I've been trying to figure out a simple analogy to explain why I think businesses survive or fail.
I think most people think of it like a 'light switch,' a business is viable one day, not viable the next. There is a clean cause and effect thinking process here; this business failed because it didn't have good service, because it had lousy product, no wonder they went out of business...
But it doesn't quite hold up, does it? Which is reflected in comments like, "I don't understand it; they were always busy, they had the best stuff, I loved that place."
And equally reflected by comments like, "I can't understand how they stay in business; the owner is a jerk, they never have what I want."
But instead of seeing business as an on and off switch, try to see it more as an hour glass, with the sand running out, but you don't see it fail until the last grain of sand has drained.
Keep that image in mind, while I reach for another analogy.
Try to see downtown as an Old West movie lot with lots of facades, but behind the facades you have sandbags propping up them up. All most people see is the facades in front, they don't see the sandbags in back.
Some facades are huge and need lots and lots of sandbags, others are much more modest and need only a few sandbags.
What you can't see until the whole edifice falls over is if there are an appropriate number of sandbags. Some of those giant facades have only a few strategically placed sandbags left, some of those smaller facades have piles and piles of sandbags behind them.
You don't know.
To stretch the analogy a little further, the sand represents not only capital, not only the cash flow, not only the profitability of the business, but also intangibles like motivation and perseverance and experience and sheer cussedness.
The economy lately has been blowing holes in those sandbags, and a whole lot of sand is falling to the ground.
We don't know how each individual facade is doing, but we can be pretty certain that most are weaker than they were before, and some are losing sand quicker than others.
Finally, it takes a lot of drainage for most facades to fall off. Even if they don't tip over, you have to realized that much of the wealth (sand) has disappeared, and some of these facades are becoming stressed and frayed around the edges.
4 days ago