Business owners often think that they are always going to be in debt with their business. However, as a successful business owner, I am telling you it is possible to own a business and be debt-free. I speak from experience because I managed to pay off six figures worth of debt in two years, once I created a solid and intentional plan.
3 Things You Must Do to Demolish Debt in Your Business
1. Freeze Your Debt
When you decide to be intentional about paying off your debts, you must stop using all your credit cards. You can’t take out any more loans either. Anything you purchase or need must be paid for with the cash you have available.The only exception to this rule is if you need to invest in yourself to grow your business. If you decide to do this, you must have a solid plan on how you will pay this investment off in a short period of time.
2. Set Aside a Percentage of Your Revenue for Debt Repayment
Part of your plan must be to take a percentage of your revenue each month and use it to pay off your debt. This money must be placed in a separate account, so you are not tempted to use it for any other part of your business expenses.
3. Set up a Snowball Method Payment Plan
There are multiple ways to pay off debt, but I find the snowball plan is the most rewarding. Since you are paying off the debt with the smallest balance first, you see results quickly.
It is easy to set up your snowball plan when you use the debt reduction calculator Dave Ramsey created. Enter all your debt information into this calculator. Once you have all your balances, interest rates, and minimum monthly payments listed, you can see what your minimum monthly payment total will be.
Your goal is to pay that minimum payment each month, while adding extra money from what you are intentionally using from your revenues. All the extra money the first month will go towards your debt with the smallest balance. As soon as that debt is paid off, you will take the minimum amount from that card, plus the extra money, and use it for the debt with the next smallest balance.
Before long, you will see your debts disappearing one by one. The best part is if you have even more money to use to pay off your debts some months, you can pay everything off even faster. You will be amazed at how much interest you save by paying off your debts using the snowball method.
Once you have a debt-free business, you can start to save the money you used to pay off your debt. Frontloading that money will allow you to be your own bank, so you do not need to utilize credit for what your business needs in the future.
Are you ready to demolish the debt in your business? Create an intentional plan today!