The last job I worked before starting my business was in the marketing department at a large corporation, and it involved running a considerable quantity of marketing analytics. I’m talking those kinds of Excel spreadsheets - the ones with hundreds of thousands of rows and numerous pivot tables, and a company intranet that required tons of maintenance and records updates. It can get tedious quickly when you’re tucked away in a cubicle filtering data (though you may be surprised to know how much I actually enjoyed it - #nerd), but one of the major benefits was that it allowed me hours each day where I could work with a podcast dripping into my headphones.
My list of favorite podcasts will have to wait for another time, but when you’re listening to 3-6 hours per day, it’s easy to burn through your favorites (and data, sorry Dad!) quickly. But, that podcast desperation is exactly how I discovered Dave Ramsey, and it’s no exaggeration to say that that discovery has changed my life.
Dave Ramsey is the champion of a debt-free life and business with his no-nonsense approach - “God’s and Grandma’s way of handling money.” And with three hours per day available to stream, I was a quick convert.
At the time, my mentality was so different. It wasn’t that I thought debt was great, it was just that I didn’t really know it was an option to exist without debt. I mean, I’d been building my credit score since I was 18 - that was important, wasn’t it? I paid off my balances every month… until I didn’t when I’d left my previous job, and then some of those balances were still lingering, but still, I had a degree in economics. I could game the system and get a great spread on interest rates, not to mention the investments I was making in myself, as I prepared myself for an entrepreneurial journey. Right??
Dave shook all of that up for me, and I’m so glad he did. He caught me just in time, as I was starting my business. Turns out small business loans, venture debt, even business credit cards are totally unnecessary - and completely toxic - for starting a business, and I’m proud to say that I started (and have run) Magnoliahouse Creative with absolutely zero borrowed money.
Here are 4 reasons why running a business debt free is the freakin’ best:
Flexibility and Freedom
Debt weighs down your business by committing you to payments and tying up your cashflow. When you’re busy paying for decisions you’ve made in the past, it’s hard to move forward, both mentally and financially. By running a business without debt, you’re not committed to any one course of action. See an opportunity in your market that you’d like to take advantage of? It’s easy to make a quick shift. Feeling less inspired by a certain kind of work or client? When you’re not dependent on that income to make monthly payments, it’s easier to evolve your business without the golden handcuffs of profitable but difficult clients. Need time off for a vacation, maternity leave or sabbatical? No problem. Without debt, it’s so much easier to hit pause on your business for life events and emergencies.
Forgoing debt lets you scale down your level of risk dramatically. My momma has this habit of keeping a blank check and a stamp in her glove compartment. Why? So that when she gets a parking ticket, she can pay it immediately, drop it in the nearest mailbox and not think about it for another second. You can do the same thing in your business by paying for things upfront and in cash. Whether it’s inventory, an expensive course or a new piece of equipment, by only spending what you have available and can afford to lose you’ve prevented yourself from being devastated by a miscalculation (which, let’s face it, we will all make at some point). Plus, if that overhyped course is a bust or you drop your brand new lens in jelly, you can have a good cry or and a deep belly laugh, and let it go.
Control and Accountability
Ever noticed that when you’re using actual, physical dollar bills (so 1990s), you actually pay attention to how much things cost? Spending real money is just that - real, and it’s something that swiping a credit card will never compare to. By running your business without the safety net of debt (even if you swear you’ll pay off those credit cards every month), you actually have to take control of your cashflow with a detailed budget. It sounds painfully boring and tedious, but it’s actually incredibly empowering! I use Dave Ramsey’s fabulously intuitive software, Every Dollar for both my personal and business budgets. You’ll never play the roulette game of “will this payment clear?” again. Plus, it forces you to be honest with yourself in your business. By looking at your incomes and expenses every month, you’ll have a chance to decide if all those subscriptions are really worth it, and give you ideas of where you should be focusing your time for maximum profitability.
Y’all, I do not want you to get the idea that I’m some kind of disciplined adult who has no problem delaying gratification. I think I’ve written “be less impulsive” in my Powersheets for six straight months now. By taking debt off the table as an option, I’ve been able to give myself extra motivation to hit my goals. About six months after starting my business, my terrible eyes (I seriously have the eyes of an eighty-year-old in the body of a twenty-something) were screaming at me to upgrade my slow 13” MacBook to a big ol’ 27” iMac. I wanted it real bad, but I didn’t have the cash on hand to pay my bills and pour a few thousand dollars into new technology. So what did I do instead? I took on extra clients and jobs, delayed some other purchases and worked hours that I would have instead been using to watch Pretty Little Liars, and was able to cashflow my shiny new baby in just a couple of months. Waiting sucks, but having the full confidence that you can afford something, and the satisfaction in earning it is surprisingly addictive and satisfying.
Oh, and on a personal note, using Dave’s baby steps, my husband and I have paid off all our personal debt, including student loans, and are working on our mortgage now! It’s a different way of life without credit cards, but I wouldn’t go back for an instant. If you want more information, I highly recommend downloading The Dave Ramsey Show podcast or picking up a copy of The Total Money Makeover.