Happy Friday everyone! Welcome to the continuation of Wednesday’s article on The Cost of Debt. At the end of the article I asked you all to think how having so much interest accumulate on a small debt that it would take 19 years to pay it off could negatively impact a business. I don’t want to get into too much detail here as we’ve already discussed this, so let’s get right back into it.
There is no sugar coating this. For a small business run by a self-employed individual, accumulating too much debt can, and often will, cause your business to fail. After all, if you’re constantly paying out to your creditors, where’s your slice of the PIE? You may still get one, but it could be very small indeed. Barely a taste. In the short term you could get by with a small income, but we’re not in this for the short term, you and I. We’re here because we want to work for ourselves, go our own way, make our own money, and keep making our own money. You’re not making much of anything if you’re spending decades pitching cash down a hole just to keep up with a loan you took out to say….get your business started in the first place, or to keep things going during a lean month. You will fall into the same trap that my example from part 1 of this article fell in to, and for a business, this can mean the difference between life and death.
For many of you just starting out, or who run into a snag along the way, some debt can be unavoidable. After all, you have to spend money to make money, and just starting out, you may not have very much (or any) to spend to begin with. Fortunately, there are many ways to mitigate this, and they’ve in fact been covered on this blog before. You may have noticed a lot of that lately, as recent posts call back to many of the things I’ve discussed previously. It’s almost like I’ve been helping to train you for this kind of thing without you even realizing it. In my personal correspondence I would put a winking emoticon here, but this is a professional blog, so do me a small favor and picture one in your head. Thank you faithful readers!
Now back to the serious stuff. While some debt can be unavoidable, the best course of action is for you to do everything you can to make sure you never go into it in the first place. Finding the correct path to take while starting up your business is your first step. You don’t want to immediately dive in to an opportunity beyond your means and end up paying for it, both literally and figuratively. Use common sense here to choose opportunities that, at least at first, are low risk and therefore unlikely to put you into the red off the bat, or any time soon. Before you take another step, you ought to sit down and figure out your operating costs, your expenses, and make a very careful budget. In fact, that post is extremely important to avoiding debt, so even if you’ve read it before, give it another go.
If things go right, you should be able to keep yourself (and your business, of course) in the black from the get go. Of course, “stuff” happens. Just be sure that when “stuff” does happens you’re prepared for it and don’t end up falling behind, lest you end up falling into the 19 year money hole.
Debt can seem scary, but it doesn’t have to be as long as you do everything possible to avoid it, and should you end up in it anyway, have a solid plan in place to escape it as quickly as possible.
Think of it as a war. You are a loyal soldier of the Republic of P.I.E., sworn to protect it at all costs. Your enemy is Kingdom of Debt. Put on your warface and show it who’s boss.
You know, like this. A little something cute to send you on your way after such a serious topic. Have a good weekend, everyone!
