Building a Small Business Without Debt

In yesterdays post, I mentioned that we don’t use debt- let’s talk about building a small business without debt.

When we started our small (teeny-tiny) business, we decided that we were going to grow our business without the use of debt. This was an easy decision for us because we’ve heard enough stories from people who built too fast and used other people’s money to do it, only to lose it all AND owe someone. We just decided that we didn’t want to live that way- with fear of failing always chasing us around. We figured it would be easier to fail ourselves than to fail ourselves AND the bank. So we decided to use our own capital to start and then just use our money from sales to move ahead.

Besides that, Shabby Alpaca was just a little dream seed and we didn’t want to see her sprout too soon and then die in the heat. We wanted to grow organically and we had time, so we decided to just do what we could, when we could. And not to oversimplify things, but that’s how you build a business without debt: by doing what you can when you can.

Building a business without debt is not the easy way. It’s actually the hard way. Super hard sometimes. We have to wait until we have money in our account to buy inventory, we have to ask people to wait a few days on a bill and we don’t get what we want, when we want it- WAAAH! But if you want to build a business without debt, here are three tips we’ve learned in the last three years. Let me state clearly here that we are in NO WAY experts in building a business OR building one without debt, but we’ve been at it for a while, so we’re here to tell you what we know now, which is more than what we knew three years ago.

Here are three tips for building your business without debt

  1. Be Patient!  Growing a business takes time. We have 10 things we would do if we had $50,000 at our disposal. We’d start our own fashion truck, we’d rent office space, we’d buy new computers, we’d buy inventory management software so my mom will stop talking about it ….the list goes on. But how much more awesome is that fashion truck going to be when it is purchased with our sweat. We’re going to take better care of it, we’re going to kiss her steering wheel every time we get in it and we’re not going to buy the best truck we can find, we’re going to buy the truck we can afford! Also, if we would have borrowed a bunch of money at the start of our business, we wouldn’t have done any of those things that we now dream of. Our dream has evolved, our business has evolved and WE have evolved. In the 3 years we’ve been in business our ideas have changed and they will change again. It helps us to remember this- we need to be patient and know that growth takes time.

2. Save Your Pennies. Obviously, we had to start somewhere. We didn’t start a business with NO money (but almost). My husband and I (Celina) have been savers for a while now, so when it came time to start Shabby Alpaca, we had a little teeny, tiny nest egg. It was mostly set aside for emergencies, but we had enough extra to be able to put some cash into that first big inventory purchase. My mom had her own little cash to contribute and a bit of inventory to add to the pile. This is what got us started. If you have a dream of starting a business (or any dream that requires cash) start saving now! When we put our money away starting several years ago, we didn’t know it would be the springboard to our success.

3. Decide Where to Spend Before You Have The Money. The standard response my business partner and I give when having any discussion that involves spending money is, “well, Shabby’s broke”. Meaning, we don’t have cash laying around. Our bank account is most likely close to zero or will be soon. We’re living market to market and month to month and often before the market even comes and the cash is in hand, we’ve already decided where that money is going. When we decided to hire Mure Media to rebrand us and help us build our business, we had to wait a little while before we said “yes” because we simply didn’t have the cash to pay for their services. But we had decided that we would not spend the money we did have on inventory, but instead to spend it investing in our business. That was a decision we had to make before the money came in. We give the money a place to land before it comes to us so that there’s no questions about what’s next.

Maybe you don’t have a business that will bring in cash on a regular basis like ours does and you need a jump start- there are other ways to build a business. Capital investors are always looking for a place to put their money (if you know any who want to buy us a fashion truck- send them our way!). We’ve looked into Kiva Loans, as they work first from your own network of people who truly believe in you- then others contribute to your loan. It’s zero interest and it’s more like community lending for entrepreneurs. We use Square to do accept payment by credit or debit card and they recently offered us a loan that was based on our sales- low risk for them since they see every sale we make and can somewhat predict our growth. And of course, there are ways to borrow responsibly. If you must borrow, then have an air tight plan for payback and make it your first priority to pay back the loan. We’re not adamantly opposed to using debt to grow business, we’ve just done it a different way. And honestly, using debt would be much easier and no judgement or bad feelings toward those that do!  It’s the normal way to build a business in America today.

For now, we’ll continue to be patient, save our pennies and decide where to spend before we have the money- and maybe – just maybe- this little dream seed will grow and one day you’ll see us tooling around in our very own fashion truck….maybe.


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