How Long Can Entrepreneurial Businesses Stay Alive Without Survival Essentials?
Under the strictest assumptions, entrepreneurs and their businesses generally cannot live more than thirty days without their immediate survival essentials.
Cruising the streets of any major city during this Great Pandemic Depression, it is easy to spot many closed entrepreneurial businesses. Some businesses are closed temporarily and some permanently. Some businesses have boarded up windows and doors, while others have hand-written signs on their windows telling their customers to wait just a little more. Many are closed because of the Financial Coronavirus.
The one major thing that these closed businesses have in common is the necessity of obtaining survival essentials. Like the owners who created them, businesses also have certain requirements to stay alive. Let’s take some time to understand the crucial concept of survival essentials in order to understand how long entrepreneurial businesses can stay alive without them.
The survival essentials overview
In Chapter 12 of my book The Survival of the Richest, human survival essentials were organized into two major categories: immediate survival essentials and essential survival tools. Immediate survival essentials were considered necessary for us to survive. They were divided into physical and mental essentials and then again into primary and secondary essentials. The physical essentials are survival requirements for the body, and the mental essentials are survival requirements for the mind. Primary essentials are the most important essentials. Secondary essentials are ranked lower in their importance than primary essentials but are still crucial to survival.
We will now look at the primary physical and mental immediate survival essentials. For the sake of brevity, the following conclusions are an ultra-condensed version of a more complex analysis. For more information, please refer to my article on Thrive Global called How Long Can We Stay Alive Without Survival Essentials? or the full examination of this topic in The Survival of The Richest book (2016). The primary physical immediate survival essentials (the most important requirements for our body in order for us to stay alive) are these: 1) quality air and proper blood circulation (it is easier for us to consider these two essentials a tie because their ranking is debatable); 2) thermal balance of the body; 3) relief of immediate life-threatening bodily injuries; 4) quality water; 5) conservation of energy; 6) a means to relieve bodily waste products, such as by defecation and urination; 7) quality food; and 8) quality sleep. The primary mental immediate survival essentials (the most important requirements for our mind in order for us to stay alive) are these: 1) a purpose to live; 2) a will to live; 3) a positive attitude (a good psychological state); 4) survival knowledge; 5) ingenuity; and 6) mental preparation.
Without the primary physical and mental immediate survival essentials, we may not live very long. Both of these essentials were ranked in accordance with approximately how much time it would take for the average human to die without each one. We could die the fastest without the first essential and the slowest without the last essential. Please note that this is a general ranking, and it might vary for each person and each unique survival situation.
It is important to review these important survival essentials for individuals in order to understand the survival essentials for entrepreneurial businesses. In my Medium business article called Three Major Reasons Why Entrepreneurs Commit Business Suicide During a Depression, I said “Entrepreneurial businesses are an extension of the mental state of living people.” Now we can expand on that statement by adding: Entrepreneurial businesses are an extension of the mental and physical state of living people. For these reasons, the survival essentials of the owners must always take a priority over the survival essentials of their businesses. If business owners are not making enough money from a business to support their own existence, then they might have to commit business suicide to save themselves (and hopefully find a new way to earn income). This point is summarized clearly through Principle 17 from The Most Important Lessons in Economics and Finance book: "Sacrifice some if necessary for the survival of the whole" (Criniti, 2014, p. 48).
Related: 3 Survival Traits for Any Leader
The above conclusion is best described in the Survival-Prosperity Sequence of the First Major Scientific Phase of Prosperity, which is a process of wealth management for all living things that was discussed in depth in The Survival of the Richest. In short, we all must survive what can be called a Survival Test before we can begin our journey through the Four Steps of Prosperity. If you can make it to Prosperity Step Four, then you might complete the First (out of five) Major Scientific Phase of Prosperity: Personal Finance. The Survival-Prosperity Sequence would then begin again in the Second Major Scientific Phase of Prosperity: Group Finance (for groups of more than two). The newly formed entity must also pass the Survival Test. If not, the group dies and the members revert back to Prosperity Step Four of the First Major Scientific Phase of Prosperity.
Personal survival clock without survival essentials
Throughout the whole process above, the survival essentials should always be in focus. If you want to have enough survival essentials to just stay alive, then you will live on the edge of survival, which is a very dangerous existence. Prosperity and its sciences focus on maximizing our survival essentials (and all other forms of wealth) and moving an entity as far away from the edge of survival as possible. But what happens when our survival essentials are gone? Easy, in time we could die. The conclusion of my Thrive Global survival article called How Long Can We Stay Alive Without Survival Essentials? was that “we can stay alive without our primary mental immediate survival essentials for a very long time, although that kind of existence would probably be painful and unfulfilling. However, without luck, most likely our lives would be short-lived as we would be inclined to always make decisions that would quickly lead to our death.” On the other hand, it was concluded that we probably could live a maximum of 30 days without our primary physical immediate survival essentials. At worst, we can die in as little as a few seconds from lack of air and/or proper blood circulation. At best, we can live as long as 30 days if we are only lacking food. Keep in mind that this is just an average time frame, and results can vary depending on the person and the survival situation.
Business Survival Clock without Survival Essentials
Is the above conclusion the same for businesses? This leads us full circle to our original major question for this article: How long can entrepreneurial businesses stay alive without survival essentials? To answer this, first we must make some major assumptions in order to have a smoother comparison: no other entity will help provide any form of wealth (for example, by gifting); the owners are of equal wealth and have no other form of income; the business cannot get any loans or any form of credit; there is no form of government protection (for example, bankruptcy laws); there are no assets to sell off and no cash reserves for both the entrepreneur and the business; and the business has no income. If we are talking about a sole proprietor business, then generally the business should die faster than the entrepreneur’s personal survival clock of 30 days or less (using the average maximum time frame that the owner probably could live without her or his primary physical immediate survival essentials). The reason for this is because if the owner’s business is not generating any income, then she will not have enough money to pay for her own survival essentials needed to stay alive—for example, food and water. If she is smart, she will quickly kill the business and find another way to make a living.
Based on the assumptions above, entrepreneurial businesses with more than two owners will stay alive without survival essentials for roughly the same amount of time. Of course, in practice, usually, every owner’s wealth is slightly different; thus, sometimes the wealthier owners might be able to use their wealth to help keep the business alive longer. However, here we used the strictest of assumptions to illustrate how severe the lack of survival essentials can be to all entrepreneurs. This subject is not to be taken lightly. With that said, similar to entrepreneurs that are sole proprietors, entrepreneurial businesses with two or more owners will need to collectively decide to commit business suicide generally around an average of 30 days or less (using the average maximum time frame that the owners probably could live without their primary physical immediate survival essentials). If the business is not producing any income, then it would be a smart decision for the owners to quickly find another path to making a living in order to ensure that they stay alive. Simply, survival of the individual entrepreneur should always be a priority over survival of her business.
Essential Survival Tools
At the beginning of this article, we discussed one of the major categories of human survival essentials: immediate survival essentials. We must now briefly discuss the last category called essential survival tools. These tools are used to help people to survive by helping them to obtain their immediate survival essentials. Every survival moment might call for a different survival tool. Some examples of essential survival tools include, but are not limited to, an ax; a bag; a bed; a blanket; books; clothing; a communication means (sometimes called signaling); a container; a cooking pot; cord; disinfectant; kitchenware; a knife; lighting sources; a means to start and maintain a fire; a medical kit; money; music; navigational equipment; security; shelter; a transportation means; a wash kit; weaponry; and other miscellaneous personal items that can increase the potential survivor’s odds of staying alive during a survival situation.
Money: Our Great Unique Survival Tool
The tools mentioned above are for personal survival. Businesses have their own unique essential survival tools relevant to their business. For example, a restaurant absolutely needs a physical space for their customers to eat. Without that space, they are no longer a restaurant but a take-out service—a completely different business. Alternatively, a hair salon’s immediate survival essentials consist of hair supplies, especially scissors. However, out of all the personal essential survival tools mentioned above, money is needed the most to keep businesses alive. In The Survival of the Richest, money was correctly labeled “our great unique survival tool.” However, this becomes especially true for businesses. It is money that pays for all of the bills for a business, which includes the costs of supplies, the mortgage or the rent, utilities, and wages. More importantly, money helps the employer and the employees to buy immediate survival essentials and other essential survival tools. In other words, money is what is helping individual people who are members of the business to survive. It trickles down like a waterfall to provide a living for the foundation to all groups: each individual person. Simply, no money, eventually no business. This rule applies to wealthy companies or companies that are supported by wealthier entities too. Their assets may allow them more time to live, but eventually, a well that is never replenished will inevitably dry.
Comparing the Conclusions Above
The conclusions above on the life expectancy of an entrepreneurial business without survival essentials is consistent with our current experiences during The Great Pandemic Depression and past related data to this subject. For example, according to a major study by the JPMorgan Chase Institute in 2015 of nearly 600,000 small businesses: “We find that, despite the importance of cash reserves, most small businesses hold a level of cash reserves that would provide an insufficient cushion in the face of a significant economic downturn or other disruption. Using a new data asset constructed from over 470 million transactions conducted by 597,000 small businesses from February to October 2015, our analysis shows that half of all small businesses hold a cash buffer large enough to support 27 days of their typical outflows.” Excluding cash, assuming that these businesses have the same restrictions mentioned earlier in our assumptions for businesses (for example, no business income), half of all small businesses in this study would also be dead in less than 30 days. Further, this study also concludes that 75 percent of small businesses hold less than 62 cash buffer days in reserve. In other words, most small businesses will die in about two months or less in an emergency situation. It is scary to think how low the emergency reserve is for most businesses. When the money runs out, these businesses cannot buy any more survival essentials. Their owners will be forced to close their business in order to focus on saving themselves and their families.
The Necessity of Finance
In summary, entrepreneurs and their businesses generally cannot live more than thirty days without their immediate survival essentials and the money used to buy them. The closer they are to the edge of survival and living hand to mouth, the truer this statement becomes. These conclusions only highlight the importance of learning finance. By learning how to manage their money and other forms of wealth, businesses can learn to not only survive but to prosper. Reading the best finance books and taking crucial finance courses are a step in the right direction.
If you want to keep your business alive for as long as possible, then you want to always ensure that you have plenty of emergency reserves of survival essentials. It is important to continuously strive to maximize your wealth and plan for a time when you might need to use it — for example, during The Great Pandemic Depression. Be different than the masses of small business described in the JPMorgan Institute statistic above; have a savings of cash well beyond 62 days (I recommend an emergency reserve of at least six months of current living expenses in cash equivalents). With the right planning and the proper resources, you can increase your odds of surviving tough times like these.
Entrepreneur Leadership Network Contributor