Some business models use float-based financing.
- Some business models use float-based financing.
- This is one of Warren Buffet's favorite tricks.
- Two businesses that look superficially similar but differ in this key dimension will have radically different long-term outlooks.
- The insight is that growth can be self-funding if your cash flow timing works in your favor.
- For example, you collect payment before having to pay for the goods.
- If your business has this shape, the larger you grow, the more leverage you get.
- The value is duration multiplied by volume.
- It works for insurance (float of years) and it works for payments (float of hours).