Having Investments Is great, But Liquidity Is King

24 Jan 2025 · 1 min

Watch on YouTube

0:41

In this concise monologue, the speaker highlights a pervasive problem among entrepreneurs: insufficient liquidity. He defines liquidity as any asset that can be accessed within 24 hours and explains how the constant cash‑strapped state of growing businesses—due to inventory turnover, marketing spend, and other operational costs—becomes normalized. This normalization of deviance bleeds into personal finances, leading entrepreneurs to mistakenly reinvest profits into illiquid assets such as real‑estate or other businesses, which can leave them vulnerable in emergencies. The speaker stresses the importance of maintaining readily accessible capital to avoid financial distress.

Chapters

The number one thing I see from entrepreneurs is not enough liquidity. Liquidity is defined as anything that you can access in 24 hours. As we're growing and building a business, we are constantly cash-strapped. We're turning over inventory, we're spending money on marketing. So we're used to going down to zero and staring at the bank account and like waiting for the next thing to come in. The problem is this is called the normalization of deviance. We get so used to being cash-strapped, the same thing bleeds over into our personal life. And so as we start to take profit out of that business, we go reinvest in other people's businesses. We invest in real estate or other assets where we can't get our money in case of emergency. So it's really important to be able to access your capital.