the thin liquid line

In a crisis, there is a very thin line between crashing and soaring.

Sometimes it’s the industry itself, and that’s not the fault of the company. No airline or hotel business model exactly thrives in a global lockdown.

But outside those specific hammered industries, you can look around at other industries: businesses in the same field either seeing record profits or going flat broke.

Either firing all of their employees & declaring bankruptcy, or bringing on more staff and seeing revenue spikes.

There is a very thin line between success and failure.

Whether you’re a multinational company, a mom & pop store, or an individual, what is going to cause you to fail? Managing a heavy debt load, feeling the crunch of cash burn, missing vendor payments, losing staff, selling off assets, all of these negatively affect your net worth. But those are just the direct problems: you also miss out on a lot of indirect opportunities.

When you’re worried about cash burn and debt, you can’t take on the myriad of opportunities that present themselves during a crisis. You can’t invest in historically cheap stocks, you can’t add a bigger client load onto your already-laid-off staff, you can’t purchase liquidating competitors, you can’t buy real estate during a crash.

The ramifications echo, and expand over time.

This month, for you it may seem as if you’re doing okay. You’ve paid the bills and you haven’t had to lay anyone off. Credit lines came through and you won’t be evicted.¬†Next year, it may be slightly different. You missed out on a project/a client/a job/an investment, and you’re still at square one.

This month, for someone else, they’re doing a little better. They had cash reserves. They had a surplus to make a speculative investment. Not only are they paying the bills, but they’re saving too. Next year, it looks even better. They’ve moved beyond square one.

Five years in, the trajectory widens between the two.

Ten years in, there is no comparison.

The difference? Sometimes it’s luck. Sometimes it’s tactical decisions. Sometimes it’s simply liquidity.

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