Starting a Business is Hard

Debt /
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For most people, starting a business is thrilling, fulfilling, and exciting.  You have a vision, and you have enthusiasm to spare.  Plus, who doesn’t want to be able to call your own shots and work whatever hours you want.  Who doesn’t want to tell their boss to “take this job and shove it” and then ride off into the sunset of happy self-employment?

The reality of starting a business, however, is it’s a huge challenge and undertaking and will likely take far more hours to get going than you ever imagined.  Nineteen years ago today, I started my business.  And yes, I have beaten the odds, since only a third of new businesses make it past ten years.  But I would be lying if I said getting to this point has been a breeze.  In truth, it’s been hard – super rewarding – but really hard.

We Persisted

My company creates financial plans and manages investments for clients.  (A quick Google search of my name and “financial planner” will bring my company right up if you are curious.)  I started the firm in 1999, the absolute peak of the bull market that lasted through most of the 80s and 90s.  The first year was difficult in large part because there is so much to learn when you are a new business owner.  The next three years were incredibly difficult, due to the recession and down market.  Nevertheless, we persisted.

Owning your own business may mean you don’t have to put up with a nonsensical boss, but it also means as a business owner, YOU are required to make the decisions.  I had an initial vision for my firm that steered many of my decisions.

In the financial planning industry, it would have been more typical to start a solo practice, well, solo.  Once my clientele built up, I could add support staff.  Instead, I envisioned a team approach to provide the very best client service experience possible, straight out of the gate.  Having employees, of course, adds extra layers of stress and expense to a new business.  For several years, I essentially had no paycheck.  The business also racked up an impressive amount of debt in its first five years, to the tune of a quarter of a million dollars.

As a rule, I’m very debt averse.  However, I also know that debt can be a positive tool in the right circumstances.  I desperately wanted to prove that the team approach was the right one, and so I borrowed to pay my staff.  Meanwhile, I taught college classes on the side to help support my family, since my business wasn’t providing an income.

The Five-Year Plan

My goal was this:  I would spend (and borrow to spend) for five years to do extensive marketing and to keep my team in place.  I dubbed this my Five-Year Plan.  At the end of five years, while we were still deeply in debt, the company was making money, supporting itself, and growing healthily.

At that point, I made a new Five-Year Plan.  My plan this time was to get OUT of business debt in five years.  My take-home pay was still well below industry standards, but I was hell-bent to pay off the debt.  We accomplished that plan in six years, not five, but in my defense, year five I became a new mom, AND the bottom dropped out of the market.  Again.  In other words, I’m proud of that six-year pay-off, and we haven’t seen business debt since.

Today, the idea of a team approach has now become the norm in the financial services industry, nineteen years after I was determined to make a team model work.  Gratefully, all is going well for us.

Know Thyself

In the early days of my business, many people asked me, “How are you doing what you are doing?”  My honest answer was always that I was comfortable spending money on my business and going into debt because I was confident I could make the business work the way I wanted it to work.

It’s critical to have that level of confidence in your business.  But you also should be pretty darn certain you can pull it off.  Not all industries and businesses are created equally when it comes to potential revenue generation.  And not all entrepreneurs are created equally when it comes to having the fortitude to withstand enormous business pressures.  You must know thyself.  Take a very close look at your plan, your risks, and your possibilities before rashly committing yourself to significant debt.

I’m not suggesting entrepreneurs should borrow money like they’re banking on The Wild Wild West.  I’m also not suggesting you steer clear of borrowing money.  As with any business decision, you must weigh the pros and cons and move forward realistically with open eyes.

Even though taking on enormous debt worked for me, I’m not sure I would be a proponent of others considering a similar approach.  It really depends on the individual and your ability to handle stress.  The stress I endured was significant and has likely had a lasting impact on my health.  Knowing your own limitations is key when you consider starting a business — or any venture, for that matter.

Are you an entrepreneur?  Want to share your war stories?




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