Business debt is a perfectly normal part of getting a company up and running. However, too many businesses wind up in a position where they’re paying off debts for their entire lifespan. Although continued borrowing might enable you to make vital business moves, it also puts your business in a far more precarious position.
If you can pay off debts and move toward self-sufficiency, you’ll have far more financial wiggle room during slow periods, meaning you’ll have the time — and the funds — to figure out a solution that doesn’t require more debt. A stable, sustainable business is an invaluable asset going into retirement since it allows you to continue drawing profits on your own terms.
Take Stock of Your Current Situation
Before you can fix a problem, you have to fully understand what it is. Start by taking stock of all of your business’s income streams, expenses, and debts. Consider working with a financial advisor to get as clear and concise a picture as possible. This process will help you identify what is and isn’t working, and can help you come up with a solution for turning things around.
For example, you might realize that your business structure isn’t working to your full advantage. Many small businesses can benefit from forming a limited liability company, or LLC. This designation can offer substantial tax benefits, plus it provides legal separation between your personal and business assets. If you’ve been avoiding it because it’s a bit tedious, you can use a formation service to do the work on your behalf.
Pause Growth Plans
Unless you’re making a huge profit, odds are you won’t be able to reduce debt while also fostering business growth. Attempting to do so simultaneously is only likely to sabotage one effort or another. It’s best to simply pause your growth plans and allow yourself to focus as much of your profit as possible toward debt reduction.
This type of growth pause offers other benefits, as well. Putting your business into maintenance mode offers a powerful opportunity to observe how your business is doing and spot any weak points in your business model or workflow. When you’re constantly in pursuit of your next big idea, it can be hard to spot these kinds of issues; slowing down gives you the chance to notice.
Building Professional (and Personal) Self-Sufficiency
Once you’ve reduced (or eliminated) your business debt, you can look toward ensuring long-term stability and self-sufficiency. Take some time to figure out if you can make any budget cuts. For example, you might realize that you can find a similar product or material for a lower price from a different distributor. Finding ways to reduce output and boost input puts you in a far stronger financial position going forward.
The same principle is true in your personal life. Indeed, your personal financial situation will often drive how your business is able to function. After all, if you’re running into financial instability in your personal life, the drive to close or sell your business goes way up.
Apply the same budget-cutting principles to your day-to-day life to make your money go further and empower you to give your all to your business. You might decide to take less expensive trips during weeks off or buy what you can in bulk. These simple measures are a great way to use your business ownership skills to enhance your personal life along the way.
Running a self-sufficient business puts you in an incredibly powerful position as you get older. If you have business debt, work to pay it off as quickly and efficiently as possible to reach this point. This way your business can remain your work, passion, and nest egg for years to come.
Work with QS2 Point to leverage technology and keep your business up-to-date on the latest innovations.
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