It’s all about the money, Honey. As mompreneurs, money is just one of those things we have to talk about—whether it be earning money, earning enough money, saving money—or perhaps worst of all, this dreaded question of debt. Does it ever make sense for a MomBiz owner to go into debt? Is it ever worth it? Is there such a thing as “justifiable” or even “good” debt? And what kinds of pitfalls should we, as small business owners, watch out for in order to successfully use debt—if we choose to—to grow our businesses? These are some delicate and sometimes controversial questions and while as women and moms and managers of our homes as well as our businesses we know there are rarely if ever one-size-fits-all answers to such issues, let’s equip ourselves with the information we need to make important business and financial decisions that support both our business and ultimately our family’s success.
Financial management experts tend to agree that there are three areas that normally constitute “good” or “justifiable debt.” One such area is a mortgage on your house. This is kind of a given. Most of us don’t purchase our homes outright and need a little bit of a payment plan and financial experts say that this is generally good debt. Why? The asset appreciates over time. A second area of justifiable debt is debt with the purpose of getting or furthering your education. Degrees and certifications geared toward your industry absolutely can be critical to your business because they can open doors for you that you just won’t have access to otherwise. And the third area of acceptable debt? Business startup and development expenses. So there you have it—the experts have cashed in on the subject—but when it comes to mompreneurs I can’t stress enough the importance of evaluation and planning when making that final decision about debt for your business.
There are three main considerations regarding the question of if debt is right and worthwhile for you and your business and if so, how to be smart about making it work for you:
- Consider the timing. As a mompreneur, you’re not just a business owner making decisions based on what looks good on paper. You’re a woman with a family—and high standards for that family—so the decisions you make for your business need to reflect and support those standards in creating a successful lifestyle and business. Do you have a child going off to college? And another who needs braces? Have you been saving for a very big family vacation that has been on the radar for a long time? All of these are considerations when deciding whether or not business debt makes sense for you and your family.
- Consider the consequences. Don’t we say this to our kids all the time? Well, the same is true when making financial decisions. There is risk involved with incurring debt and that risk can impact both your business and your family life—so do your homework and make sure you know what you’re getting yourself into.
- Have a plan. We are all familiar with the old adage “Fail to plan and plan to fail.” It’s true! So often as entrepreneurs we learn the hard way—from our mistakes. It doesn’t have to be that way when it comes to this issue of debt. If you consider the timing and the consequences of incurring debt to start-up, grow or develop your business and you do decide that it is a good and worthwhile venture for you, have a plan. Be crystal clear on how you are going to spend that money and be crystal clear on how you will pay it back. With careful consideration and planning we can be confident in our abilities to succeed in both our businesses and families.