The number one concern of many businesses is the amount of debt that piles up during the first two years of business.
I spend a lot of time speaking to owners of businesses who provide services, and this is one of their biggest issues.
You start your business and there is so much investment in the beginning. You may need to buy a new computer, a new printer, perhaps new office equipment. Then you may need a new website, branding, logo design. Next you sign up for newsletter software, teleseminar services, customer relationship software. And you may hire a virtual assistant, a bookkeeper, an accountant. Finally your biggest investment is usually in business coaching and/or business training programs.
You do your best to learn everything you can and get clients as quickly as possible to keep up with all of the mounting expenses. By all of your best estimates, you are doing fairly well. You are signing new clients, becoming better at your trade and learning more and more about how to run a business.
But despite your best efforts, you just can’t keep up with all of the expenses. And by the end of year one you have amounted several thousand dollars in debt.
By the end of year two, you have even more.
The thing that is most frustrating is that you love what you are doing and your business is growing. It’s just not growing fast enough to be able to live well, pay your business expenses and pay off your debt.
If this is your story – know that you aren’t alone. And more importantly, you didn’t do anything wrong!
Here’s a statistic you should know: most brick and mortar businesses take between 3-5 years to break even (think restaurants, stores, product lines).
Please read that line more than once. I don’t share it with you to scare you. Nor does it have to be true for your business. In fact most service oriented businesses break even much faster due to the lack of fixed and other large expenses (no buildings, factories, products, or large teams).
I share the statistic above with you to add a dose of reality to a marketplace that is full of “you’ll be rich tomorrow” promises. I also share it with you to let you know that credit card debt shouldn’t be a source of shame.
So how do most companies get off the ground and stay in business those first couple of years?
* They get a loan or credit line from a bank.
* They have investors in various forms.
* They get a loan from friends, family or followers.
* They have a secondary income from a spouse.
* They have a large savings account.
* They have another job.
Many of you didn’t have any of the options above. You jumped straight into your business and ran as fast as you could to grow as quickly as possible.
Credit cards became your source of funding.
And I’d like to say something quite radical here: there is no shame in that.
You used your credit cards as leverage to learn your trade, to learn how to run a business and to buy the tools you needed to get the business started.
Know that the core principle of creating a service business is building the “know, like and trust” factor with your clients. And that doesn’t happen overnight. So know that as long as you keep marketing consistently, are good at what you do, and follow the steps below, it will get easier and easier to generate revenue. Therefore, you’ll be able to pay off most of that debt over time. The key is consistency and persistence. I often see entrepreneurs make huge leaps in terms of being able to keep more money in the bank in years 3 and 4 of their businesses.
Also realize that as you grow you may need to continue to use debt to leverage certain aspects of your business. For example, if you want to do an event, you may need to put the $5,000 food and beverage deposit on a credit card. There is nothing wrong with that either (just make sure you get that room filled).
Ok, so now that you’ve released the shame and restored hope, how do you start getting ahead of the game to pay off large portions of debt? Here are three steps:
1. Get a plan. If you aren’t clear about your brand, your target market, your marketing strategy or your income goals, it’s time to get some help. Invest in some one-on-one help from a business mentor who can make sure you are on a lucrative path and give you a step-by-step plan. That way you aren’t working hard, but running in the wrong direction.
2. Focus on Revenue Generating Activities. Many of you would much rather work on your website than follow up with clients. You’d rather work your restaurant shift than walk the streets looking for speaking event opportunities. Know that not all “work” is equal as an entrepreneur. If you aren’t focused on revenue generating activities (RGA’s), you won’t increase your revenue. Once you let go of the “I’m freaked out about my debt and this should be working faster” feeling, you should have more energy to focus on RGA’s. Those actions will create momentum and momentum creates cash. Trust me, money will start to come in from places that you can’t possibly predict.
3. Get a loan. Sometimes I meet clients that just can’t seem to get ahead of their debt and expenses and they become paralyzed with fear around money. This usually coincides with money that was spent to cover a sickness, an accident, a messy divorce or some other unforeseen tragedy. If this is you than you may need to get a business loan of some sort. For most people this looks like a job. For others it looks like a loan from a family member. For others it may be investors.
Know that getting a job is not a cop-out. I’ve seen countless clients get jobs and then watch their businesses take off. Why? Because when they were able to finally stop worrying about money, they attracted so much more of it.
I got a job during my first year of my first business, and it was the best thing I did for myself. It allowed me to hire my first high-end coach, pay off all my expenses and sleep well at night.
Don’t let debt get you down. For many of you it was a necessary tool that you needed to get your business started or get you through an uncomfortable period in your life. Release the shame and guilt and use that energy to generate revenue and pay off any large portions of debt that are bothering you. Now, doesn’t that feel better?© Copyright 2017 TextOnly'Admin