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This is a true story, although the names and places have been changed. Everything ended up OK, but there was a lot of unnecessary stress — all of which could have been easily prevented by just a minimum of business planning. This kind of problem happens all the time, and it’s so easily preventable, it’s a shame it happens at all. The lesson: Don’t be a victim of unplanned growth.

The story takes place in a midsize university town on the West Coast, during the mid-1990s, as the Internet boom took off and most everybody in business and education was getting connected. The main players are Leslie and Terry, co-owners of a consulting business offering computer and network services, mostly to local businesses.

At the beginning of this story, Leslie and Terry had a small but comfortable office a few blocks off Main Street, near the university, and a comfortable business, averaging about $20,000 in sales per month with a few steady clients and not a lot of seasonal variations in sales. They had one employee who did the bookkeeping and general administration tasks, maintained office hours and made appointments.

Then came the big, wonderful new job — a contract with a large and fast-growing company to install new Internet facilities in offices on its corporate campus, 10 miles up the freeway. This was a $200,000 contract that had to be delivered quickly and opened up an important new relationship with a potential business-changing client. There was great celebration. Leslie and Terry and their spouses started with a fancy dinner in the best restaurant in the area.

Both partners readily got going on fulfilling the contract, delivering the network, connecting the systems, making good on their promises. To make sure the new relationship would be a permanent increase in business, they took on five contractor consultants to deal with the needs of installation, training and the general increase in business demands.

Within two months, it seemed clear to both partners that they’d made the leap. Systems were being installed, clients were happy, and they were on the road to doubling their business volume in a very short period of time. The contractors were doing good work, and four of the five were happy to consider becoming permanent employees. Leslie and Terry decided they could celebrate more, so they both went to the local car dealer and leased new Mercedes sedans.

Then things started going bad.

Like a television loosing its connection, things got fuzzy, then blank. Though sales and profits were way up, jobs were done and invoicing was under way, Leslie and Terry had no money. The contractors — good people who Leslie and Terry wanted to keep — needed to be paid, but there was no money. They rushed to their local bank, waving their increased sales and profits, but banks need time.

The business suffered the classic problems of unplanned growth. Just as the accounting reports looked brightest, the coffers were empty. People were barely done celebrating, and suddenly they were looking at the disaster of unpaid bills and, much worse, unpaid people.

What happened? Unplanned cash-flow problems happened. The new, larger client had a slow process when it came to paying bills, so the jump in sales didn’t mean an immediate jump in cash in the bank. Leslie and Terry were more concerned about delivering good service than delivering necessary paperwork, so their own invoicing process was slow.

They were owed about $85,000, but they couldn’t go straight to their new client to get the money — she said she’d already authorized payment and sent them to the company’s finance department for answers. The people in the finance department were slow to respond and not particularly concerned about vendors getting paid quickly; their job was to pay slowly, but not so slowly as to get a bad credit rating.

Leslie and Terry had a bad case of “receivables starvation” — money that was owed to them was already showing in sales and profits, but not in the bank. It would have been predictable, and preventable, with a good plan.

In this case, fortunately, the two partners had enough house equity to get a quick loan and pay their contractors. The business was saved and grew, but not without a great deal of stress and strain, and even second mortgages.

The worst moment is worth remembering: One of the partners’ spouses was particularly eloquent about the irony of taking on a new mortgage while driving that ” [profanity omitted] Mercedes.”

The moral of the story: Always have a good cash-flow plan. Never get caught not knowing the impact of a sudden rush of new business. Get to the bank early, as soon as you know about new business, and start processing a credit line on receivables. And never lease a Mercedes until you’re sure you won’t have to take out a new mortgage a few weeks later.

This column was originally published on RealMoney on Feb. 15 at 1:36 p.m. EST. It’s being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Bring on the bad!

I wish the bears understood how important subprime lending is to my thesis about the market going higher. But then again, if they did, they would be forced to cover everything.

For as long as I have been at this game, it has taken a crisis for the Federal Reserve to move. The Fed is always reluctant to move because it needs the crisis as a cover so it doesn’t look like it’s soft on inflation. Maybe you think we have good growth in this country; I think we just have easy retail comparisons because of nat gas and gasoline bills being down but that in reality we’re in a slump that the international portions of our great businesses are saving.

That’s not enough for the Fed to cut on. That’s not obvious enough.

Ah, but if all of the subprime lenders pull out of that market and if Merrill (MER) and Bear (BSC) and Lehman (LEH) — big subprime lenders via acquisition — start saying “it’s a crisis” and New Century (NEW) goes belly-up or Accredited Home (LEND) takes down a big part of its book value or Countrywide (CFC) leaves the business — then we’ll have a crisis that can justify not one but maybe three or four cuts.

When you have the housing industry building a fraction of the homes it was building and credit hard to come by, you are giving Benanke the crisis cover he needs.

Some of my friends who read RealMoney are freaking out about the negative columns that are being written about how dangerous this subprime crisis is. I’m taking those columns very seriously, which is why I am growing more bullish by the day. The fact that the Fed chairman bought into it today in front of the House of Representatives shows me that the Congressional drumbeat — remember, prime is Republican, subprime is Democrat — could be building and building fast.

Am I Mr. Brightside? No, I believe that subprime’s awful, even worse than the bears think. When I look at the cancellations that a KB (KBH) or a Toll (TOL) has, I know that the same rate applies to those who took these loans down. That’s maybe 30%-40%, not the 7%-10% default that their models presume when employment is this low.

If anything, they’re saying there might be a fire. I say it’s raging, which is why I believe the crisis is about to give us that May cut that I am counting on to take the Dow up 17% this year.

I grew up in New Jersey, where Aaron Burr was killed in a duel. I totally get the idea of dueling. I’ve been mad enough, more than once in my life, to risk everything to defend my honor. Haven’t you? And some of the times I’ve been most tempted have been at work.

There’s something about the workplace, the competition for resources and power, that brings out the worst in certain people. And you know what I mean if you have ever had the dreaded experience of getting cut off at the knees during a meeting.

Here’s how it happens: You’re in the middle of a presentation or propounding an idea, and someone comes back with a comment that’s actually more like an extended middle finger in verbal form. Let’s say you’re describing your marketing plan when a co-worker suggests you don’t know what you’re talking about or your analysis is completely off the mark.

There are a lot of variations on this kind of attack. I’m just giving you a sense of the knee-cutting experience. It’s not fun. Out of nowhere, unprovoked, you’ve been blasted in front of your peers. Cut That Short Fuse

Your instinct, when you get slammed in public so rudely, is to react with anger. I don’t use the word “instinct” lightly. Human beings are hard-wired to deploy a fight-or-flight reflex when attacked, and since you can’t very well run out of the room at the moment, you’re very likely to want to fight. In fact, the first words likely to leave your mouth after being savaged by a co-worker will be some of the meanest things you can think of.

While mean and pithy and sharp would be O.K. (although still mean), the reality is that few of us, under stress, can conjure up mean, pithy, and sharp retorts to use at moments like this. So we resort to just plain mean—perhaps laced with a touch of the juvenile: “What makes you an expert?” That’s why when you’re struck from behind, I advise you to clamp your mouth shut and keep it that way.

Yep—clam up, and let the cutting-off-at-the-knees comment hang in the air for a moment. If you don’t rush to defend yourself, chances are your co-workers will likely jump into the conversation. “That seems harsh, Carl,” someone may say. Or, “What is your problem with Jill’s analysis?” The Professional Defense

Your silence in the face of a head-on assault does two things. It gives you time to think and avoid lashing out in a potentially self-destructive way. It also allows the room to take in and process the unfortunate (duel-worthy, if you ask me) criticism that’s been lobbed at you, bringing no favor upon your attacker.

After a few moments—let’s say 30 seconds—of silence, you can pick up your presentation where you left off. You don’t need to, but if you want to, you can ask for comments, perhaps in this way: “We heard Gary’s comments; does anyone else have a comment or question?”

By taking the high road, you’ll show that you are unperturbed by your workmate’s ill-tempered interjection. If he or she continues to heckle you, you can say, “Gary, let’s talk after the meeting about your concerns.” Your colleagues will be glad you took the duel off-line, for their sake.

The good news is that after having been slammed in public once, you’ll know how to deal with it when it (nearly inevitably) happens again down the line. With time, you will see that the person firing the shot is most often the one who comes out of the experience looking unprofessional and ill-bred. By tempering your anger and holding your tongue, you can defend your honor without firing a shot.

Most of the debilitating bout of infighting that threatens to derail Chelsea’s season can be traced to Frank Arnesen’s appearance on Roman Abramovich’s super-yacht Pelarus 18 months ago.

Abramovich had already invested much time talking football with Piet de Visser, the chief scout at PSV Eindhoven and a septuagenarian survivor of multiple heart bypasses and cancer. Though De Visser became a trusted confidant of the Russian oligarch, it was only when 8m was invested to recruit Arnesen from a reluctant Tottenham that the nexus was formalised.

With that came the challenge to Jose Mourinho’s authority that has riled the Chelsea manager ever since. In the initial exchanges Mourinho tried to banish Arnesen from the Chelsea training ground as he jealously sought to protect his first-team territory. The Dane responded by making it clear that he had no role in the acquisition of senior players, that his remit surrounded only the scouting and purchase of youth prospects, not the ready-made versions. But Mourinho’s intuition told him that, since De Visser had a direct line to Abramovich, it would not be long before Arnesen too was consulted on the players the manager called for. His suspicions were well founded.

Abramovich began to lose faith in the Portuguese’s ability to recruit players. There had been expensive failures: Asier del Horno and Tiago Mendes were both 8m purchases and even Paulo Ferreira’s contribution has been mixed for the 13.2m spent.

Though it is alien to most English clubs, Arnesen is used to working in a continental structure in which he is the technical director with responsibility for all the ins and outs at the club.

“It’s about the structure when it’s like this,” Arnesen said of his relationship with the Tottenham manager, Martin Jol, in an interview with the Guardian in March 2005, three months before he agreed to join Chelsea. “He doesn’t need to be, like me, up until half past one at night because I have to talk to agents; he has to be fit for the first team.

“All the communications are between me and him on a daily basis, sometimes we talk two or three times a day. We talk about everything. I prefer to see that the coach assists in the situation and on top of that to see that it is better to be two to run such a big club in this department than to do it all alone.”

But that role, as shown by his reaction to Arnesen’s first day at Stamford Bridge, is anathema to Mourinho. His resentment has festered and it was a key issue that arose in meetings at Chelsea last week.

Indeed, although the club have tried to placate their manager with the promise of at least one signing - likely to be either of the defenders Tal Ben Haim or Oguchi Onyewu - the board’s decision to defer serious discussion of the issue to the summer suggests Mourinho’s power is waning.

The Portuguese, who retains the support of the chief executive, Peter Kenyon, will seek in the close season to have complete control of transfer matters restored to him on pain of his resignation. Whether Abramovich will capitulate is another question.

Mourinho is banking on his capacity to deliver trophies but, having dropped six points over the Christmas period, Chelsea are now six points adrift of Manchester United. It has not gone unnoticed that, while Mourinho was wailing for a new centre-half, he overlooked Michael Essien’s ability in the position, one he often occupied at his former club, Lyon.

Indeed Mourinho admitted last week that he had been slow to react to the dangers of deep defending without the injured John Terry. “The team now is defending up because we have no power to defend back,” said Mourinho. “We are defending up the field with a fast defensive line. That is the best way to do it because the defensive players are fast.” Yet for too long he persisted with Ferreira as his stop-gap centre-half at the cost of many goals.

That has hardly increased Mourinho’s currency at Chelsea; maybe he has recognised this, since he has bought in to the concept of a temporary peace pact before the season’s end.

Arnesen will no doubt agree, but he will always be a fan of the structure Mourinho so despises. “The owner of the club has to say, ‘We would like it this way,’” he said back in 2005. “I think it is all about people. You can have all the structures that you like, and that is very important, but you have to have the right people. It’s about egos.” With Mourinho it usually is.

Arnesen’s mixed bag of transfer shopping

Chelsea

Khalid Boulahrouz The Dutch international defender has proved a less than adequate replacement for William Gallas

Salomon Kalou Although Mourinho was happy with his acquisition the young Ivorian has failed to impress so far

Mikel John Obi Recommended by Arnesen’s ally Piet de Visser. Has begun to contribute after being dropped for a bad attitude

Tottenham

Noй Pamarot Full-back packed off to Portsmouth

Pedro Mendes Another cast-off to Pompey

Sean Davis Midfield misfit. Brought in 7m with two above from Pompey

Paul Stalteri Only two starts this season, both in Carling Cup

Erik Edman Another disappearing full-back. Shipped out to Rennes

Calum Davenport The lacklustre centre-half has had more loans than the Halifax

Michael Dawson Has become a defensive linchpin

Thimotйe Atouba At least Hamburg paid 1.4m to take him off Spurs’ hands

Michael Carrick, below Spurs made nearly 16m profit on his sale to Man United

Rodrigo Defendi From Brazil to Roma with barely a stop in N17

Marton Fulop Gone to Sunderland for 500,000

Nourredine Naybet

Good stopgap centre-back

Wayne Routledge Signed for 2.5m, loaned to Fulham

Tom Huddlestone Looks a good prospect at 2.5m

Andy Reid Sold at 1m loss to Charlton

Reto Ziegler Bright start, two loans, cannot get a game

Teemu Tainio Useful midfielder brought in on a Bosman

When you pick stocks for a living, whether it’s as a portfolio manager, trader, analyst or columnist, you’re bound to end up with both winners and losers over time. Every so often, a stock will end up burned in your memory as an example of perfect execution or everything going wrong.

With the buyout Tuesday of New River Pharmaceuticals (NRPH) by Shire (SHPGY) , the New River story will leave me shaking my head in bewilderment for years to come, wondering where my analysis went wrong.

Over the past several months, I detailed the biotech company’s sky-high valuation, its insider sales, its hiring of an executive that signaled expectations of a tough regulatory environment and most of all my belief that Vyvanse, its attention deficit hyperactivity disorder drug, will not be as successful as the Street expects.

But despite my being a nattering nabob of negativity, Shire found value to the tune of $2.6 billion in New River’s business. Along with Vyvanse, Shire also obtains NRP290 — a drug currently in phase II trials that is intended to be a safer and abuse-resistant alternative to acute pain medications such as Vicodin, OxyContin and Percocet — and NRP409, a treatment for hypothyroidism that could enter clinical trials this year. Price Points

The takeout premium is less than 10%, which leads me to believe that perhaps the parties involved in the negotiations realized the stock was fully valued. Biotech acquisitions have sported some large premiums over the past few months, including the 100% premium Merck (MRK) paid for Sirna Therapeutics last year. Genentech (DNA) is in the process of acquiring Tanox (TNOX) , for which it will pay a 47% premium.

Morningstar’s Brian Laegeler believes Shire felt pressure to protect its ADHD business. In a report issued Tuesday, Laegeler writes: “Shire has watched New River’s stock price increase tenfold over the past few years without a substantial increase in the drug’s prospects. At this point, it appears Shire is willing to pay any price to avoid a deterioration in profits from its Adderall franchise.” By acquiring New River, Shire ensures that all revenue and profits from Adderall competitor Vyvanse stay in house.

New River CEO R.J. Kirk, who owns about 20 million shares, or more than 50% of the total outstanding, has agreed to tender his holdings at $64 a share, likely putting the kibosh on any higher counteroffer.

Just last week, I had a conversation with a source who was also negative on New River. With the stock having climbed straight up over the past few months, I told him that it felt like I was missing something. I knew that there had been rumors about a Shire takeout for a while, but a deal didn’t make sense to me — it still doesn’t. Nevertheless, having been trained in technical analysis as well as fundamentals, I should have realized the market was signaling that perhaps my analysis was flawed.

With Wall Street and Shire both telling me that I’m wrong, I should simply accept it, file it away as a bad pick and move on. However, until I see strong sales numbers for Vyvanse, being wrong never felt so right.

That being said, price is the ultimate benchmark for right and wrong in the market. I was dead wrong on this one. Mea culpa.