To continue: Start with previous post.
Let's say, for instance, that you start your business with 30k in credit. In your first five years, you use up about half that credit, not because you are in trouble but because you are doing so well you want to invest, to add, to expand, to fix things up.
Business is good. You're not worried about paying it back.
Then you have an unexpected slow down, (and they are always unexpected) and before you can adjust, you use up another 10k of that credit.
Suddenly, you have used up 25 out of 30k of credit.
You survive another few years without using up the credit, and are finally rewarded with a nice few years of upsurge.
But you are only able to pay off, say, 5k of the 25k you owe. Why?
Because you are starting in a hole. You've probably let your infrastructure go south, your fixtures get worn, you've probably let your inventory get stale.
Making money in business is hard even when conditions are good; and the better business is, the more likely that you'll have increased expenses, like rent, increased competition and so on.
So you've got to catch up.
It's as if you start climbing Mt. Everest, not from the foothills but from sea level. You have to walk all the way to the mountain before you can even begin to climb it.
Businesses almost always accumulate mistakes.
New businesses have the luxury of starting out fresh.
So the same economic conditions that look good to a new business, can be bad news to an old business
2 days ago