How liquidity serves the entrepreneurial couple

Liquidity plays a vital role in all financial strategies, but it plays a special role for couples who are making important financial decisions about a business.

Liquidity—defined simply as cash and assets easily converted to cash—allows businesses to absorb unexpected shocks and to seize unexpected advantages. It is a particularly powerful tool for entrepreneurial couples because it lessens fears and fuels possibilities.

Shock absorbers and turbo boosters

Unexpected shocks are a part of any business—and any family. Roofs collapse, kids or parents need help, supply chains disappoint. With sufficient liquidity, you can face these challenges without losing sleep.

At the same time, liquidity positions you to take advantage of opportunities as they present themselves—and before they go away. Stocks can be purchased during downturns; real estate for a second location can be nabbed before it goes on the market; low-risk, high-potential investment opportunities can be locked in before others get to them. These are precisely the moments that can help you grow your wealth in ways that align with your long-term goals. Liquidity lets you say “yes.”

A counterintuitive benefit: the power to say “no.”

To grow your business the right way, you also need to say “no,” even to good opportunities, if they don’t align with your long-term strategy. Having strong liquid assets is key to making these prudent decisions.

This may feel counter-intuitive, but we often find ourselves jumping more quickly at risky opportunities when we’re low on liquidity. Whether it’s pressure to pay bills, eagerness to make that next big purchase for our business or ourselves, or simply the desire to “make more money,” low liquidity often pushes us to make decisions that may benefit us in the short term without taking into account the long-term picture.

For example, we’ve seen entrepreneurs eager for a quick return on an oversold new venture. Not only did the venture not pay off–they couldn’t take advantage of legitimate future opportunities.

This played out in the early days of the pandemic: There was suddenly an opportunity to both do well and do good by taking on mask or hand sanitizer production, often in ways that aligned beautifully with their mission. But this required quick access to cash—cash which those entrepreneurs simply didn’t have. Because they didn’t say “no” when they should have, they had to say “no” later.

Liquidity isn’t found under the mattress

Cash is the simplest liquidity strategy but it is generally not the best. We can show you vehicles that offer returns above saving account returns while giving you access to your funds. The decision as to where precisely to keep your funds should be a part of an ongoing conversation about your goals and timelines.

Aligning liquidity and investment, risk and reward, family and business can be challenging. Fortunately, that’s precisely where we can help—learn more about our unique approach to your finances.