If you have acquired more debt in your beauty business due to this year’s circumstances, you will learn how to handle the problem in this article. You must demolish your debt to become more profitable.
Maybe you have a business mortgage or purchased expensive equipment earlier this year. Or you have put expenses on credit cards to get through tough times.
You’re not alone… The average American has over $90,000 in personal debt, including credit card balance, mortgage, and student loans. This debt has likely increased in 2020.
It’s important to keep your business debts in check. Otherwise, you may not be able to sustain your business.
As author Mike Michalowicz says, “When you can’t pay your bills, you can’t afford your bills.”
Purchasing things we can’t afford is a slippery slope. Let’s demolish your debt in a few easy steps and improve the financial health of your business.
We are offering a live Masterclass on December 7, 2020, with Mike Michalowicz! You are invited!
The One Thing You Should Focus On To Demolish Debt
What’s the most important thing you can do to demolish debt in your business? Believe it or not, it’s a simple answer — increase your profit!
To become more profitable in your beauty business, you must lower costs to increase margins. Let’s take a closer look. If your business is accumulating debt to cover your expenses, that’s the financial definition of being “upside-down” — you need a recovery plan as quickly as possible.
4 Steps To Demolish Debt In Your Beauty Business
Taking control over a large amount of debt can be overwhelming. Here’s how you can eat the elephant one bite at a time.
1. Stop Incurring New Debt
The first thing you need to do is to stop the debt bleeding! Don’t incur more credit card debt because the interest will compound quickly and you’ll be spending more money paying down the interest.
If you have debts on high-interest credit cards, give yourself a breather by transferring the balance to one that offers a 0% interest rate for a period of time (e.g., 12 months.) If your credit score is compromised, ask a family member to help you out to get a 0% card. You can also stop using your credit cards and pay all your expenses with cash or a debit card.
2. Start Paying Off the Smallest Debt
Although tackling large debts first may seem logical, eliminating small debts first, will help build momentum so that you can celebrate a win. (Dave Ramsey style!)
List out your debts and pay down the smallest one first and celebrate progress when you do! For example, if you have a $3,500 credit card balance and a $23,000 car loan, you should make minimum payments for your car loan and focus on paying off the credit card quickly.
3. Be Disciplined With Your Spending
Get frugal with your lifestyle until you have demolished your debt. Cut your monthly business draw and apply the money towards paying down your debt. This might be tough, but you can do it with some focus and discipline!
I was talking to a beauty business owner whose car lease was up. She was dead set on getting a new car with a new lease. “I can business expense it!” she claimed. I said yes, you could, but why would you want to?
Imagine how much debt she could pay down if she didn’t have a high lease payment! Instead, she could buy a used car with less expense.
4. Cut Business Expenses
The Profit First Formula states that “Sales – Profits = Expenses.” First, determine the profits you want to make, then you adjust how you spend the remainder as business expenses. If you increase the profits, then the money you have available for business spending will go down.
To adjust to a lower budget, make a list of all business and personal expenses, and review each item. What can you trim without compromising your business? Can you streamline your inventory to improve cash flow?
Eliminating Debt Is the First Step To a More Profitable Business
Debts or loans come with interest. Which expenses don’t contribute to the growth of your business? Eliminating debts and minimizing the expense associated with interest payment means more money in your pocket!
Keep in mind that while reducing your expenses is key, be strategic about how you cut your spending so you don’t eliminate investments that can help your business generate more profits.
Register for , “The Profit First Workshop Shift Money Habits And Change Your Esthetician Business Forever”. Learn the “Profit First” formula & start generating profits immediately.
Don’t waste any more time! Your business is counting on you!