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The Danger of Debt-driven Growth

Entrepreneurs are always looking for capital to grow their business or build the foundation of their venture. Most people raise money from family and friends, then borrow against their house or use credit cards. That is not always bad but the current crisis on Wall Street is a great example of why building your house on sand aka debt can lead to tremendous blowback. "Therefore, everyone who hears these words of Mine and acts on them will be like a sensible man who built his house on the rock.

Entrepreneurs are always looking for capital to grow their business or build the foundation of their venture. Most people raise money from family and friends, then borrow against their house or use credit cards.

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That is not always bad but the current crisis on Wall Street is a great example of why building your house on sand aka debt can lead to tremendous blowback.

“Therefore, everyone who hears these words of Mine and acts on them will be like a sensible man who built his house on the rock.

The rain fell, the rivers rose, and the winds blew and pounded that house. Yet it didn’t collapse, because its foundation was on the rock.

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But everyone who hears these words of Mine and doesn’t act on them will be like a foolish man who built his house on the sand.

The rain fell, the rivers rose, the winds blew and pounded that house, and it collapsed.

And its collapse was great!”

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This is not a quote from some billionaire like Warren Buffett – this is a parable from Jesus (Matthew 7:24 – 27 to be exact).

Building a business on debt is exactly like building a house on sand. You can use debt to grow, but you must first have a sound foundation of rock – capital that is not accruing interest payable but instead investors who are prepared to lose their money if the venture fails.

Leveraging is great at amplifying returns but a knife can cut anybody.

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About the author

I am a young entrepreneur who started my first company at 20 during my MBA program at the University of Miami. Our first project was the creation of RealVibes.net, later renamed Realvibez.tv, a leading online destination for Reggae, Dancehall and Soca videos, first launched in February 2002. I am the co-founder of Random Media, an integrated media and entertainment firm focused on Caribbean entertainment and culture, as well as co-founder of Kaizen Interactive, a digital marketing agency. Experience and Achievements - Secured deal for my venture (through the Realvibeztv channel) to become YouTube’s first Caribbean media partner - venture now part of YouTube’s new rental program - Random Media has signed distribution deals for e-book versions of a number of Caribbean books in the Amazon Kindle and Apple iBooks stores - Interviewed numerous times about using social networks for business, previously built up a Facebook fan page for Jamaica to over 55,000 fans in less than 2 years that is now being used by the Jamaica Tourist Board - Asked to endorse a book on entrepreneurship The Toilet Paper Entrepreneur alongside Donny Deutsch, Host of CNBC’s The Big Idea with Donny Deutsch - Contributed a chapter to a McGraw-Hill Publishing book, How To Make Money With YouTube - A judge for Business.com’s What Works For Business contest in 2009 I was born in Kingston, Jamaica, completed his B.Sc

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