Building A Debt-Free Business
By: Karen Pattock

Have you ever bought something of significant value and not long after your purchase you had buyers remorse? What makes it even more difficult is if you charged that purchase to your credit card and need to continue paying on it for months into the future. Being in debt is no fun, especially when it’s for things you wish you hadn’t purchased.

Last week I received an email from a client that was trying to make some decisions for her business. She was looking into purchasing an all-in-one accounting software, email management and shopping cart system. There would be a monthly fee for the program so it was a big decision for her. She was taking her time and doing research which is always a good thing when making big purchases in your business.

I suspect, as a business owner, that you have had moments in starting your business when you’ve debated whether or not to make a purchase. Maybe you’re in the same place as my client right now and you’re making foundational decisions and purchases for your business. There is never a one-size-fits-all answer. You must evaluate your unique situation.

There’s an old saying that says, “It takes money to make money”. While there is some truth to that statement, it doesn’t take as much money as you may think.

I read this week, according to Businessweek 50% of small companies use credit cards for purchases in their businesses, with 71% of them carrying on-going balances month after month. Credit card debt, whether personally or for your business, is an extremely expensive way of making purchases.

One of the quickest ways to place undo stress on you and your business’s performance is to have outstanding debt. In fact, it is one of the most common mistakes small business owners make, especially when they are just starting out.

Often times using a credit card to pay for a business expense is a result of poor planning in your business. It is another reason why I always say having a budget that shows income and expense projections and a business plan to support that budget are mandatory in your business. It’s not to say that you will never have an unexpected expense come up, but if you are putting a small amount into a slush fund each month you will have money set aside for that unexpected expense.

Here is another common mistake inexperienced business owners make that causes increased pressure in their business; They’re convinced that they will earn more then they actually will. Often times they spend money like their income is higher causing a deficit every month. This is where the unpaid credit card debt enters the equation.

It takes time to get the experience you must have to create a reliable budget and business plan. So what do you do in the meantime?

Here are three valuable tips that you should implement in your business immediately when it comes to making sizable purchases!

#1) Don’t let ego make financial decisions for you. Example: You don’t need a brand-new mahogany desk, filing cabinet and big office chair to get your business started. Those are ego purchases. You aren’t going to make more sales because you sit behind a fancy desk. Many successful business owners have started their businesses with a card table and a folding chair in their living room and you can too! 

#2) Before you make any purchase ask your self this question – “Will this purchase help me make more money?” Example: Will a new computer with lots of fancy software make me more money? Well that depends, if you are a graphic designer or web designer then the answer is a resounding “Yes”! If you are a health practitioner the answer is “probably not”!

Here’s another example: Let’s say you are considering purchasing an accounting software program that costs $500.00.  Will that program help you make more money?

Your initial answer to that question may be “no”. However, you must look at all of the facts for your unique situation. If you use that accounting program to keep track of your income and expenses, (which I hope you are), it will also help you identify leaks. You’ll quickly see where are you are losing money in your business.

It’s the end of the month and you’re recording your income.  You accept credit cards so you are also recording the credit card fees that were charged for you to collect the income. Suddenly you may realize that you are paying a ridiculously high percentage to your credit card merchant. Seeing this information on paper makes it more real. It gives you the opportunity to shop around for a merchant that charges lower fees thereby creating more income in your business each month.

#3) Next question, “Will this purchase increase my skill and/or exposure?” Increasing your skill makes you more valuable in your industry. When you increase your skill level, you are more valuable and you can charge higher fees for your products and services. 

Increasing your exposure means that you are showing up in more places so your ideal client is more likely to find you.

Example – Let’s say you give a monthly seminar at your local library. You regularly charge $20.00 for each participant. You typically see a turnout of 10 to 15 people with each seminar. That equates to $200 – $300 in income for each seminar that you give.

You would like to give more seminars but in your local area you don’t think that there is a demand for it. Another option would be to give that same seminar via the Internet through a teleseminar. You now increase your exposure because you are marketing on the World Wide Web.

Let’s say that you purchase a membership to an online teleseminar service that costs $47 per month. You market your online seminar and find that you get a regular monthly signup of 25 to 30 participants per month. That’s an additional $5oo – $600 a month.

That’s quite a profit margin. You spend $47 to earn $500 – $600 per month. Pretty good investment wouldn’t you say?


Here’s the key to this whole equation.When you know that you need to purchase a new computer, a new desk or accounting software package you need to create a budget for it. When the purchase is something that is a major expense you should do one of two things: 1) purchase it in cash or 2) save up for it then purchase it in cash.

Think of it this way, if you aren’t capable of putting the money aside through a monthly budget before purchasing how will you ever be able to make the payment on a credit card to pay it off.

Saving for it will give you an extra incentive to work harder, earning more money, so you can purchase what you need sooner. You have to make sure that the things you’re purchasing from the beginning are the things that you absolutely need and not just things that you want.

Thank you for sharing this time with me. I welcome your feedback so come over to my Facebook Page to leave me a message. I promise I’ll write you back.

With love & support,
Karen Pattock