When You’re In Over Your Head…

AB InBev, which makes one out of every four beers sold worldwide and owns hundreds of brands is selling assets in Australia, Asia, and Central America. Why? Because an acquisition spree got them to the size they are but also saddled them with massive amounts of debt And there’s a lesson here for small businesses and individuals.

Many things can derail a business’s value (customer concentration, owner dependency, etc.) and there’s nothing wrong with manageable debt. But the beer market is struggling, both in emerging and mature markets, and that threw AB InBev’s debt coverage out of whack, i.e. not enough profits to cover debt payments the way they wanted to.

Growth is great. We all want to grow. Business buyers especially want to grow. But growth for growth’s sake can throw things off kilter. It doesn’t matter if it’s beer, widgets, aerospace, or something else, manageable growth with attention paid to margins and cash flow is what you want.

The key is to understand what you do best and do more of it. When you want to expand your product or service offerings make sure there’s a market. Don’t be trying to sell beer when customers are moving to other beverages.

And, whether personal or business, manage your debt, your cash flow, and your growth so you don’t fall off the cliff.

“Insanity is a relative. It depends on who has who locked in what cage.” Ray Bradbury

 

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