The title of this blog article is the tagline I used during my days as a Corporate Turnaround Consultant some 2 decades ago. This tagline recently popped into my mind again as I read and saw numerous business closures that owners claimed were caused by the COVID-19 pandemic.
Frankly, I believe the COVID-19 pandemic cannot be completely blamed for their business closures. I believe many businesses were already in the red before COVID-19 came along. Many were already struggling with their loan repayments and were in negative cash flow situations.
This COVID-19 pandemic just gave them a better reason or excuse to close their business and retrench their staff. They can now say loudly, “It was the COVID-19 pandemic. NOT me.” Nothing can be further from the truth. Thankfully, we have solid governmental policies to deal with these errant employers.
Why Positive Cash Flow is Important
Money is synonymous with air, water, and food. We need them to survive. Without them, we die. Sometimes slowly and other times quickly.
The same thing can be said about the cash flow in a business. Without sufficient cash (a.k.a. Free Cash Flow) flowing through the business system, the business cannot sustain for long. Like I always say, “Cash is the lifeblood of any business.”
Many business owners are too focused on profits and revenue growth. They have forgotten that they can never pay their employees or suppliers with profits but only with cash.
To me, if a business is not able to generate positive cash flow from its operations, it is NOT a good business at all. Its lifespan is limited to the amount of loan it can take and the duration it can sustain itself to repay those loans. Sadly, in our debt-driven economy, most businesses are already in debt from the day they start their business.
Cheap Loans. More Debts
Since the start of the COVID-19 pandemic, governments across the world come up with massive stimulus packages that include cash giveaways, cheap loans, grants, tax rebates, etc. in the interest to save jobs and businesses.
We need to understand that this crisis is vastly different from other crises that the world has been through in the past. Unlike past crises where only certain countries, industries, and business sectors are affected, this COVID-19 pandemic affects all countries, industries, and business sectors at the same time and caused the global aggregate demand and global GDP to go down to the negative territory almost overnight.
Can more cheap loans, grants, and stimulus packages help save all jobs and businesses? I doubt so given the current negative global growth situation. It is like throwing good money after bad. The question is, “Can we afford any more of it?”
Without positive growth in global demand, businesses cannot repay those loans no matter how cheap they are. I believe, a global debt crisis is just around the corner and brewing. A double whammy for all governments and businesses alike.
All countries have thrown billions and trillions of dollars into their economy. Guess where we are now?
Forex Trading to the Rescue
Most businesses that trade globally will know the importance of currency hedging to protect the value of their goods and services. However, much to my surprise, most businesses including MNCs have not thought of trading the Forex market for an income to supplement their business income. I think they should have a department for trading the financial markets as part of their business.
Granted, Forex trading is not suitable for all people. But to me, it is a recession-proof, disruption-proof, and crisis-proof way of making a consistent income. No matter what happens to the world economy, money will continue to change hands, and the financial markets will continue to move. The market movement may be slower, but there is still money to be made.
I hope businesses that survived this COVID-19 crisis would think about passive income generation to supplement their active business income. Doing so will probably shield them from the next crisis that may wipe them out forever.
Happiness to all.
Founder & CEO, ALGOINSIGHTS PTE LTD