During my MBA, and later as a Business Head at Ola, I carried a wrong mental model: that Rs 1 is always worth Rs 1.
In corporate spreadsheets, revenue is fungible. If the dashboard shows growth, the How matters less than the How Much. But in the business I run every day, that logic is a death sentence.
This clicked when I recognised Gresham’s Law at work in my own operations. In economics, it says that bad money drives out good. When two currencies share the same face value but different intrinsic worth, people spend the bad one and hold the good. In my business, operational capacity is my currency. And if I am not careful, bad revenue will drive out every good opportunity I have.
The 90-Day Suicide Mission
Recently, I analysed a deal for 30 guards. Twenty-six security guards at Rs 19,400 per month and four supervisors at Rs 21,400. Monthly wage bill: Rs 5.90 lakhs. My service fee at 6%: Rs 35,400. Total monthly billing: Rs 6.25 lakhs excluding GST.
On paper, the volume looked like growth. Then I ran the actual cash physics.
The credit term was 90 days, but my real cash-to-cash cycle stretches to 120 days. At my capital charge of 0.8% per month, a four-month cycle consumes 3.2% of the working capital deployed. That is roughly Rs 20,000 gone permanently — not as an expense I can argue about, but as a structural cost of the financing.
On top of that, the government takes 2% TDS on the entire invoice — gross billing plus GST — immediately. On a Rs 7.37 lakh total invoice, that is Rs 14,750 of liquidity locked away for a year or more.
Before I have paid for a single uniform or litre of petrol, my Rs 35,400 service fee is down to Rs 650. That is my operational buffer for the entire month.
To chase that Rs 650, I would have to lock up Rs 7.03 lakhs in immediate working capital — Rs 5.90 lakhs for wages and Rs 1.13 lakhs for GST. This is not a contract. It is a transaction where I pay for the privilege of working.
The Retail Inversion
Contrast that with my best client: a retail customer who pays Rs 850 per guard within two days of invoice.
Because they remit the gross invoice — including GST and compliance fees — I hold that cash for 15 to 20 days before wages and taxes fall due. Receipts after 2% TDS: Rs 833. Operating expenses: minus Rs 350. Fixed cost allocation: minus Rs 300. Net cash flow: plus Rs 183 per guard per month.
More importantly, I am never out of pocket. I receive the full invoice before I pay anything out. This positive float reduces my overall capital needs. I am not just earning a margin — I am generating liquidity. That is good money.
Why Bad Money Wins the Market
The 90-day deal exists because of market structure. Good customers like my retail client are already locked in. They have been hoarded by the operators who got to them first. So when I am hungry for growth, I tell myself: take the low-margin deal, keep the team busy, something is better than nothing.
That reasoning is wrong. It is not better than nothing. It is worse than nothing.
The Physics of Displacement
When I accept bad money, three things happen that I cannot recover cheaply.
I burn my best people. One of my top supervisors spent six months firefighting a Rs 4 lakh per month account on 60-day credit. I could not reward his effort on those margins. He left for a competitor.
I drain my oxygen. Every rupee locked in a 120-day cycle is a rupee I cannot deploy when a retail-tier customer becomes available. Capacity is not infinite, and bad deals consume it just as thoroughly as good ones.
I degrade my position with high-tier clients. Operators running on razor-thin margins signal it in how they respond, how they staff, and how fast things slip. Good clients notice.
The Decision
I walked away from the 90-day deal. A competitor took it at 110-day credit terms. They think they won. But according to Gresham’s Law, they just filled their oxygen tank with carbon monoxide. They have tied up their capital and attention in a deal that costs them money to execute.
Revenue is not an indicator of health. It is an indicator of activity. If the cost of the oxygen required to earn a rupee is higher than the rupee itself, I am not growing. I am evaporating.
What I Am Doing Now
I have stopped treating all revenue as equal. Every deal now goes into one of three buckets: bad money with negative or zero net cash flow, good money with short cycles and positive float, and playable money — deals that start as bad money but can be converted.
Before I look at any deal with more than 45-day credit or less than 10% margin, I run one calculation. Capital cost: 0.8% monthly charge multiplied by the number of cycle months. TDS drain: 2% of the gross invoice. If the service fee minus those two costs is less than 3% of billing, it is bad money and I walk.
I have also found a way to convert some bad money into playable money. Recent tax updates — October 2024, Section 194-O — let me reduce TDS from 2% to 0.1%. On a 6% margin deal, that is a 30% increase in immediate liquidity. I am now using Form 13 under Section 197 to lower TDS for contracts above Rs 50 lakhs annual billing.
What I Am Still Figuring Out
The competitor who took the 110-day deal might make it work. Maybe they have access to cheaper capital. Maybe I miscalculated.
I am tracking one metric: do the good customers actually show up when I have capacity free? If six months from now I am still at the same revenue despite rejecting deals like this, my math is right but my judgment is failing.
I am betting that holding capacity for the plus Rs 183 deals is better than spending it on a deal that nets Rs 650 a month. The physics should hold. I will find out.