It is very common, particularly when people start their business, that they incur debt.
If that is you, and you are fed up with it, you are ready to really start paying it off, and not have it pulling you down…then read on.
I also want to add at this point, there is nothing inherently wrong with having debt in your business, however, if you are fed up of having the debt and want to get rid of it, or know that you need to get it under control, then this post if for you.
Ready to destroy the debt in your business (or the personal debt that you have as a result of running your business)
Here are the steps you need to destroy debt – starting today.
Decide, from this day forward, you will not incur any more debt, and cut up those cards – you are not going to be spending on them any longer.
Yes, this might feel extreme – but if you are really committed to destroying debt and not having it creep up on you again – then this is, without a doubt, the first, and possibly the most important, step, and you need to take it today.
Flip your mindset – you need to get to a place where it is more enjoyable to save than it is to spend. Where you enjoy seeing money accumulate, in preference to owning “stuff”
Financial health needs to start being much more important. And getting your business financially healthy needs to be dominating your thinking about your business finances.
Find out what the true picture is.
Not opening your Credit Card bills is not getting you anywhere.
Open all those envelopes.
Find out exactly where you are, write it all down, every bit of debt.
Every amount that you owe, if it’s on Credit Cards, if it’s to your friend or a parent, or if it’s to your household.
Write it all down – every penny.
Get your expenses down.
You need to only be spending on this that are absolutely necessary, and all other money needs to go on repaying the debt – so you need to get expenses down (and if you are unsure where to being with that, head over to www.annetteandco.co.uk/financal-health where I go into this in much more detail)
Build a leaner team.
I often find that business owners take on people (at scale) too soon when the business revenue cannot support it. I have a little rule that your business employee costs (and by that I mean either contractors, freelancer or employees) should be 18-20% of the business revenue – if you are spending over that on team members you need to have a really hard look at the team to get financially healthy and to get that debt under control.
Start the Debt Snowball.
Often we read that you should be paying off the debts with the highest interest rate first – that is not my philosophy.
My belief is that you should start paying off the smallest debts first.
Keep making your minimum payments on all debt, but pay off those with the smaller amount, in full, asap.
As you wipe out the smaller debts you can use that freed-up money to tackle the next smallest debt. There is a snowball effect.
KEEP GOING until all your debts are paid off.
Do not give up.
Do not get distracted by the next shiny object.
And – let me know how you are getting on – I would love to know in the comments.
Thanks ever so much for taking the time to read my post I truly hope you’ve found it useful and insightful. If you have any questions feel free to contact us!
I am Annette Ferguson, CEO of Annette & Co. Chartered Accountant, Profit First Professional and creator of the Business Wealth Engine. We’re also SUPER social so don’t forget to follow. Here’s to your success!