Starting a business is a great way to embrace your passion and establish a legacy. Big or small, a business can change your life and financial standing—for better or for worse. It’s a leap of faith to build a brand, so it’s important to do what you can to minimize risk if you’re ready to start a business. The best way to reduce risk? Launch your business debt free.
Opening and maintaining your business debt free is the best way to grow your brand. Doing this will give you more freedom, less stress, and a much better chance at success! I know this is true, because I’ve experienced this myself. I built Strong Tower Consulting debt free and I know a lot of my success is because of my discipline to remain debt free and grow at the speed of cash. Here are my tips for starting a debt free business:
How To Start a Business Debt Free
Ask yourself what the business is for.
Before you brainstorm business ideas, ask yourself what it’s for. Are you starting a side-hustle for extra cash? Do you want to be your own boss and establish something for the next generation? Or, do you want to be the next Steve Jobs?
This is important to know, because the start-up costs, effort, and time you spend on your business need to match your intent. A side-hustle shouldn’t cost you your life savings! And, a big business needs to have good planning and long-term potential. Before anything else, consider the purpose of your business.
Choose your business wisely.
Once you know what your business is for, carefully choose your best idea. Consider all the pros and cons of that start-up before you decide to start saving and investing. Here are some questions to ask yourself:
- Do I have to quit my job to pursue this?
- What resources and equipment do you need to get started?
- Will hiring be necessary at the ground floor?
- How does your family feel about your choice?
- What is the time commitment?
- Have you discussed the time commitment with your spouse?
- How difficult will it be to find your client base? Do you already know where they are?
- How long will it take you to be profitable?
Ideally, you want to start your business with as few variables as possible. You want low overhead, low time commitment, and, as I said, low risk. This will give you a great capacity to develop and income from the start, which will squash any temptation to go into debt. (Hopefully.)
Get on a budget.
Right away, create a budget for your business. Just like you should have a zero-based budget for your household, you need one for your business. Your budget should ensure your business thrives on less than it makes while building savings and giving generously. If you diligently budget every month, you can be ready for unexpected expenses and keep your business in check—all while growing your brand!
Prioritize getting out of debt.
If you’re in any type of debt, work the baby steps to get out of it. When you’re personally debt free along with your business, you’ll experience a level of peace most start-up entrepreneurs can’t understand. No matter what happens, you don’t owe anyone anything! That means your business will thrive, survive, or fizzle away—but your household will not be shaken.
When you considered the reason for starting a business, what was the answer? If this is a low-investment side-hustle to get you through the baby steps, you don’t need to be completely debt free before starting. However, if this is a bigger business that you hope becomes your full-time job and requires a lot of time and money, get out of debt before starting. Let the dream of owning your own business be a driving force to get you out of debt fast!
Go with the B-version of your business plan.
You may have big plans for your brand. Keep that enthusiasm! However, you need to start small. Don’t invest in expensive equipment if you can go without. Don’t spend money on warehouse space if you can use your garage. And, definitely don’t go back to school for your new business if you don’t have the funds.
Go ahead and vision cast your dream version of your business. Then, respectfully, tear it down to its bare bones and start there. As your business makes money and your customers tell you what they want, you can step closer to that dream biz.
Keep your day job.
No matter how confident you are your business will take off, never quit your day job to launch your start-up. There’s too much risk and the income is too uncertain. If you’re freshly out of debt or just getting out of debt, a new business may tempt you to open new lines of credit that’ll put your family back in the financial turmoil.
Let your day job pay your household bills while the business income gets invested back into your start-up. This way, you minimize risk and keep your personal life stable, despite the growing pains of your business. You can switch jobs if that’s required to keep your start-up commitments, but keep a traditional W2 job while you wait for your business to be profitable. We hope that soon your profit grows and you can go all-in really soon!
Get people to prepay for your services.
Most businesses have some type of start-up costs, even if it’s small. You can either save for these things, or you can see if people will prepay for your services. If you’re starting a landscaping business and need to buy weed eaters, lawnmowers, and trimmers but don’t have the funds, try getting clients to prepay for the service at a discount. Start with family and friends, and go from there! For certain types of business, this can be an effective strategy to fund your start-up. (Just make sure you can deliver.)
Rent instead of buy.
Don’t purchase everything you need to start your business. You can rent your equipment, tools, vehicles, space, and even clothes for your new business. Don’t think about the fact that in the long run it’d be cheaper to buy, because too often that’s not the case! Because if you spend money you don’t have, it’s easy to carry the debt over from one month after another as running the business gets expensive. Then, before you know it, the interest charges will make your money-saving strategy a total flop.
Do things by hand (for now).
Automation is great, but in the beginning don’t focus on speed. Yes, some automation and outsourcing can increase profits, but in the beginning it’s hard to do it debt free. Make it a goal to stop doing certain things yourself, but for now, get your hands dirty!
Embrace the grind.
It’s tough to start a business from the ground-up without debt, but I know you can do it. I know you can do it, because I’ve done it and so have thousands of others. It’s not normal to start a business without other people’s money, but more and more people are catching on to the security and success you can achieve when cash is your primary business tool.
On day one, the business won’t be what you always dreamed—especially if you go debt free. There will be late nights, hard work, and a lot of hurdles. Embrace the grind and remember that all your work will be worth it, and the fact you built a brand debt free will feel incredible!
Start your business debt free to minimize stress and risk while maximizing your chance of success!
Some people have a strong entrepreneurial spirit and dream of owning their own business. Others have a unique talent and want to monetize it to pursue their financial goals. Wherever you land on the spectrum, I’m rooting for you! Just ensure your business starts debt free and as low risk as possible to increase your chances of success and joy as your business grows!
If you need help getting out of debt or want more advice on starting/running your own business, join me for a free session! I am both a financial coach and a small business coach, so I am uniquely qualified to help you with your debt free start-up journey. Of course, I also started my own business debt free, so you won’t find anyone more qualified to walk you through the trials your entrepreneurial endeavors will bring. Let’s do this!
