I was checking out an article over at MSN’s Business on Main titled “Taking On Debt to Grow Your Business.” In the article the author explores the notion that businesses need debt to grow. I’ve been thinking a lot about this lately and reading this article, filled with ways to get capital for your business, made me wonder if a business could grow without having to take on debt.
Do You Really Need to Spend Money to Make It?
A lot of times you will hear people say, “You need to spend money to make money” or you’ll hear people talking about how the universe opens up and expands to return to you what you spend. I beg to differ. I don’t believe that, in every scenario, you need to spend money to make money nor do I think that you should frivously spend your capital and just trust that it’ll come back to you. My own business, for example, was built with zero debt and zero funding. I bootstrapped it and you can too.
Businesses that feel like they have to spend an inordinate amount of money to make money often fail. Now, I am not talking about spending money to get your brick and mortar location set up or the capital that goes out to hiring people when they are needed. However, most of the people that are in my world are online entrepreneurs who are setting up web spaces and hiring virtual teams. For these particular people, not having a tight rein on your spending will inevitably lead to the death of your business.
Spend What You Make, As You Make It
You should spend what you make, as you make it. I know for the eager beaver entrepreneurs and the perfectionists, this idea sounds ludacris. You instead might think that you have to put things on a credit card now to ensure that everything is perfect before you launch things to the world and start making money. I see the reverse as being true. Get your wares out there in a professional yet quick and dirty way, see if it’s viable and see if it will turn a profit and when it does, reinvest a portion of that revenue back into business improvements. The other portion? That’s your income!
When I started my business, I started it with an Internet connection and my computer. The only money I put out was for an Elance.com account (where I landed my first client) and for website hosting that included a domain name. It wasn’t until my business turned profits that I upgraded my website, invested in a fancy schmancy telephone service, upgraded to a fancy shopping cart and all of that fun stuff. When you are in start-up mode, you have to nickel and dime in every area of your business so that your business doesn’t start creeping into your personal life.
If Your Spending is Out of Control, Reel It In
I can’t tell you the number of entrepreneurs that I’ve personally worked with who started their businesses, put things on credit cards, maxed out all of their available credit, dipped into their children’s education funds, used their life savings, dipped into retirement funds or sold their posessions just to keep their perfect business image. If this is you, stop spending, look for ways to bring in revenue and get your business out of debt.
What tips do you have for entrepreneurs who might be struggling with business debt? Leave them in the comments below.