Running your business with no debt allows you to have a larger profit margin, bring in more for your family and ultimately have the peace of mind that you deserve for all the hard work you put into your business. Credit cards have become normalcy in our society, but they don’t have to be in your business (and personal life).
There is quite a bit that could be said about being debt free in your business. I’m going to give you some tools that can help you on your journey to becoming or staying debt free in your business. Most of what I’ve learned has been from Dave Ramsey. My family applies his methods to our personal lives and have worked out a method that has worked for my business. Please note that I am NOT a financial adviser, so please seek the help of a licensed professional if you feel you need it.
If your business hasn’t accrued any debt yet, great! Keep it that way!
Most debt occurs from wanting or thinking you need new equipment or something for your business. I am guilty of wanting the newest cameras and lenses, especially when I see so many others posting on the boards about how much they love theirs, etc. Prolonging your desire for things you want shows maturity. You don’t need the next new camera or gadget unless you have the funds in your account right now to purchase it.
For my business, each month I have a spreadsheet for all of my sales. You can see an example of what mine looks like below.
Each month I write the sale amount, cc fees, sales tax, federal tax, my studio manager and my product. I do this every single time so I always have an idea of what I am bringing in per sale. This is a really helpful way for you to visually see what you might need to adjust in your pricing to bring in more money for your business. Every time I spend money for my business I write it down and put a minus in the profit column (unless it is product that has already been accounted for).
At the end of the month I tally all of the columns up. We can see how much I brought in for sales, etc. My taxes get put into a separate account that is solely for them. I don’t touch that money, ever!
You can easily see your profit for the month. What I do is take a percent of the profit and put it aside specifically for my business. This can be for anything business related such as a new camera, lens, blogsite, logo, etc. Of course, each month is different depending on how well I did but it’s easy to see how long it might take for me to reach my goal. If you are continually putting a percent of your profit into an account JUST for your business you won’t ever need to go into debt to purchase things you might need.
When my business was new I put a lot of money on my credit card at the time. At one point I had $14,000 worth of credit debt for my business. This was before we started on our journey of becoming debt free. Every month I would put all of my profit into paying off that credit card bill. I remember hating it. It felt like I was pouring all my hard work into a credit card because, well… I was. It was frustrating and I didn’t want to live like that ever again.
It’s been over 3 years now that I’ve been debt free in my business and I have promised to try to educate people on becoming and staying debt free in their business. There isn’t anything that I want for my business bad enough to charge it.
The above principle can also be applied to businesses that have debt and you’re trying to pay things off.
There is more that can be touched upon on this topic. I’m not saying that it’s going to be easy but it’s going to be so worth it! For now, I want to leave you with the fact that having freedom from debt opens up many more doors for your business and also your creativity. If you don’t have debt you can be more confident in your pricing and business practices because you don’t “have to make the sale” as much. You aren’t a slave anymore and that’s a great feeling!!