Should I take out debt to start a business?

This episode is sponsored by Personal Finance on a Leash, a 12 module masterclass where we teach you all about your personal finances.

So what is debt?

Debt is money that you don’t have and that you borrow from a bank, a friend, a credit card, or any kind of loan. It is money that you owe.

When you are thinking about debt, a lot of times people will say that debt is necessary, debt is a tool, etc.

Here’s what no one tells you: If your business fails and you’ve taken out debt, you still owe that money.

Did you know that statistically, over 50% of small businesses close within the first 5 years?

I’m not going to lie. I took out $10,000 on a credit card to open up a grooming salon. Now, I was very blessed because $10,000 is not a lot of money to take out for a grooming salon. Most salon buildouts are between $40,000 and $80,000, if that person doesn’t have a family member who’s a contractor, an electrician, etc.

So my salon was a very small buildout because my salon had already been a salon, which I was very grateful for.

I was very good at budgeting each month and was able to pay that off in about a year. For some quick math, that’s about $800 a month. That’s a lot of money to have to pay extra each month. With that same $800 a month, we could have eaten like kings and spent money on other things.

What could a business look like with less debt?

If I were to open up a business with zero debt, it’s a lot easier to balance bills and be able to pay myself. There are so many things that I could start saving that money for, instead of paying back that debt.

When I bought my grooming van, (most grooming vans are between $75,000 and $100,000) I didn’t have that kind of money laying around. So what did I do? I put down $20,000 and I paid off that van in less than 5 years. I’ve spent thousands of dollars in interest paying off that van. My van payment was about $1,500 a month. An extra $1,500 in my pocket each month is amazing now that I don’t have my van payment anymore.

If I save $1,500 a month for 6.5 years I could pay $100,000 for a new van. I would also get between $45,000 and $75,000 for my used van, so I could potentially get a new van within 3 years (also interest free!).

So there are ways that you can utilize debt in the beginning to get your business moving along and then you can move on.

Now, it’s incredibly difficult to sell salons because salons are designed with you in mind. You generally set up a salon based on your grooming preferences.

Most of the grooming vans are generic in the sense that you can set up everything that you want inside and then take everything down. That’s why vans are easier to sell and the person can take them wherever they want. There are less complications when selling your van vs. when you are selling a shop.

When you are using debt to open a business you are promising money to someone.

“Debt is like any other trap, easy enough to get into, but hard enough to get out of.” -Henry Wheeler Shaw

It’s really easy to have the best of intentions to open up a salon.

Realistically, the first 2-5 years of your business you’re going to be working 60-80 hours a week, so you’re going to be tired.

When you finally do hire a person, you’re going to realize how little they do compared to you. But that’s because you’re doing everything. You’re just hiring them to groom or bathe. It is such a commitment to open a business.

So when you open up a business, not only are you taking on all of this stuff, but you are promising money that you haven’t even earned yet. So you’re hoping to earn enough money to cover not just your bills, not just to put food on the table, but you’ve also promised to pay back this money with interest. Now, hopefully that interest is low, like 4% - but a lot of times it’s 8, 10, 15, 24 in some cases. Good luck paying that back. And when you do finally pay that back you’ve likely paid thousands of dollars in interest.

I also think of money in terms of time. So let’s say I value my time at $40 an hour, and I think about handling over a $20 bill. Is this worth half an hour of my time?

“Today, there are three kinds of people: the haves, the have-nots, and the have-not-paid-for-what-they-haves.” -Earl Wilson

It was very annoying to see the first $1,500 in my business not go to me or my bills, but go towards the van.

So when you open up your business and take out debt, you are promising time that you haven’t earned yet.

What if your life changes? If your life changes, you want to be able to get out. And these things are very hard to do when you have debt. Even if you sell the business or the van or salon, you are still responsible for the debt.

“Never spend your money before you have earned it.” -Thomas Jefferson

When you spend money that you don’t have, you don’t know what the future holds. You’re making promises that you hope you can keep. But what if you’re sick, your spouse is sick, you get bit and you can’t groom anymore? There are so many bad things that could potentially happen.

“Creditors have better memories than debtors.” -Benjamin Franklin

That’s the truth. I talk a lot about how to grow wealth. Wealth is a mindset. You have a plethora of abundance.

Debt is something you owe.

You need to have money to spend it.

There is always a lot of stress and pressure to make enough money, and to make more money in a month that you need to survive.

The last point that I want to make is that when you are in debt, you are a slave to the lender. It means that you are stuck.

For example, let’s say I borrow $10,000 from my grandfather. When I go to Thanksgiving, he’s going to critique every decision that I make. Let’s say I went on vacation to Disneyland with my son. He’s going to be like, “Well, where did you get the money for that?” And I’m going to be like, “Oh, I just saved up the money and went.” Then he’s going to say, “Well, you owe me $10,000. Where is that money? Why didn’t you pay me back first?” Borrowing from friends or family can be tricky like that.

If you can save up that money, save up that money. Another option is to start as a house call groomer. Start small, build clientele, purchase equipment slowly over time, and work to build a steady income.

As an employee, however, if you cannot get on a budget and get on a written monthly plan of your finances, then do not open up a grooming salon.

Because if you can’t make your money work now, what makes you think that with more responsibility and less time you will be better at this?

I want to encourage you to sign up for my masterclass - Personal Finance on a Leash. This will help you get your money under control. You will only be able to thrive financially, if you get on a written budget every month, intentionally pay off debt, intentionally save up money for emergencies as well as for retirement, and this masterclass will help you do just that. It is 12 modules long, and it will help you change your habits if you do the work.

Thank you all so much for reading these show notes for Should I Take Out Debt to Start a Business. Be sure to visit me at to see my current opportunities to work with me in growing your pet grooming business plus more free resources for you to learn. See you in our community on Facebook - Savvy Pet Professionals! As always, Happy Grooming