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Liquidity Ratios and James Kim
Dec. 7th, 2006 10:23 amSo I spent yesterday – when I wasn't crying my eyes out over poor James Kim – calculating my financial ratios.
I like financial ratios – contemplating a quick ratio of .5, for example, is easier on the nerves than thumbing through a big pile of unpayable bills although both mean exactly the same thing. (By way of comparison, Hewlett Packard's quick ratio is also .5; Amazon's is .7 while Microsoft's is 1.5 – still sub-par as an industry standard. Of course neither Hewlett Packard, Amazon nor Microsoft sell hot sauce.)
Financial ratios are a euphemism that allows one to separate emotion from a dire situation, to think in terms of strategy. The business is carrying too much debt; the debt is mostly credit card debt. Credit cards were all I had four years ago when I started the business and I started the business because I'd lost my high-paying corporate job two years before. I searched for another job throughout that two years. But the truth was at fifty I was just too old and what I considered my greatest strength – a kind of Protean ability to do a lot of things well but no one thing superbly – had become a liability. No one wanted to hire me.
Lemons from lemonade, right? I hired myself.
It's a simple dilemma really. I have to figure out a way of converting my current debt to another kind of debt.
Not many options here.
Scarcely does a day go by without getting an email like this:
Are you prepared to lose everything you’ve worked for?
It’s a painful question to ask. If you’re past due with multiple creditors, deadlines are quietly being set that can destroy life as you know it. It starts with collection calls and ends with assets being seized. Imagine a fire that burns down your business, then spreads to your home and personal life.
Without enough money, things fall apart.
If your business is seriously in debt, your main source of income is in jeopardy. So are the lives of everyone who depends on you. Health insurance can be cancelled. Homes can be put into foreclosure. The stress alone can give you a medical condition you can’t afford.
The biggest problems are more than financial.
Marriages are destroyed. You feel like a bad parent. You feel like a bad provider. You can’t afford birthday presents. You can’t take someone out for dinner. You have to think twice before seeing a doctor. With collectors calling, you can’t even answer your home phone. Your cell phone gets disconnected and every time someone calls it, they assume the reason why.
You just want the nightmare to end.
These people are obviously the carrion feeders in the small business food chain, but you can see their appeal. In fact, debt reduction is a huge business. Funny and ironic that my serviceable debt at this point is almost a bigger asset than my inventory and good will.
The James Kim thing hit me hard. If only they'd turned in the opposite direction on that seasonally closed road, they would have hit a resort lodge not five miles away.
Of course, many years ago I had my own misadventure in the snow – which oddly enough I've never written about. Perhaps it's the memory of those weird interpersonal dynamics as we tromped through the Ostrander Lake blizzard determined to do anything to survive that's lodged a picture in my brain that's impossible to shake: the mother must have breastfed not only her two children but also her husband. It must have been embarrassing and strange. And he left as much to spare her that strangeness as he did to look for rescue.
(Any similarity to actual events is purely coincidental yada yada yada. Can I help it if I have a narrative brain that spins creepy horror stories?)
I like financial ratios – contemplating a quick ratio of .5, for example, is easier on the nerves than thumbing through a big pile of unpayable bills although both mean exactly the same thing. (By way of comparison, Hewlett Packard's quick ratio is also .5; Amazon's is .7 while Microsoft's is 1.5 – still sub-par as an industry standard. Of course neither Hewlett Packard, Amazon nor Microsoft sell hot sauce.)
Financial ratios are a euphemism that allows one to separate emotion from a dire situation, to think in terms of strategy. The business is carrying too much debt; the debt is mostly credit card debt. Credit cards were all I had four years ago when I started the business and I started the business because I'd lost my high-paying corporate job two years before. I searched for another job throughout that two years. But the truth was at fifty I was just too old and what I considered my greatest strength – a kind of Protean ability to do a lot of things well but no one thing superbly – had become a liability. No one wanted to hire me.
Lemons from lemonade, right? I hired myself.
It's a simple dilemma really. I have to figure out a way of converting my current debt to another kind of debt.
Not many options here.
Scarcely does a day go by without getting an email like this:
Are you prepared to lose everything you’ve worked for?
It’s a painful question to ask. If you’re past due with multiple creditors, deadlines are quietly being set that can destroy life as you know it. It starts with collection calls and ends with assets being seized. Imagine a fire that burns down your business, then spreads to your home and personal life.
Without enough money, things fall apart.
If your business is seriously in debt, your main source of income is in jeopardy. So are the lives of everyone who depends on you. Health insurance can be cancelled. Homes can be put into foreclosure. The stress alone can give you a medical condition you can’t afford.
The biggest problems are more than financial.
Marriages are destroyed. You feel like a bad parent. You feel like a bad provider. You can’t afford birthday presents. You can’t take someone out for dinner. You have to think twice before seeing a doctor. With collectors calling, you can’t even answer your home phone. Your cell phone gets disconnected and every time someone calls it, they assume the reason why.
You just want the nightmare to end.
These people are obviously the carrion feeders in the small business food chain, but you can see their appeal. In fact, debt reduction is a huge business. Funny and ironic that my serviceable debt at this point is almost a bigger asset than my inventory and good will.
The James Kim thing hit me hard. If only they'd turned in the opposite direction on that seasonally closed road, they would have hit a resort lodge not five miles away.
Of course, many years ago I had my own misadventure in the snow – which oddly enough I've never written about. Perhaps it's the memory of those weird interpersonal dynamics as we tromped through the Ostrander Lake blizzard determined to do anything to survive that's lodged a picture in my brain that's impossible to shake: the mother must have breastfed not only her two children but also her husband. It must have been embarrassing and strange. And he left as much to spare her that strangeness as he did to look for rescue.
(Any similarity to actual events is purely coincidental yada yada yada. Can I help it if I have a narrative brain that spins creepy horror stories?)
