An older acquaintance of mine told me in the early 2000s that it was no longer possible to make money by trading goods because everything became about financial operations. He was engaged in very high-volume trade and was able to maintain a perfect balance between suppliers and dealers without using capital money. His success continued until he could not collect payments for months.
Fortunately, his 30 years of business experience helped him come up with a solution: He had a large number of dealers and operations spread throughout the country, so when the cash flow disruptions began, he decided to sell his company for a handsome amount of money instead of going into a debt spiral. The reason why he was able to sell the company so quickly was that he had plenty of sales points and his right choice of human resources had helped make his company quite powerful. Otherwise, it would not have been possible for him to achieve such a satisfying profit with a small capital, and proudly run a company that is envied by most of his competitors.
Unfortunately, others who were not as lucky or resourceful as him went bankrupt also because they overlooked the fact that financial operations are a crucial component of a strong and sustainable business. Many companies that failed to resolve their maturity mismatch problems faded into history.
I, on the other hand, learned a valuable lesson from this story. Working with enough funds without overcapitalization and without borrowing money at high interest rates can make it easier to keep your company afloat. Today’s strong companies have survived to this day by utilizing only an amount of capital that is enough for them. The trick here is to solve the problems without using capital when you can take out loans with low interest rates, and to manage the funding composition by considering alternative costs when the interest rate is high.
“Some would make a lot of money if the government increases pressure on the markets.”
In countries like Turkey where national currency, Euro and US Dollar are used in business as three main values, companies need to be skilled in both local money and foreign exchange transactions. If your country allows free movement of capital, all you need to do is to take only calculated risks as a prudent business person would do. However, in countries where capital movements are restricted, having a business mindset and financial manoeuvrability are sadly no longer enough. Regulatory authorities make things difficult for both lenders or borrowers when it comes to financial manoeuvring.
As costs and prices keep rising, maintaining a successful business becomes more and more difficult for those who use imported inputs. Meanwhile, since interest rates are quite low compared to business costs, investing funds in foreign currency becomes an unlikely option. Before long, most companies in Turkey will be technically bankrupt without even realizing it, which may become an acute issue especially in meat and dairy retail, and any industry that experiences problems in its distribution and supply networks.
To avoid such risks and ensure fluidity in trade, finance, collection and payment systems, and auction markets, the parties should come together to find a solution about how to regulate the maturity between the expected life of the goods or services and their financing in order to prevent monopoly and monopoly-like practices.
I just hope that the new government will ensure a gradual return to the free market economy and a good harmony among all elements and processes of the system.
