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Start-Up Debt & Calculated Risks

Out of the five businesses I’ve started in the past decade, two of them took on some pretty hefty debt right from the get go. It’s not exactly the greatest way to start a business – getting in over your head before making your first sale – but many times it’s the only way depending on the nature of your business. I should note these two businesses were both franchises instead of independent start-ups like the others; businesses that already had some established systems and branding in place, hence the higher price tag. Debt isn’t always a bad thing though. In the case of starting a business, it can help you get to where you want to go, sometimes even faster. If there’s a pretty good chance you’ll have the ability to pay it off as negotiated without losing your house or going bankrupt, then debt can be the one thing that makes your idea a reality. You have to be smart about it of course, and there were times I wasn't, but you live and learn, and then get better right!?

The total accumulated start-up debt between the two businesses was $175,000 plus interest over 5+ years each. If you just gulped a little reading that number, that’s a small fraction of the reaction I had when taking it on. And don’t even get me started on my husband’s reactions, especially since some of it was tied to the mortgage of our rental property as security. This was all within the first 2.5 years of being married and I’m sure he didn’t envision having a wife who’d rack up $175k to pursue her “dreams.” What can I say – I’m a risk-taking serial entrepreneur! On another note, you don’t realize the value of good credit and assets until you’re in a situation where you need to bring your vision to life (a.k.a. leveraging).

It was a big risk both times, but I was ultimately betting on me – my skills, perseverance and passion. Those intrinsic pieces of who I am sealed that bet through a recession, wildfire, and now global pandemic, among many other personal challenges along the way.

I like to refer to the experience as a calculated risk. When you're thinking of loaning this kind of money to bet on something with no real guarantees, you'd be a fool not to consider all the factors that could impact the decision. Some of my considerations were:

1. I had the preliminary experience and required skill set to adequately run the business. I didn’t know everything, but I knew I could figure out what I didn’t know

2. There was a good demand for what the business offered (at the time)

3. I spent time developing a Business Plan that gave me a holistic viewpoint of the opportunity, factoring in key considerations I may not have thought of on my own

4. I had the drive and passion to pursue each as a long-term commitment

5. Because they were franchises, I also had a wealth of knowledge and support at my fingertips from head office

As of yesterday, I’m proud to say I have paid every last penny of that debt off! Damn, that feels good to say! Through all the ups, downs, and hard lessons at times, looking back do I think it was all worth it? 1000%!!!

The decision to finance these two businesses ultimately paid off. Not only did I financially gain more than the initial debt I took on, but these risks also gave me invaluable experience – something you can’t really put a price on. I took a calculated risk on me, and it paid off.


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