Should you go into debt to start a
business? A lot of people do it. A lot of
people think it's a good idea. It might
be a bad idea. Let's talk about that. All
right, you kind of left us hanging there.
Because you didn't, you know, state with
clarity. Because it was just the
introductory little hook if it's a good
idea, if it's a bad idea. Yeah, are you
straddling the fence on this one again
to you're saying... I'm going to stay from the
beginning, I'm leaning towards it's a bad
idea. To go into debt to start a business.
You know, I've got some, some reasons why.
But the biggest reason is, if you're not
experienced as a business owner, you're
taking on a huge huge risk most
businesses fail. And you're going to go into
debt to start something that you're not...
You yourself have used the word risk in the past. You know, that
it's risk, there's risks you got to take
in order to be an entrepreneur or stuff
like that.
Shouldn't that be kind of included
though in waiving this question? I actually really
embrace risk. I think there's a lot of
risk in entrepreneurship. But that's the
other after you kind of know what you're
doing, is that what you're saying? Well,
there's different degrees of risk.
It's like calculated risk. That is true.
Calculated risk I think is important for
growth than and anything. But the risk of
getting...
This is a real number. I did not... Maybe
I'll step back. When I started my
business, I did not go into debt. I was
behind on my bills as I've talked about
this story in the previous videos. But I
did not have to go into debt to sell or
create my service. I just tellemarket
it. I didn't pay for advertising. I
just, you know, pounded the phones.
Dial the number, there you go. Right, right.
People will get that, sure. And called and
called and called.
And got some sales. I was able to be
profitable. Now, a few years later, I
had some ideas of expanding and growing
and I made a bad decision.
I got a $15,000 line of
credit,
business loan from Zions Bank. They're
the only bank that would give it to me.
And my plans didn't work out as I
foresaw. Yeah, that that's been something
that I was... That that burned you a
little. So, you're... So, to go into debt to
start a business, you haven't had that
experience yourself? And I see large
companies or they're like they're doing
of funding, they're
funding phase, so they're gathering all
this debt and whatnot and then they're
finally going to be profitable in 3
years. That's a different world.
I don't know that world so I can't
really talk to that world. Right. Let's be clear.
We're talking about small business
owners. Yes, Solopreneurs, small businesses. That's a
dangerous thing. If you get a loan before
you actually know that you can make a
sale. So, it's got to be a calculated risk.
If you're going into debt because you're
already making sales but you just need
more inventory or something, that's...
You're just getting more inventory
because you got customers that need to
buy it. That's different, yeah. I can't
give blanked advice across the
board. Yeah. But just understand that
there's a huge risk. If there's a way of
starting your business kind of
bootstrapping it and growing yourself
into a good income, if I'm saying it the
right way, that's that's definitely my
recommendation. So, yeah, just kind of
allow the natural growth that occurs and
be prepared for it based on the
capital that you begin with which is
probably from your own pockets, from your
own savings, from your kids college fund,
from retirement. At least that's not debt.
I mean, some people would say, "Gosh, I've
got to cash in some of my 401k and
after, I'm going to take a big hit on taxes."
But I need something to start with. At
least it's your money, right? I mean, you
know you won't owe anybody. I believe
that we all kind of have a ceiling or a
thermostat that work will almost operate.
Those are two completely different things.
Let's use the thermostat then. I could
go either way. Let's go with the thermostat.
thermostat or thermometer? Thermostat.
Okay, so because thermostat regulates the...
Thermostat regulates. So, if we want to be
right at 72 degrees or that's where
we're comfortable, if the heat starts to
get turned up, the
AC is going to turn on and bring us right
back down to where we're comfortable.
Okay. So, what I what I'm talking about
here is, if finances are tough and I
don't have a loan. So, I'm trying to make
it by I'm trying to make enough sales,
the heats going to be turned up and I'm
going to be working hard to
make ends meet. I'm going to be thinking
outside of the box. I'm going to be
trying things that I normally wouldn't
do. I might be working longer hours. So
that I can make sure that we get results.
But if I've got a loan, Zions Bank gives
me $15,000. It's like, "Yeah. Okay, I've got
a little cushion here and I can, you
know, it's going to pick up next
month, you know, just keep doing what I'm
doing. It's going to get better and better."
What you would think that that pressure
to perform the pressure, to pay that back
for most people would be the thing that
ignites them, gets them out and calls,
"Holy, I don't want to default on this loan." But that interest rate
was 5%. And it's like... That's just a risk.
I mean, hopefully you think
it didn't work that way for me.
Obviously. But you're okay now.
Yeah. So, it worked out. You got out of debtors
prison or whatever. Whatever they do to
people like you. It's a mental,
it's a mental prison. Yeah. So, you
know, I thought that we could turn this
video into some practical advice because
I was not taught this from an early
age. I did not know how to use a credit
card.
I knew that credit cards were good for
developing credit. Right. And so, I got a
credit card... For renting cars and you know
what I'm saying. I mean, you have to like
or to check into a hotel, you know, things
like. But as you're
a teenager or entering your 20's and
you're starting to like get into career
thinking and you're starting to develop
your credit, that's the age I was in my
early 20's and I got some, I got some
credit cards. The mistake that I made and
this sounds obvious. But I bought things
when I didn't have the money for them.
Yes. But I I thought that I was going to
get the money. I had a summer sales
job for a few summers. Okay, okay. And I
like, you know, last summer I did really
well
made 20 grand in just three months. So,
I'm going to buy this thing now. Let's say it's
spring. Yeah. I'm going to buy, I'll just be
real, I'm going to buy this audio recording
equipment for my acapella group because
I know I'll be able to pay it off this
summer. That's too nerdy to make up.
I'm going to make.... That's totally true. I'm
going to make twice as much this summer.
It's really what I was thinking. Yeah.
Did I make twice as much? I don't know. I
mean more about only by like a couple
few thousand. And I actually could have
paid off my studio equipment. But you
didn't? But then I needed a new car and I
actually had enough cash that I could
have paid for the car. But I thought, "Well,
I'll pay half of it with cash and I'll
put half of it on my credit card. So, I
can build up my credit." Anyway, a few
years later, all my credit cards were
maxed out. And I was struggling to make
the payments on them. Yikes. Yeah. So, it's
a... Man, it was rough and I carried
that burden of that debt into my
marriage and it was... That's a real
problem. Yeah. Interests never sleeps. So,
the right way, let's talk about
what is the right way to use a credit
card? And I love this. It's if I'm going
to buy something that I have money for,
So, first of all don't buy it unless you
have the money for it. So, yeah that's the
problem with most kids these days is
they're not educated on that. No, they
just go, Oh, this just buys me things. Yeah.
So, you have to have... If I'm going to go buy
some clothes and it's going to cost me 200
bucks. I need to have that 200 bucks in
cash or in my bank account. Right. But
then I can use my credit card to Buy it.
And then pay it. And then when I get home,
I sent 200 bucks to pay off the credit
card. That's a good way to use a credit
card. And it will develop your credit.
You get that little bonus points
or whatever per credit card has. So, it'll
build your credit and you won't get into
trouble. But that's really, the only way
that you should really use credit cards
in my opinion. Yeah, I mean, they're like it
says, there're risks. I've never used credit
cards for business... I mean, I use them for
business all the time because they have
a business card for my business. But in
terms of, you know, saying, "I know I've got
a $35,000 or fifty thousand dollar limit
on this card.
or I can write a check today for 25
grand." That's basically, the credit cards
way of saying, companies saying, "You've
got an 800 score, we love you, here's some
free checks. Go on a spending spree." But
if I know it's a capital investment and
it's something that I absolutely must
have for my business, it's hard to resist
that. You know, if I need to buy the
zoom h2n or h4n, right? And I know
that it's going to set me back two grand or
whatever they are. 150 bucks.
Well then I'll just walk out of the
store with it. Not even going to pay if it's
150 bucks, they're not even going to miss
that. So, just stealing. I don't know where
this video is going. No, I was going to say, I've
always lived that way. The same way. If we
don't have the money for it, we're not
using the card. The card really is for us
to get miles, to get points and to build
our credit score. That's really all it is.
And then in those rare, rare, rare
emergencies when you know, you've got a
dental emergency. Something
maybe that you might not have as much
money for. But you know, "Okay,
we'll pay it off in 2 months."
It is nice to use an emergency. It's
better to have a nest egg of cash for an
emergency. But you know if you've got
something comes up... It's never happened
to me personally but I'm just saying. So,
I've got another piece of
advice going back to starting a business.
You know, with debt. My recommend... You can
start your business in a grand
way. And if you think about all the
different services I've offered, from
website design, searching an optimization,
to video production to all the stuff
that I do for YouTube. All the nerdy stuff.
The events that I've put on, okay? I think
it's cool. It is. Imagine if I would have
day one launched all those
services at once. And then I would need
all the camera equipment, I need this or...
Or think about if you're going to start a
store and you're going to have one product
versus a whole product line right from
the beginning. Mm-hmm. My recommendation
is just to start with one thing, keep it
simple. Start with one thing and make
sure you can sell it and sell it well.
And when that starts to take off, start
another service or start another product.
Because in order to start big and you're
not selling any one thing, you're going
to have to go into debt
to do that. And it's better when you have
the focus. So, another point or advice
that I want to give, you may have heard
the phrase, "Shiny object syndrome." Have you
heard of that? I can imagine what it is.
I've heard of a shiny object. Yeah, so if
you've... Shiny object syndrome means
that you can't resist. So, some
new opportunity comes along or some new
some new course or some new marketing
thing, "Oh, it's this new app that's
going to send people a text message and get..."
You're going to get tons of leads. It's like,
if it's really cool, you've got a book
market but you've got to stay focused on
the thing that you know is going to work
and because stuff like that can just
eat up your funds, it can pull you into debt.
A lot of organizations are never debt free.
I mean, they have debt service that goes
on and on and on and on. That's just part
of who they are. And I think about, I
think about that I'd scale it down to
just me on my own. And I go, "My gosh, I
could never sleep at night." I would never...
I still drive by these buildings and see
these big companies and know that
they're constantly in debt. That we
might make profit. A profit, this quarter
for the first time in 5 years, a
profit?
You mean, you know, we're
actually going to make more than we've
spent and all of our debt and everything
else. I mean that is frightening to me.
But it's tempting to go, "I've got a card
that I know has this much I could use."
Don't do it. It's just, just nice, measured
approach. Well, hopefully enjoyed this
episode. Hopefully found some advice
there that will benefit... You'll have to dig.
You might have to dig a
little. Talk about your comments.
Exactly. Alright, like, subscribe.
We'll see you tomorrow.