How Debt Can Help You Succeed

I want to talk about debt a little bit in this post as we are going through a round of funding with one of my entrepreneurs and they are losing sleep over the thought of debt on the business. There are many facets to debt requirements in order to launch your business. Rarely are you financially stable enough to get your business off the ground by bootstrapping it with your savings-If you are one of those people, I am proud of you! But you are the exception, not the norm. Financing a business to get it off the ground can provide soft benefits that will make you a better entrepreneur, leader, and business owner.

We are trained (hopefully) to view debt as a bad thing, it is a slow leach that robs us of our savings with each monthly minimum payment. In starting a business, however, debt can be a great motivator. I truly believe that entrepreneurs need their backs against the wall to succeed, they need motivation to make sure they do everything in their power to make the business work. Whether you finance your business on credit card (I know I have) or have secured a small business loan via the bank, carrying some debt against your business is an incredible way to make sure you want to succeed-and will.

When I started my first business, I was young and didn’t have a lot of savings. My parents were not wealthy people and nor was the rest of my family. My first business partner also did not come from an affluent family or wealth, so when we started, we had to buy all our inventory on credit cards. Over the course of our first year in business, we racked up over $100k in unsecured debt and it weighed on us daily. We would have weekly finance meetings to figure out how many more sales we needed to make to pay off the balances, and these weekly discussions led to more creative ways to market and sell our products.

My first company was a brick and mortar car audio business. We started it during a time when Fast and Furious was all the rage (it still is among car people) and before a time that e-commerce retailers were selling at razor thin margins like they are today. When we started, people wanted to touch, feel, and hear a speak before they purchased it instead of reading reviews online. We needed to have demonstrator products in our store, and the inventory on hand to install those products when a customer came to us.

I digress, this debt meant two things for us as a company. 1. We were a legitimate business with inventory needs to sell to our customers. 2. We needed to sell enough products to not only pay the debt, but also to pay ourselves-with the debt being the first priority.

There were many days where we didn’t think we would be able to make the minimum payments on our debt, which made us work even harder. The nights were long, when we weren’t doing installs we were canvassing local car shows promoting our business and getting new customers. We were putting together deals with car dealerships for their alarm system and remote starter installations, we were leaving no stone unturned to build our customer base as fast as possible.

This is the value of debt on a business, that it drives you to succeed at all costs, and if you don’t succeed, you know you gave it everything before you called it quits. Whether it’s a loan from your parents, the banks, or high interest credit cards, you have someone else depending on you succeeding, and you will do everything you have to to make that happen. Debt will make you more creative in how you acquire customers and drive more sales. It creates an accountability and urgency like very few other components in business. Don’t be afraid of debt to start your business-paying it off will be a huge part of your accomplishments and success.