A debt-free business; is that even a real thing?
Back in 2005 when the doors to our business opened, one of the core beliefs that we carried into our family business was to keep debt at a minimum. That may sound idealistic and old fashioned, but by abiding by this debt-free concept, we’ve been able to take a three-man company and turn it into 40+ employees with 30 paid-for service vehicles on the road, and now after 10 years, we are in a building that is virtually paid for.
While this may sound “hoity toity” of me to say, business growth and progress is possible without owing the bank and racking up credit card debt. Here’s the thing. When you decide to keep out of debt as much as possible, you DO have to make hard decisions. You have to say no to conveniences and even resources. You have to make do for periods of time before buying that new service vehicle, or moving your office to a better location, or paying yourself a salary that you deem you are worth.
Let me go over just a few areas that we can all benefit to rethink when it comes to how we spend our money in business and how, sometimes, what we call “needs” are more likely “wants.” If you’re a brick-and-mortar kind of business, you’ll understand some of the key expenses that we have to face on a regular basis.
Be Smart with Company Vehicles
If you’re a service company, vehicles are definitely going to be a large portion of your expense. It’s generally an unwise decision to buy a brand new vehicle. And don’t just think, “Okay, I’ll get a two-year old service van.” Think 5-8 years old. And, PAY CASH. Save up for as long as it takes, and don’t give in to the temptation of a monthly vehicle-loan payment for every vehicle in your company.
It’s a good thing to want to look professional when driving up to a customer’s home or meeting a client, and you can look neat and respectable with a well maintained older vehicle. You won’t be flashy, but that’s okay.
Choose the Right Office Location
We all want the best location possible for our business. We want a storefront near all of the action. Besides, that will bring in more business, right? Sure, good location is awesome, but if you’re paying more than you can afford, or sucking up all your company’s profits, then consider working from a home office, or a lower profile area until you’re more financially ready to pay higher rent/lease.
Know Your Numbers
You may be saying, “Dude, I don’t have a nice vehicle OR a storefront and I’m STILL struggling to pay the bills and not drown in debt.” If that’s you, take a closer look at your numbers. All of them:
- Monthly expenses
- Salaries (labor)
- Cost of product/materials
- Marketing
Write it down. Go over the details. Almost always there are ways to trim our expenditures and find areas that our bills are unnecessarily kicking us in the butt.
When you cut back on the fluff and simplify, you will start seeing expenses go down. Overhead lessens, and slowly but surely you can start to gain ground on your finances. Whether you find a commitment to premium materials that costs you more than you knew, or a monthly service or equipment lease that is too large to ignore, you’ll find ways that you could shave your expenses by a few dollars.
Start a Budget
No matter how small or large of a company you are, start a budget. A budget keeps you accountable and gives you more control of your finances. Budgets hurt, and many of us (myself included) shy away from them and choose an “ignorance is bliss” stance. We all know that bliss doesn’t last long.
When you document all of your expenses you’re going to see that there are things you have to cut. There will be no more hiding behind credit card debt and loans. While it may feel depressing at first, it’s the disciplined road to freedom and a whole lot less stress.
Trim up, scale down, and move forward!
What are some areas that debt has been a problem for you?