Admit That You Are Not Breaking Even

I talk to many small business owners who claim they are breaking even, paying their loans and doing OK. Not so.

I begin to inspect them a bit and ask them a few pressing questions:

Q: Are you taking a full paycheck worthy of the job you are doing?
A: No. (Sometimes a very, very small paycheck, or only on occasion, or never.)

Q: How is your marketing department doing?
A: We cut that out long ago. We can’t afford to market.

Q: Are you using your personal credit cards?
A: Yes, and they are all maxed out.

Q: Have you invaded your IRA or 410k?
A: Yes, long ago.

Q: Are you in arrears on your home mortgage?
A: Yes, and the second one I took out on it in order to put more money into the business.

I could go on and on but the point is obvious – this business is upside down but the business owner is current on his debt service and is kidding himself into believing he is running at break-even. He believes he must pay his debt service so he does everything else that will eventually kill his business so he can remain current on his loans.

It’s ridiculous, yet it’s so common a situation. The better strategy? Cease debt service payments, default on your loan and take a check for yourself. Bolster your business and support its survival and emergence. Then, workout the debt.

The reality is that if things continue as they are, this business and the owner will eventually fail. There is no hope. The owner can hang on for a long time but there is no win here, just a slow death. However, by doing the right thing and supporting the business and himself, working the debt with debt forgiveness, he can win. That is your obligation as a small business owner.

Stop kidding yourself. You are not breaking even, you are dying. Admit it, stop wasting money you cannot afford on debt service. Support your business and workout the debt instead.