Thursday, July 29, 2010

Business Tip #1 - Start out Debt Free

Have you ever seen an episode of Shark Tank? It's a show where budding entrepreneurs go before 4 established entrepreneurs, present their unique idea or invention and agree to give up part of the profits from said invention for monetary backing and help with marketing. One thing every contestant has in common is their confidence in their product. What gets me every time is how many of them have mortgaged their home (sometimes twice!) or racked up thousands of credit card debit or signature loans to invest hundreds of thousands of dollars on their idea.

Only to find out, it's not unique enough to market and/or they haven't thoroughly thought through their product idea or invention. It makes me sick to my stomach to know those people banked all that debt on striking it rich only to learn they won't be striking anything.

So my advice to you today, is learn from their mistakes. DO NOT rack up ANY debt to start your business. Success RARELY happens overnight. True entrepeneurs build on an idea. Over time, they refine it, learn from others, adapt to their environment or cliental and learn from their small mistakes. Most importantly, they start small. And so should you.

A man in debt is so far a slave.
Ralph Waldo Emerson

Debt is the new slavery.
The effects of having business debt are no different from having personal debt. In fact, I think I could argue the side effects of business debt are more serious. Because you owe money to Discover, Capital One, Citi, Chase, or whomever, your time at work belongs to them. Your paycheck, at least partially, is theirs. Which means what? It means you don't have complete freedom.

The rich rule over the poor and the 
borrower is slave to the lender. Proverbs 22:7 (NIV)

Have you ever looked up the definition of slave? I mean, sure, we all know what it means. But sometimes looking up the textbook definition of a word, helps give us some clarity.

slave - a person who is the property of and wholly subject to another; a bond servant.

A bond servant is someone bound to work without wages. So if you owe somebody money, all the work you do until the debt is paid is theirs. Your money is not your own. You are a slave.

Debt, n. An ingenious substitute for the 
chain and whip of the slavedriver.
Ambrose Bierce
The good news is, if you're willing to abandon the "I want it now" philosophy, you can launch your business debt free.
How do I start?
1. Use what you have
If you're starting a business based on your hobby or interest,chances are you already have lots of supplies waiting to be put to good use. I certainly did. The amount of fabric and paper I had was ridiculous. So when I opened my first Etsy shop, Tattered Tapestry, I started it with material I already owned. It wasn't necessarily the most popular, but it was enough to get me started.
2.  Sell your junk.
a)This one is my personal favorite. It would have been more aptly titled, 'Sell your husband's junk' because that's exactly what I did. My husband says I'm a purger while I contend he's a hoarder. So we try to meet in the middle. Years ago, my husband told me if I could sell it on Ebay, I could get rid of it. That's all I needed to hear. I've been selling off and on Ebay since 1997. And if it wasn't nailed down, I listed it. I sold clothes, books, cookie jars, cake pans, car parts, movies, cds...if we hadn't used it in a year, I listed it. The more I sold, the more able I was to recognize what would be a good item to list, so I occasionally rummaged yard sales and thrift stores.  Ebay's fees have gotten way out of control so it's not as profitable there as it use to be.  But you have lot's of sites you can sell on for very low or reasonable fees. Here are just a few: Craigslist (great for large items like furniture): for handmade or vintage items - Etsy, Artfire, 1000Markets; for all else -,, and

b) What do you sell? Anything you're not using or don't think you will use in the next year. Movies, CDs, Books, Old College Textbooks, Electronics (even older ones), Shoes, Clothes (especially jeans or other designer clothes), Kitchenware, Knick Knacks, Records (especially if you happen to have any old 78 RPMs), etc. A good way to see if your item will sell is to search both current and completed listings. And don't get too big for your britches. You're not going to make thousands doing this. But just as you can nickel and dime your way into debt, you can nickel and dime your way into wealth too. Just be diligent.

3. Do without.
One of my favorite quotes is from Dave Ramsey, whom I consider a living debt free guru and excellent financial advisor. He says, "Live like no one else today, so you can live like no one else tomorrow." Do you still want to be living in debt into your golden years? Who does?  So sacrifice now. Here are a few of the things we do or have done to save money:
  • Take your lunch to work. If you spend $10 a day, that's $50 a week or $200 a month!!  
  • Don't shop w/o a list or a purpose. Do you need black slacks for work? Look at thrift stores, or designer discount stores first before moving to big department stores - and even then, peruse the sale rack. If you do pay full price for them, only buy the pants!! Don't add on with a shirt, shoes and belt and leave the store with an outfit. 
  • Cut the TV or satellite bill. Ouch, this one hurts. I put this one off for months! I kept telling my husband I needed to DVR my favorite shows!! Then he introduced me to websites where I could watch all those shows the very next day for free. Then he purchased a high powered antenna for $60 (less than half price) off Craigslist. And when I bought a laptop (all with business earned money) a few months ago, he set up our old PC next to the TV so we could easily watch anything online in our family room. Now I had no logical argument for keeping our satellite. There are lots of places to watch TV online, but I watch my favorite shows for FREE on Hulu, CastTV, Netflix (yep, we do pay the low fee for this), or on a specific station's website (like TNT).  Take that $70+ bucks a month and pocket it. You'll be glad you did.
  • Use coupons. It's not my favorite thing to do, but when I ring up at the grocery store and see that I saved $10 on $100 groceries, it's so worth it. That's 10%. If you saw a $10 bill stuck in a shrub, you'd nab it right?
  • Use cash. I know it's not always feasible. But if you give yourself a weekly budget for gas, groceries, etc and make yourself pay with cash, you'll be surprised at how frugal you'll become when you see the bills leave your wallet.
4.  Get a second job.
It's pretty easy to find a second part-time job. Deliver pizzas, work in retail, work in food service (really, are you too proud to flip burgers so you can realize your dream?), work in childcare, find a temp job...If you want it, you can find it. Because we live primarily only on one income, I absolutely had no extra money. Sometimes I was cutting money from the grocery budget to pay for an oil change or somebody's birthday present. So when the opportunity came to work at the Mother's Day Out program at our church, I took it. It was 2 days a week, but most weeks, I only worked 1 day. It was only about $50 a week, but it was enough to buy fabric, paper and other supplies to get me started and keep me rolling. And the best part was, I could take Aiden for free.

5.  Change your thinking.
This is, perhaps, the most import tidbit I could give you. Get out of your day to day rut. If you want to be somebody, if you want to have something that's all yours, it's all up to you. You have to be willing to make some changes.

I can't stress enough how important it is to start your business out debt free. It may take a few months longer to get it going. It will be harder and require more work from you. But in the end, it will be all yours. You will owe no one. All the profit will be just that - profit.  Now get busy.

His brow is wet with honest sweat,
He earns whate'er he can,
And looks the whole world in the face,
For he owes not any man.
Henry Wadsworth Longfellow
The Village Blacksmith.

Next topic: Make your Business Legitimate 

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