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There's so many businesses that legitimately operate on tight margins, it's kinda the point of capitalism. While this will hit some legitimately badly run busin
by mattmanser 7y ago
There's so many businesses that legitimately operate on tight margins, it's kinda the point of capitalism. While this will hit some legitimately badly run businesses, it will also hit lots of well run businesses that simply can't reduce their overheads that quickly.
The businesses that fail might have a totally legitimate business model, as long as you didn't expect all your customers to abruptly disappear for a month or even months.
- smarri 7y ago"There's so many businesses that legitimately operate on tight margins, it's kinda the point of capitalism" I dont think that's true. Also, the business model isn't legitimate if it needs a bail out.
- mattm 7y agoIt is true. If you do have a high-margin business, eventually other people will notice and start to compete which will bring the margins down.
- smarri 7y agoThanks, yes I agree with your point on competition eroding margins. But I think it is nuanced, not all successful business have slim margins, many are awash with cash, Apple for example.
- mattmanser 7y agoA luxury product with high margins that is entirely reliant on branding, and on top of that has a long shelf-life and retailers buy in bulk. Great example! /s
- smarri 7y agoAs are Berkshire Hathaway, Ford, Cisco, Amazon, Alphabet, Microsoft. But that's not the point, the point I'm making is a solvent business should have cash reserves.