Debt Does Not Kill Companies. Soft Revenue Plus Debt Does.

There is a warning going around that debt could make AI's disruption of business much worse. It is correct, but the framing hides the real danger. Debt is not the problem. Debt sitting on top of revenue that was never durable is the problem. One of those you can survive. The combination is what sinks you.

Think about what debt actually does. It is leverage, and leverage multiplies whatever is underneath it. Put it on top of strong, predictable revenue and it accelerates a good business. Put it on top of soft revenue, the kind that depends on a few big accounts, heavy discounts, or a market that was briefly in your favor, and it multiplies the fragility instead. When the revenue wobbles, the debt does not wobble with it. The payment is due on the same day regardless.

Revenue is the shock absorber

Every company gets hit. A market shifts, a category gets commoditized, AI changes what buyers will pay for. The question is never whether the hit comes. It is whether you can take it.

Durable revenue is the shock absorber. Customers who renew without being chased, a sales motion that produces new logos on a schedule, retention that holds when you stop discounting. That kind of revenue lets you absorb a bad quarter and keep paying your obligations. You bend, you do not break.

Soft revenue has no give in it. When the hit lands, the whole structure transmits the shock straight through to the balance sheet. Add a loan payment to that and the timeline from "bad quarter" to "insolvent" collapses. I wrote about exactly this failure mode when OpenWeb hit insolvency: the warning sign was never the debt by itself, it was what the debt was resting on.

How to tell which one you have

You do not need a CFO to run this check. Ask four questions and answer them honestly.

What share of next year's revenue is already contracted and likely to renew? If most of your number has to be won again from scratch every year, it is soft.

How concentrated are you? If losing your top two accounts would miss the plan, you are one procurement decision away from a crisis.

How much of your revenue survives without discounts? If the deals only close when you cut price, you are buying revenue, not earning it.

Could you make debt payments through two bad quarters on current cash? If the honest answer is no, the leverage is already larger than the business can carry.

Where those answers are weak, that is not a financing problem a new round solves. It is a revenue problem, and more capital on top of it just raises the stakes.

Fix the revenue before you lever it

The order is not optional. Build the durable revenue first, then borrow against a business that can actually service the loan. Reverse that order and you are betting the company on a market that stays friendly, which no market ever does.

This is the core of what I do as a fractional CRO: turn soft, founder-dependent, discount-driven revenue into the predictable kind that survives a downturn and can safely carry leverage. If you are considering debt, or already carrying it, the smartest thing you can do is pressure-test the revenue underneath it before the market does it for you.

AI will disrupt plenty of businesses. The ones that go under will not be the ones that got disrupted. They will be the ones that borrowed against revenue that could not take the hit.