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  • Nick Gilbert

We CHOOSE to operate debt free

Starting a small business is scary enough. Why would you borrow money and make it more scary? I am an anxious and impatient person. With my personality traits, debt emotionally drains me, as well as draining my pockets, but I also want things to move quickly. I am also a simple person. Banks and lenders use words and phrases that confuse and frustrate me. I hate the small print at the bottom that no one can read. We try to simplify our life and pay cash when we have it and wait to purchase if we don't. We have learned the hard way with debt and we now choose to operate without it. We sleep much better at night knowing we do not have to write a lender a monthly check out of my business account.

The world teaches us to consume,consume, consume. It is believed that Millennials will be the highest consuming generation of our nation's history. Within year one of our marriage, my wife and I bought a brand new house, brand new car, brand new appliances (because the ones we had just weren't "good enough"), and a brand new 800.00 dollar couch. I was in my first year as a teacher and my wife had a great job. We were living "The Great American Dream." In addition to our beautiful new life, we had over 20k in student loans, around 4k-5k in credit card debt, and I owed my parents 2k. WE WERE BROKE! But it did not appear we were broke...looks can be deceiving. We were paying nearly $3500/month in debt payments and bringing in about $4200.00/month. It is difficult to provide for a family of 3 on $700.00/month. We were offered financial help by those close to us. We refused every cent. I was so embarrassed of the hole we had dug ourselves that we made the decision to change. For extra income, I coached, mowed lawns, and my wife delivered newspapers while being 6 months pregnant. We sold the car for WAY less than we bought it for and bought a car for $5,500.00 cash, which my wife still drives today. We consumed because it looked good, but it did not feel good to live broke.

We have taken a much different approach with our business.  We started our mowing business with a $150.00 mower, a $50.00 weedeater, and a $300.00 dollar trailer. It was not the most professional looking lawn service, but we built up clients because of the way we treated them. When we decided to start our sign business, we cash flowed all the inventory and equipment with the money we made from mowing and landscaping. There were months where our mowing and landscaping money kept inventory and equipment for our sign business up to speed, but I sleep better at night knowing that there is not a bank that owns my company assets. As we have grown, we now lease a building with no yearly contract. Meaning, we can leave whenever we want if it is not working out for us. We cash flow everything and are committed to continue growing without debt. I know the saying, "You have to spend money to make money." I agree, but you do not need to spend money you do not have to make money. It would be easy for me to walk into a bank and take out a large business loan and buy all the best gadgets to help my business operate, but is it necessary?  We are growing and have never borrowed a cent. Do we have the top of the line equipment according to industry standards? Nope. We bought what we could afford and we make it work. In some cases, we make it work better than our competition. We buy tools, equipment, etc. as needed and within our current budget. We do not spend in mass to build up a mass amount of products and tools that we will sit on for years and rarely use. It is not always about the tools you have, but how you use the tools you have. My Ryobi drill performs the same tasks, in the same amount of time, as any Dewalt I have seen or used and my Ryobi was half the price. Sometimes businesses finance trucks, tools, equipment, etc. unwisely and that is an unnecessary expense that could go to another company investment such as employees or your pocket. If you need a backhoe for a job, don't go finance one, but rather go and rent one for the job until you have cash to pay for one. Just because you have the fanciest gear does not mean you are the best business, anyone can finance just about anything these days.

Debt free companies and people sustain during tough times. Currently, we are watching our economy struggle and most of us know someone who has been laid off.  Small businesses are not failing because they lack skill, motivation, etc., but because they have too much debt to overcome. In our economy, it is important to have cash flow. That way while your indebted competition is failing during the bust, you continue to win because you have set your business up to sustain economic droughts. Businesses often blame the economy or our leadership. Several small businesses continue to make money and grow even in tough times. Read Rework or Good to Great for several examples. When you own a business, you have to adjust and be prepared for those hard times. Being a business owner means you get to control your destiny.

How we have stayed debt free:

  • We keep at least 6 months of cash reserves in our business account. Meaning we can sustain for at least 6 months without income. 

  • We offer our employees a monthly truck allowance to use their trucks

  • We rent equipment. 

  • We go in half with another business and share the equipment.

  • We buy used equipment.

  • We lease a building with no strings attached. Meaning we can leave whenever.

  • We buy tools as we need them.

  • We buy enough inventory for a couple weeks and order when we need to.

  • We do not gamble on projections of what we THINK we will need. 

  • We outsource 

Avoiding debt is my best suggestion in business based on experiences, but if you think you need to go into debt, do it wisely. For example, if you have a 100k in the bank, but owe 60k on a truck and owe 40k on a trailer, you are broke. Your net worth is 0! Don't borrow more than you have in your bank account. If something crazy happens, be able to write a check for the balance due on your debts. "The rich rule over the poor, and the borrower is slave to the lender." Proverbs 22:7


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