Mike Andes breaks down the 4L framework: Liquidity, Leads, Laborers, and Leadership. He shows how debt can grease growth through each constraint, comparing a $2,000 start against taking $20,000 to move faster through them.
Is a debt a good thing for my small business? This is going to tell you what the pros and the cons are in a nutshell. When we look at growing a business, we have what I call the 4L framework. You need liquidity, the first L in the 4L framework, to grow the business. But then you take that money and you turn it into more customers, more leads. And then once you do that, you now need to go get more employees. Now, as you get more employees, guess what you're going to need? You're going to need leadership. Because as soon as I get a bunch of good management in place, now, they cost a lot of money. They're extra overhead in the business. So guess what? I need more liquidity. I have to raise prices. And this process keeps spinning the 4L framework. Now, here's what's crazy. If I can just take a bunch of money and plop it on each of these constraints of the business, it solves the constraint much faster. For example, if you only have $2,000 to start your business, it's gonna be hard to get a bunch of leads. But guess what? If I go, hey, get a bunch of debt, $20,000 to solve liquidity immediately. And I can go get more leads and say, well, I got all these leads now, but now I can't find any laborers. No one wants to work for me. Well, guess what? If you had enough money, if you go out and get some debt and pay people 5 or $10 more per hour, I happen to think you'd get more laborers. Ultimately, when it comes to growing a business, money is sort of the grease to this engine, and it'll spin faster. And so the hack, the way to do this faster is go out and get debt to grow the business faster.
