrupt.

Between 1995 and 2000, the NASDAQ rose from under 1,000 to over 5,000. Following its peak at 5,048, panic ensued, and the index lost trillions within the year.

While the majority of tech upstarts folded during the crash, Amazon stayed afloat. Since March 2000, the company has grown about 20x in market value.


One reason that Amazon was able to ride out the downturn was the tight cash conversion cycle.

While some companies left inventory in stock for long periods of time, Amazon was always focused on minimizing this to a few days at most, and collecting payments from customers before paying suppliers. This avoided lag times and ensured that Amazon continued to have cash coming in while others were bleeding dry.

Prioritizing free cash flow and being extremely disciplined with their operating cash flows gave Amazon a sound foundation they could use to ride out tough times and ultimately come out ahead.

Author: Andrew Mann

Managing Partner at NorthBailey. Having had senior marketing & insight roles at Tesco, Sainsbury's, Asda, Coop and M&S, I'm now using my experience & network to solve strategic marketing problems for NorthBailey clients

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