via Trizle by The Trizle Team on 10/25/09
- Why did companies fail during the 2008 financial crisis?
It went like this:
- Loan mofo: "We want our money!"
- Leveraged mofo: "We don't have money!"
- Loan mofo: "We will kill ya"
- Leveraged mofo: "OH NOOOOOOOOOOOO!"
When the economy tanked, companies that failed had loans that they couldn't repay.
What Will Make You Fail
Debt -- especially the long-term ones with variable interest rates -- will suck you down, and will be the main cause of your impending failure.
- Google avoids long-term debt.
- Microsoft avoids long-term debt.
- Apple avoids long-term debt.
- Walgreen's avoids long-term debt.
- Any company with great financials = no long-term debt.
Unless your main line of business is providing loans (i.e., you're a bank), leveraging your company = NO GOOD.
(The banks that died over-levered themselves.) Instead, ask yourself this:"What if we could get money for free?"
"BAM DANG SON HOW AN I DO THAT?!?!?!!" you're asking.
Raise it.- "No! You shouldn't give away your equity! Boo!"
- "You work so hard! Investors are sharks!"
The points:
- Equity financing (i.e., raising money from investors) is free money with no interest rates (i.e., helps you grow much quicker).
- Avoiding interest costs puts money back into your business to reinvest, and grow exponentially stronger financially.
- You can always buy back the sold equity.
Solid businesses perform financially awesome to the awesome to the max avoid long-term debt.
- When you: (1) avoid debt, and (2) keep raising money = YOU WILL NEVER FAIL HIGH FIVE
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