I learned this expression early in my life, not as a farm hand or even by having cows in our suburban yard, but as a CPA.  Although dairies have been plentiful in the greater Puget Sound and most other parts of our country, I have only had the opportunity to saddle up with a stool and bucket once in my life to milk a cow.

Here are a few of the warnings I was given by someone more familiar with the job:

• Cows kick and they kick hard. They can knock your teeth out and give you a concussion. Be sure you're working with a nice, gentle and well-trained cow, or have experienced supervision.
  
  
• Watch your feet. A cow typically weighs around 1,000 lbs. If she steps on your foot, those 1,000 lbs will easily break your toes.
  
  
• You may also get smacked in the face (sometimes the eye) by her tail. This is not harmful, but it can be inconvenient and annoying. If this happens, be sure to wash your face and eyes--there's a good chance there's manure and bacteria on the tail.
  
  
• Just because the cow's getting milked doesn't mean she has good manners. Don't be surprised if she drops a "cow pie" in the middle of her milking.

There are comparisons between over-milking a dairy cow and a “cash cow”.  If your company has produced buckets of cash and you have been dutifully clearing the corporate udders, you may be doing harm to the company.  Just like over-milking a cow can cause stress on the animal that weakens it, so does removing the cash and profits from a company.

Some of today's cows are unnaturally milked dry up to 3 times a day. Did you realize that the life of an average cow is shortened by 4/5 (80%) due to excessive milking and calving?  That means it would live a natural lifespan 5 times greater if it was not treated to these excessive stresses.

Your company also produces milk, in the form of cash.  Cash is the key component of working capital and working capital is the life blood of any company.

When business owners strip away all the cash or profits from the company, there is nothing left to use when the cash flow from profitability dries up.  I have seen owners who insist on taking every dollar of cash/profits out of the company for their own personal use, every year.  This may be possible with S corporation tax structures, dividends and compensation but it is not healthy for the company.

Bankers frown on removal of all the profits by the stockholders in the form of cash because they know it is required to operate and maintain liquidity when an economic downturn arrives or the company experiences significant losses.

This past year one company that I am an owner in went from having its best fiscal year ever in 2008 in terms of profits and cash flow to losing a significant amount of revenue and incurring a loss through 2009.  We survived without using our credit line or pouring personal cash back into the entity.  Without the foresight to preserve working capital and cash we would have been out of business along with our competition.

Sometimes advisors encourage owners to remove cash from the entity to protect it from any potential legal action or for funding other investments.

Despite the fact that the business owner operates the company to create profits and cash flow, stripping it all out can lead to a similar shortened life span of the company.  Although you may not get your toes stepped on by the 1,000 lb donor or have a “cow pie” dropped into your lap, the affects of an over-milked “cash cow” can sometimes be just as painful or unpleasant.

Remember that cash is king is business and a requirement to keep the company alive and strong.  Resist the temptation of taking out more than a reasonable amount of cash and prepare for the times when cash is not being generated so freely.

That advice alone has allowed certain companies to weather the 2008/2009 depression/recession.  If you haven’t been slapped yet by this “economic tail”, remove your hands from the udders of your corporate funds and let the company maintain a healthy reserve of cash to keep you competitive and lengthen your business’s lifespan.