September 4, 2025 • 18 mins
We explore the silent burden of business debt in therapy practices and provide a clear, systematic approach to breaking free from financial stress without sacrificing growth. Through practical strategies like the debt snowball method and creating dedicated "debt destroyer" accounts, practice owners can regain control of their finances and build a permanently profitable business.
• 60% of small businesses carry outstanding debt, with 40% having over $100,000
• Credit card debt among small businesses has doubled in recent years
• Reactive approaches like increasing revenue alone or cutting owner pay lead to burnout
• Business cycles between "foundation years" and "growth years" - know which phase you're in
• The debt snowball method focuses on smallest balances first to build momentum and free cash flow
• Creating a separate "debt destroyer" account helps maintain focus on debt elimination
• Weekly payment rhythms for credit cards prevent debt accumulation
• Building a 3-month emergency fund prevents future debt cycles
Ready to make your therapy practice permanently profitable? Visit therapybusinesspod.com to learn how our coaches can help you implement these systems and break free from the debt cycle.
Meet with one of our coaches
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King Around Here by Alex Grohl
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Roughly 60% of small businesses are carrying
outstanding debt, and therapypractices are not immune to this
statistic.
Today, I'm gonna guide youthrough debt in business and how
you can start to proactivelymake your way out of it.
Or, if you don't have debt, howcan you avoid it completely.
My name is Craig and I'm theowner of Daisy Financial
(00:21):
Coaching.
Our team is on a mission tomake your therapy practice
permanently profitable.
If you own a solo or grouppractice, we're here to help you
build a business that createsmore time, makes more money and
serves more people.
This is the Therapy BusinessPodcast.
(00:41):
When it comes to debt, none ofus are really immune to it.
Right, it can sneak up on us.
Even myself.
I'm a profit coach.
I have been teaching peopleabout paying off debt and
getting control of theirfinances for well over a decade,
and I still, during that time,have found myself in the credit
card trap or finding myselffalling into debt that I have to
(01:04):
crawl my way out of.
What happens is sometimes itcan sneak up on us.
Sometimes we don't even realizeand the next thing we know we
look down at the credit card atthe end of the month and we
don't have enough in the bank topay it off completely, and then
the next month it gets higherand higher and before we know it
, we have this mess that almostfeels insurmountable.
It's tying up our cash flow.
It's creating all these issues.
(01:29):
Debt really is an anchor on yoursmall business.
Now, I know that there are waysthat you can leverage debt in a
positive way, and so really,today is not talking about those
options.
So I just want you to know Iacknowledge that sometimes
that's how you can get yourbusiness off the ground, or that
is a tool you can tap into.
However, most of the time, it'snot done the right way and it
ends up being this anchor on youand your cash flow.
(01:50):
It's borrowing from futurerevenue that you then have to
service later, and most of thetime it's.
I don't meet a lot of businessowners who are happy that they
did that.
So while we walk through todayand some steps to pay off debt
and get yourself to a debt-freeplace, I also want you to keep
in mind that if there comes atime where you are facing the
(02:10):
question of, do I take out thisloan to scale or to do X, y and
Z, we want to make sure that weare doing it with eyes open and
that we have exhausted all otheroptions.
A lot of times, debt is asafety net, a thing we can tap
into.
That prevents us from lookingor getting creative and thinking
outside of the box when itcomes to solving our problems.
Now I want to walk you throughsome statistics, just really
(02:32):
quickly, on what debt looks likein business.
So 60% of businesses arecarrying outstanding debt, and
with nearly 40% of those havingover $100,000 in debt, that
means most businesses aredealing with this in some form
or fashion.
Now, credit cards has doubledover the last few years.
(02:54):
About 25% to 50% of businesseshave credit card debt.
That's between 2023 and 2024.
One in three small businessesstruggle to make debt payments
and over half of businesses 51%are considered financially
unhealthy.
That's I tell you this in asense to.
(03:16):
So if you're dealing with debt,if you whether it's 10,000 in
credit card debt or hundreds inSBA loans and credit and student
loans and other things, whetherit's in your business or your
personal life you're not alone.
Most people are struggling withthis, and even that data is
just on the business side.
That doesn't even tap into theamount of personal debt that
business owners are carrying Now, the numbers are one thing, but
(03:40):
how is this showing up in yourlife?
What we see is that people arelosing sleep.
I know this for myself.
I was stressed, I was anxious.
I wasn't sleeping well becausejust in the back of my mind, I
knew I was carrying this weightfinancial weight.
We're robbing Peter to pay Paul, we're working long hours just
to make ends meet, and sometimesour body is present, but our
(04:02):
mind isn't.
I would find myself sittingwith my kids, playing with them,
and maybe my body's there, butmy mind is a thousand miles away
, doing financial gymnastics,thinking about the credit card
debt that has piled up, thinkingabout having to make payroll
and knowing at the end of themonth, unless some drastic
changes happen with our revenue,that credit card debt was just
going to get higher.
(04:23):
Now, when people are faced withthis and this is what we see
every day here's what they thinkthe solution is.
I want to guide you throughsome of the things that maybe
you've thought of, things I'vedefinitely considered when
trying to tackle this problemIncreasing your revenue.
I'm not saying that's not asolution, but some people think,
oh, all I got to do is makemore money, bring in more sales,
then I can solve that problem,get some more clients problem
(04:45):
solved.
They cut their own pay, theysacrifice on the personal side.
So scorched earth spending iswhat that's called.
That means you're not spendinga dime on anything fun, you're
not spending a dime on anythingextra, it's purely just.
We are going just the basics.
We borrow more to pay off debt,whether that's refinancing into
a different way, or we borrowmore to invest in maybe
(05:07):
advertising, hoping that'llbring in some clients, and then
that just puts us in a deeperhole.
We make large payments anytimecash comes in.
I was super guilty of this.
If we signed a client who paidupfront for six months, my
instinct was great I'm going totake that cash, I'm going to
throw it on the credit card andpay that down in a huge chunk.
But then what would happen isI'm having to pay my team to
(05:29):
work with that client, and sothe next six months I'm paying
out more in operating expensesand in payroll and I don't have
that cash to help fund thatpayroll and to help pay that
coach.
And so inevitably I'm puttingmore on the credit card to cover
our overhead costs and then wefind ourselves penny pinching.
Now this isn't the solution,and I know, going back to the
(05:51):
revenue piece, more revenue justdoesn't always work.
Just because we're bringing inmore sales doesn't always solve
the problem.
Now, I think it solves a lot ofproblems but truthfully, we
have to have something in tandemwith that.
So the things we're going totalk about today, we have to
have some kind of game plansystem tied to that revenue
(06:11):
piece.
And in fact, we've had clientsin the past who, if we looked at
their numbers, literally, ifthey were to sign another client
, they were going to be furtherin the hole.
They were so tied up withvendors, so tied up with
different things, that,financially speaking, if they
got another sale, it was goingto hurt them.
We had to do some other workinside their business in order
to turn that around.
Cutting your paycheck orscorched earth on the personal
(06:33):
side, it can lead to burnout asthe business owner.
Now, temporarily maybe thatcould be a solution.
But again, if it's not tied toa plan if that is our solution,
it's not tied to a biggersolution you're going to get
burnt out because you'reprobably not going to suddenly
be able to start paying yourselfmore.
Usually we get stuck in thatlower paycheck or find ourselves
(06:53):
not taking home anything.
Sometimes what we find frombusiness owners so if you can
relate to that, you're not aloneBorrowing is just a Band-Aid
for an open wound.
You're hemorrhaging and you'retrying to put a Band-Aid on it.
That's not solving anything,you're just making the problem
worse.
And then reactive paymentsputting lump sums when it comes
in just creates that financialyo-yo that I was talking about.
(07:14):
So I want to guide you throughsome steps that you can use to
put into place to pay off debt.
Step one is to be proactive.
That is the problem.
Our natural tendency is to bereactive, especially when it
comes to debt or anything withmoney.
When money's good, we spend.
When it's not good, we stress.
When it's tight, we arefreaking out.
(07:35):
We hold money in.
We are scared to spend a dimeon anything.
So we want to be proactive.
What are your goals?
What are you trying to achieve?
We want to know where you'retrying to get, and part of being
proactive is knowing what phaseof business are you in.
We believe there are two keyphases of business that we kind
of cycle through.
(07:56):
So some years we're going tohave what we call foundation
years and then some years we'regoing to have growth years.
Foundation years are the yearswhere growth really isn't the
priority.
We are creating necessarysystems in order to grow.
We're creating a solidfoundation so that our business
can handle the growth that couldcome in.
What that might look like isbuilding your team, hiring some
(08:19):
people to then be able tosupport more clients coming in
the door.
It might mean implementing abrand new money system, which is
what a lot of clients come tous for is okay, we are, yes,
maybe we are passively trying togrow, but right now, our main
priority is can we manage themoney that we have coming in
better?
So then, as we add zeros to theend of our revenue, we are in a
(08:43):
healthier financial place andthat money is being better
utilized.
Maybe you are focusing onstreamlining processes or
prioritizing debt elimination.
All of those can fall into thatfoundational year where maybe
you're growing, but again, yourfocus is on let me get this
stuff organized, let me get itinto play.
And then, of course, growthyears are the years where you
(09:04):
are focusing on scaling thebusiness, reaching new
milestones, trying to get yourrevenue up and up, and that
might be where you invest inmarketing, you invest in
advertising.
You invest in different thingsto directly bring in some more
sales.
So right now, I want you to doa status check.
This is part of being proactive.
Where do you stand?
(09:25):
How can you free up cash flow?
Looking at your minimum debtpayments, looking at your
overhead expenses?
How can we free up cash flow tothen focus it toward the debt?
What do we need to cover ourexpenses?
If you have no idea, let's getthat status.
How much revenue do I need to bebringing in in order to cover
our expenses?
What are our monthly expenses?
(09:45):
Payroll, rent, all the above.
What do we need to have inorder to cover that?
So how much extra cash do weneed to pay down debt?
Or how much extra cash do youhave to pay down debt?
So how much extra cash do youhave to pay down debt?
So think through that, and thatcould be your minimum payments.
What are my total minimumpayments?
So, on top of our bills and ourpayroll, what do we need on top
(10:07):
of that to pay down this debt?
Cover our minimums and then, ontop of that, any extra we want
to do.
And then, what is your businesscurrently paying you?
We want to get a pulse on thattoo.
How much is it paying you now?
And then, what is your businesscurrently paying you?
We want to get a pulse on thattoo.
How much is it paying you now?
Is that enough?
Is it more than enough?
Is that something that, again,if we're strategic about it,
that we can pull down for thenext two pay periods, or the
(10:28):
next one or two months, whateverthat looks like, we don't want
it to be permanent, and so it'sgot to be real intentional.
That's why I say cutting yourpay is not a solution.
But if you're so, if you have asolution of, okay, we're gonna
go through, and over the nextsix months, we're going to focus
as much excess cash as we canto pay off these two debts,
which will free up these monthlypayments.
(10:48):
That's the solution, and thenyou can step in and say, okay,
where can we pull some cash from?
Is it from our optics, can wepull a little bit from the
owner's pay again temporarily,knowing we're going to go back
into it?
When I was getting through goingthrough the debt payoff for
myself, we do profit first,which is the bank accounts
having multiple bank accountsfor different things, and I have
a bank account labeled owner'spay.
(11:10):
So what I did was I was puttingmore in there than what I
needed to take home.
So I pulled my paycheck back alittle bit.
I opened another account and Inamed it debt destroyer and I
took a percentage from what Iwas putting into owner's pay and
put it into that debt destroyeraccount.
The reason I did this way wasbecause, by intentionally taking
it from there and moving itover here, everything in that
(11:32):
account is money I can throw ontop of the debt.
It's extra money to go towardthe debt, and then, when I am
done with that goal, I can justmove that percentage point right
back to owner's pay and it'sgoing right back to me.
It's not going to get mixed inwith the operating expenses.
I'm not going to look down twoyears from now.
Realize, oops, I never wentback to my old pay.
It's really intentional andit's separate.
(11:54):
Okay, we gotta be proactive.
Step two is to have a debtpayoff strategy.
Now there's multiple debtpayoff strategies.
I'm not gonna get into theweeds on these.
In fact, we have an episodewhere we talk about debt payoff
options, and so go find thatepisode, listen to it.
It's gonna go more in depth,the one that we see most success
with is what we would call thedebt snowball, and that's just
(12:15):
listing all your debts in orderfrom smallest to largest balance
and focusing as much attentionon the smallest balance as you
can.
So we're paying minimums oneverybody and then we're
focusing as much attention aspossible on that smallest
balance.
Now, this means we're ignoringinterest rates, like I said, so
maybe you're not paying offthose more expensive ones.
(12:36):
Maybe you're.
You have, like this, really lowbalance, one that is a 0%
interest.
Our goal with this method is tofree up cashflow.
The attacking the smaller onesmeans we're going to knock them
out quickly.
That's a monthly payment thatwe no longer need to pay on that
debt, and then we take thatmonthly payment, we start paying
it toward the next debt, and soon and so on.
So that's where that snowballeffect can come into play.
(12:58):
There's also the debt avalanche, where we focus our money.
Same thing we list it, but it'san order of largest interest
rate to smallest interest rate,so you're getting rid of the
more expensive debt first.
The problem here is maybe yourmost expensive debt is a $75,000
SBA loan that's going to takeyou 18 months, a couple of years
(13:18):
, however long to pay it off andso you're not going to be able
to free up that cashflow veryquickly, versus if you were able
to knock out three or fourcredit cards that might free up,
you know, maybe five to 500 toa thousand dollars a month then
that you could turn around andstart throwing in other things
If you're doing the snowballmethod.
The other method that we talkabout is what we would call the
emotional connection, and thisis going through and saying,
(13:41):
okay, which debts maybe carry ananchor to me.
So is there a debt here thathas an emotional toll that we
want to get rid of?
You know, on the personal side,the example I use is we've had
clients in the past who had adeath in the family that they
ended up having to borrow moneyto for hospital bills and things
that ended up not working out.
The person passed and now theyhave this debt hanging over
(14:02):
their shoulder.
That's just a negative reminderof the trauma, the heartache,
everything they just wentthrough, and so, regardless of
whether it was the financiallybest one to pay off first,
getting it out of their life,out of their way, was super
important and it was a priority.
Okay, so that is the threepossible methods that you can
follow for paying off debt.
(14:22):
Again, for sake of this podcastepisode, I'm not going to go
super in depth on those, becausewe've already done that before
and we will likely do it again.
So just keep an eye out, or goback through and find our
episodes on debt.
That will guide you through thesnowball method and the
avalanche method.
Step three is to create a debtpayoff system.
(14:43):
So having that game plan is onepiece, but how are we going to
implement it inside the business?
Because it's great to have themlisted in order and be like
cool, I'm going to throw as muchmoney as I can at that smallest
one.
But how?
Where am I going to get thatmoney from?
So what we want to do isanything excess and operating
expenses we're going to throwtowards that debt at the end of
the month.
So making sure your payroll iscovered.
You have enough to cover bills,anything extra we're going to
(15:06):
throw.
The next thing we're going to dois, if you're doing profit
first and if you're not, thenwhat I would recommend is
opening an account andnicknaming it profit and putting
some percentage amount intothat account, even if it's just
1%.
Put it towards there.
I would aim for maybe 5%.
If you can squeeze it, do thatand then at the end of every
quarter even every month if youwant to do it more frequently
(15:27):
we're going to take what's inthat account.
We're going to throw it down onthe debt.
So we're going to just useexcess cash here and there, and
then we already talked aboutusing maybe a debt destroyer
account, like I did excess cashhere and there.
Then we already talked aboutusing maybe a debt destroyer
account, like I did, we aregoing to just proactively look
through and say we are going totake this cash.
Where can we find cash so thatwe can implement that strategy?
(15:48):
The strategy is just one piece.
We actually have to have asystem in place in order to do
that.
So if you don't have a moneymanagement system in place, you
have to have one.
Episode two we go into profitfirst, how it works, why your
business needs it.
So I highly recommend you golisten to that after this
episode.
If you haven't, if you don'thave a money system in place, of
(16:09):
course, always in thedescription below here, we have
coaches on standby ready to helpyou.
You can always schedule a freecall to learn how we help people
like you.
Put in systems to manage yourmoney better, but you have to
have that system in place orelse a debt strategy is not
going to work.
Now what if you can't affordyour payments?
So you have your debt.
You calculate all your minimumpayments.
(16:30):
You're like I can't even affordto pay just the minimum, much
less anything on top of that.
Well, the first thing we can dois negotiate monthly payments.
So I always recommend callingeach of your lenders and just
how can I lower my monthlypayment credit cards, especially
seeing if you can negotiatethat payment down because it's
eating you up, if you canrefinance loans, or if you can
(16:51):
consolidate loans over a longerterm or for a lower interest
rate that might bring thatpayment down.
We want to focus on freeing,reducing payments, so that you
can then not only covereverybody and make sure that
everyone's taken care of, butalso have excess cash to funnel
towards those debts and thenavoiding debt in the future.
(17:11):
I want you to think throughthese things.
So number one is managingrevolving debt.
So those of you who maybe don'thave debt now, or you do, but
you don't want to fall back inthe trap, we need to manage our
revolving debt, meaning that'sthe debt that we pay off.
You charge it to a card and youpay it off at the end of the
month.
I recommend switching to aweekly rhythm so you're only
paying off debt from that week,expenses from that week, not
from the full month.
Then we want to build anemergency cash reserve.
(17:34):
This could be anywhere fromdepending, and I give a rough
estimate, but I would say threemonths of expenses that's like
your bare payroll overheadexpenses in that account and
then ideally enough to pay youwhat you need to get paid just
in a account to cover yourexpenses, so that you don't have
to borrow in order to make endsmeet and then know yourself,
(17:56):
use your financial habits.
Are you somebody who can managecredit cards or are you somebody
who has struggled in the pastand it's caused issues and it's
gotten you into a trap and it'sgotten you into trouble?
If that is you, then mayberevolving debt is just not an
option and you should probablymove toward a debit card and
just paying for things with cash.
So debt again, it's an anchor,and so if you're finding
(18:20):
yourself struggling with debt,please reach out to our coaches.
That's what we are experts inhelping people like you turn it
around, get the money in orderso that you can grow a perfectly
financially healthy practice.
Thanks for joining us on theTherapy Business Podcast.
Be sure to subscribe, leave areview and share it with a
practice owner that you may knowIf your practice needs help
(18:42):
getting organized with itsfinances or just growing your
practice.
Head to therapybusinesspodcomto learn how we can help.
Roughly 60% of small businesses are carrying
outstanding debt, and therapypractices are not immune to this
statistic.
Today, I'm gonna guide youthrough debt in business and how
you can start to proactivelymake your way out of it.
Or, if you don't have debt, howcan you avoid it completely.
My name is Craig and I'm theowner of Daisy Financial
(00:21):
Coaching.
Our team is on a mission tomake your therapy practice
permanently profitable.
If you own a solo or grouppractice, we're here to help you
build a business that createsmore time, makes more money and
serves more people.
This is the Therapy BusinessPodcast.
(00:41):
When it comes to debt, none ofus are really immune to it.
Right, it can sneak up on us.
Even myself.
I'm a profit coach.
I have been teaching peopleabout paying off debt and
getting control of theirfinances for well over a decade,
and I still, during that time,have found myself in the credit
card trap or finding myselffalling into debt that I have to
(01:04):
crawl my way out of.
What happens is sometimes itcan sneak up on us.
Sometimes we don't even realizeand the next thing we know we
look down at the credit card atthe end of the month and we
don't have enough in the bank topay it off completely, and then
the next month it gets higherand higher and before we know it
, we have this mess that almostfeels insurmountable.
It's tying up our cash flow.
It's creating all these issues.
(01:29):
Debt really is an anchor on yoursmall business.
Now, I know that there are waysthat you can leverage debt in a
positive way, and so really,today is not talking about those
options.
So I just want you to know Iacknowledge that sometimes
that's how you can get yourbusiness off the ground, or that
is a tool you can tap into.
However, most of the time, it'snot done the right way and it
ends up being this anchor on youand your cash flow.
(01:50):
It's borrowing from futurerevenue that you then have to
service later, and most of thetime it's.
I don't meet a lot of businessowners who are happy that they
did that.
So while we walk through todayand some steps to pay off debt
and get yourself to a debt-freeplace, I also want you to keep
in mind that if there comes atime where you are facing the
(02:10):
question of, do I take out thisloan to scale or to do X, y and
Z, we want to make sure that weare doing it with eyes open and
that we have exhausted all otheroptions.
A lot of times, debt is asafety net, a thing we can tap
into.
That prevents us from lookingor getting creative and thinking
outside of the box when itcomes to solving our problems.
Now I want to walk you throughsome statistics, just really
(02:32):
quickly, on what debt looks likein business.
So 60% of businesses arecarrying outstanding debt, and
with nearly 40% of those havingover $100,000 in debt, that
means most businesses aredealing with this in some form
or fashion.
Now, credit cards has doubledover the last few years.
(02:54):
About 25% to 50% of businesseshave credit card debt.
That's between 2023 and 2024.
One in three small businessesstruggle to make debt payments
and over half of businesses 51%are considered financially
unhealthy.
That's I tell you this in asense to.
(03:16):
So if you're dealing with debt,if you whether it's 10,000 in
credit card debt or hundreds inSBA loans and credit and student
loans and other things, whetherit's in your business or your
personal life you're not alone.
Most people are struggling withthis, and even that data is
just on the business side.
That doesn't even tap into theamount of personal debt that
business owners are carrying Now, the numbers are one thing, but
(03:40):
how is this showing up in yourlife?
What we see is that people arelosing sleep.
I know this for myself.
I was stressed, I was anxious.
I wasn't sleeping well becausejust in the back of my mind, I
knew I was carrying this weightfinancial weight.
We're robbing Peter to pay Paul, we're working long hours just
to make ends meet, and sometimesour body is present, but our
(04:02):
mind isn't.
I would find myself sittingwith my kids, playing with them,
and maybe my body's there, butmy mind is a thousand miles away
, doing financial gymnastics,thinking about the credit card
debt that has piled up, thinkingabout having to make payroll
and knowing at the end of themonth, unless some drastic
changes happen with our revenue,that credit card debt was just
going to get higher.
(04:23):
Now, when people are faced withthis and this is what we see
every day here's what they thinkthe solution is.
I want to guide you throughsome of the things that maybe
you've thought of, things I'vedefinitely considered when
trying to tackle this problemIncreasing your revenue.
I'm not saying that's not asolution, but some people think,
oh, all I got to do is makemore money, bring in more sales,
then I can solve that problem,get some more clients problem
(04:45):
solved.
They cut their own pay, theysacrifice on the personal side.
So scorched earth spending iswhat that's called.
That means you're not spendinga dime on anything fun, you're
not spending a dime on anythingextra, it's purely just.
We are going just the basics.
We borrow more to pay off debt,whether that's refinancing into
a different way, or we borrowmore to invest in maybe
(05:07):
advertising, hoping that'llbring in some clients, and then
that just puts us in a deeperhole.
We make large payments anytimecash comes in.
I was super guilty of this.
If we signed a client who paidupfront for six months, my
instinct was great I'm going totake that cash, I'm going to
throw it on the credit card andpay that down in a huge chunk.
But then what would happen isI'm having to pay my team to
(05:29):
work with that client, and sothe next six months I'm paying
out more in operating expensesand in payroll and I don't have
that cash to help fund thatpayroll and to help pay that
coach.
And so inevitably I'm puttingmore on the credit card to cover
our overhead costs and then wefind ourselves penny pinching.
Now this isn't the solution,and I know, going back to the
(05:51):
revenue piece, more revenue justdoesn't always work.
Just because we're bringing inmore sales doesn't always solve
the problem.
Now, I think it solves a lot ofproblems but truthfully, we
have to have something in tandemwith that.
So the things we're going totalk about today, we have to
have some kind of game plansystem tied to that revenue
(06:11):
piece.
And in fact, we've had clientsin the past who, if we looked at
their numbers, literally, ifthey were to sign another client
, they were going to be furtherin the hole.
They were so tied up withvendors, so tied up with
different things, that,financially speaking, if they
got another sale, it was goingto hurt them.
We had to do some other workinside their business in order
to turn that around.
Cutting your paycheck orscorched earth on the personal
(06:33):
side, it can lead to burnout asthe business owner.
Now, temporarily maybe thatcould be a solution.
But again, if it's not tied toa plan if that is our solution,
it's not tied to a biggersolution you're going to get
burnt out because you'reprobably not going to suddenly
be able to start paying yourselfmore.
Usually we get stuck in thatlower paycheck or find ourselves
(06:53):
not taking home anything.
Sometimes what we find frombusiness owners so if you can
relate to that, you're not aloneBorrowing is just a Band-Aid
for an open wound.
You're hemorrhaging and you'retrying to put a Band-Aid on it.
That's not solving anything,you're just making the problem
worse.
And then reactive paymentsputting lump sums when it comes
in just creates that financialyo-yo that I was talking about.
(07:14):
So I want to guide you throughsome steps that you can use to
put into place to pay off debt.
Step one is to be proactive.
That is the problem.
Our natural tendency is to bereactive, especially when it
comes to debt or anything withmoney.
When money's good, we spend.
When it's not good, we stress.
When it's tight, we arefreaking out.
(07:35):
We hold money in.
We are scared to spend a dimeon anything.
So we want to be proactive.
What are your goals?
What are you trying to achieve?
We want to know where you'retrying to get, and part of being
proactive is knowing what phaseof business are you in.
We believe there are two keyphases of business that we kind
of cycle through.
(07:56):
So some years we're going tohave what we call foundation
years and then some years we'regoing to have growth years.
Foundation years are the yearswhere growth really isn't the
priority.
We are creating necessarysystems in order to grow.
We're creating a solidfoundation so that our business
can handle the growth that couldcome in.
What that might look like isbuilding your team, hiring some
(08:19):
people to then be able tosupport more clients coming in
the door.
It might mean implementing abrand new money system, which is
what a lot of clients come tous for is okay, we are, yes,
maybe we are passively trying togrow, but right now, our main
priority is can we manage themoney that we have coming in
better?
So then, as we add zeros to theend of our revenue, we are in a
(08:43):
healthier financial place andthat money is being better
utilized.
Maybe you are focusing onstreamlining processes or
prioritizing debt elimination.
All of those can fall into thatfoundational year where maybe
you're growing, but again, yourfocus is on let me get this
stuff organized, let me get itinto play.
And then, of course, growthyears are the years where you
(09:04):
are focusing on scaling thebusiness, reaching new
milestones, trying to get yourrevenue up and up, and that
might be where you invest inmarketing, you invest in
advertising.
You invest in different thingsto directly bring in some more
sales.
So right now, I want you to doa status check.
This is part of being proactive.
Where do you stand?
(09:25):
How can you free up cash flow?
Looking at your minimum debtpayments, looking at your
overhead expenses?
How can we free up cash flow tothen focus it toward the debt?
What do we need to cover ourexpenses?
If you have no idea, let's getthat status.
How much revenue do I need to bebringing in in order to cover
our expenses?
What are our monthly expenses?
(09:45):
Payroll, rent, all the above.
What do we need to have inorder to cover that?
So how much extra cash do weneed to pay down debt?
Or how much extra cash do youhave to pay down debt?
So how much extra cash do youhave to pay down debt?
So think through that, and thatcould be your minimum payments.
What are my total minimumpayments?
So, on top of our bills and ourpayroll, what do we need on top
(10:07):
of that to pay down this debt?
Cover our minimums and then, ontop of that, any extra we want
to do.
And then, what is your businesscurrently paying you?
We want to get a pulse on thattoo.
How much is it paying you now?
And then, what is your businesscurrently paying you?
We want to get a pulse on thattoo.
How much is it paying you now?
Is that enough?
Is it more than enough?
Is that something that, again,if we're strategic about it,
that we can pull down for thenext two pay periods, or the
(10:28):
next one or two months, whateverthat looks like, we don't want
it to be permanent, and so it'sgot to be real intentional.
That's why I say cutting yourpay is not a solution.
But if you're so, if you have asolution of, okay, we're gonna
go through, and over the nextsix months, we're going to focus
as much excess cash as we canto pay off these two debts,
which will free up these monthlypayments.
(10:48):
That's the solution, and thenyou can step in and say, okay,
where can we pull some cash from?
Is it from our optics, can wepull a little bit from the
owner's pay again temporarily,knowing we're going to go back
into it?
When I was getting through goingthrough the debt payoff for
myself, we do profit first,which is the bank accounts
having multiple bank accountsfor different things, and I have
a bank account labeled owner'spay.
(11:10):
So what I did was I was puttingmore in there than what I
needed to take home.
So I pulled my paycheck back alittle bit.
I opened another account and Inamed it debt destroyer and I
took a percentage from what Iwas putting into owner's pay and
put it into that debt destroyeraccount.
The reason I did this way wasbecause, by intentionally taking
it from there and moving itover here, everything in that
(11:32):
account is money I can throw ontop of the debt.
It's extra money to go towardthe debt, and then, when I am
done with that goal, I can justmove that percentage point right
back to owner's pay and it'sgoing right back to me.
It's not going to get mixed inwith the operating expenses.
I'm not going to look down twoyears from now.
Realize, oops, I never wentback to my old pay.
It's really intentional andit's separate.
(11:54):
Okay, we gotta be proactive.
Step two is to have a debtpayoff strategy.
Now there's multiple debtpayoff strategies.
I'm not gonna get into theweeds on these.
In fact, we have an episodewhere we talk about debt payoff
options, and so go find thatepisode, listen to it.
It's gonna go more in depth,the one that we see most success
with is what we would call thedebt snowball, and that's just
(12:15):
listing all your debts in orderfrom smallest to largest balance
and focusing as much attentionon the smallest balance as you
can.
So we're paying minimums oneverybody and then we're
focusing as much attention aspossible on that smallest
balance.
Now, this means we're ignoringinterest rates, like I said, so
maybe you're not paying offthose more expensive ones.
(12:36):
Maybe you're.
You have, like this, really lowbalance, one that is a 0%
interest.
Our goal with this method is tofree up cashflow.
The attacking the smaller onesmeans we're going to knock them
out quickly.
That's a monthly payment thatwe no longer need to pay on that
debt, and then we take thatmonthly payment, we start paying
it toward the next debt, and soon and so on.
So that's where that snowballeffect can come into play.
(12:58):
There's also the debt avalanche, where we focus our money.
Same thing we list it, but it'san order of largest interest
rate to smallest interest rate,so you're getting rid of the
more expensive debt first.
The problem here is maybe yourmost expensive debt is a $75,000
SBA loan that's going to takeyou 18 months, a couple of years
(13:18):
, however long to pay it off andso you're not going to be able
to free up that cashflow veryquickly, versus if you were able
to knock out three or fourcredit cards that might free up,
you know, maybe five to 500 toa thousand dollars a month then
that you could turn around andstart throwing in other things
If you're doing the snowballmethod.
The other method that we talkabout is what we would call the
emotional connection, and thisis going through and saying,
(13:41):
okay, which debts maybe carry ananchor to me.
So is there a debt here thathas an emotional toll that we
want to get rid of?
You know, on the personal side,the example I use is we've had
clients in the past who had adeath in the family that they
ended up having to borrow moneyto for hospital bills and things
that ended up not working out.
The person passed and now theyhave this debt hanging over
(14:02):
their shoulder.
That's just a negative reminderof the trauma, the heartache,
everything they just wentthrough, and so, regardless of
whether it was the financiallybest one to pay off first,
getting it out of their life,out of their way, was super
important and it was a priority.
Okay, so that is the threepossible methods that you can
follow for paying off debt.
(14:22):
Again, for sake of this podcastepisode, I'm not going to go
super in depth on those, becausewe've already done that before
and we will likely do it again.
So just keep an eye out, or goback through and find our
episodes on debt.
That will guide you through thesnowball method and the
avalanche method.
Step three is to create a debtpayoff system.
(14:43):
So having that game plan is onepiece, but how are we going to
implement it inside the business?
Because it's great to have themlisted in order and be like
cool, I'm going to throw as muchmoney as I can at that smallest
one.
But how?
Where am I going to get thatmoney from?
So what we want to do isanything excess and operating
expenses we're going to throwtowards that debt at the end of
the month.
So making sure your payroll iscovered.
You have enough to cover bills,anything extra we're going to
(15:06):
throw.
The next thing we're going to dois, if you're doing profit
first and if you're not, thenwhat I would recommend is
opening an account andnicknaming it profit and putting
some percentage amount intothat account, even if it's just
1%.
Put it towards there.
I would aim for maybe 5%.
If you can squeeze it, do thatand then at the end of every
quarter even every month if youwant to do it more frequently
(15:27):
we're going to take what's inthat account.
We're going to throw it down onthe debt.
So we're going to just useexcess cash here and there, and
then we already talked aboutusing maybe a debt destroyer
account, like I did excess cashhere and there.
Then we already talked aboutusing maybe a debt destroyer
account, like I did, we aregoing to just proactively look
through and say we are going totake this cash.
Where can we find cash so thatwe can implement that strategy?
(15:48):
The strategy is just one piece.
We actually have to have asystem in place in order to do
that.
So if you don't have a moneymanagement system in place, you
have to have one.
Episode two we go into profitfirst, how it works, why your
business needs it.
So I highly recommend you golisten to that after this
episode.
If you haven't, if you don'thave a money system in place, of
(16:09):
course, always in thedescription below here, we have
coaches on standby ready to helpyou.
You can always schedule a freecall to learn how we help people
like you.
Put in systems to manage yourmoney better, but you have to
have that system in place orelse a debt strategy is not
going to work.
Now what if you can't affordyour payments?
So you have your debt.
You calculate all your minimumpayments.
(16:30):
You're like I can't even affordto pay just the minimum, much
less anything on top of that.
Well, the first thing we can dois negotiate monthly payments.
So I always recommend callingeach of your lenders and just
how can I lower my monthlypayment credit cards, especially
seeing if you can negotiatethat payment down because it's
eating you up, if you canrefinance loans, or if you can
(16:51):
consolidate loans over a longerterm or for a lower interest
rate that might bring thatpayment down.
We want to focus on freeing,reducing payments, so that you
can then not only covereverybody and make sure that
everyone's taken care of, butalso have excess cash to funnel
towards those debts and thenavoiding debt in the future.
(17:11):
I want you to think throughthese things.
So number one is managingrevolving debt.
So those of you who maybe don'thave debt now, or you do, but
you don't want to fall back inthe trap, we need to manage our
revolving debt, meaning that'sthe debt that we pay off.
You charge it to a card and youpay it off at the end of the
month.
I recommend switching to aweekly rhythm so you're only
paying off debt from that week,expenses from that week, not
from the full month.
Then we want to build anemergency cash reserve.
(17:34):
This could be anywhere fromdepending, and I give a rough
estimate, but I would say threemonths of expenses that's like
your bare payroll overheadexpenses in that account and
then ideally enough to pay youwhat you need to get paid just
in a account to cover yourexpenses, so that you don't have
to borrow in order to make endsmeet and then know yourself,
(17:56):
use your financial habits.
Are you somebody who can managecredit cards or are you somebody
who has struggled in the pastand it's caused issues and it's
gotten you into a trap and it'sgotten you into trouble?
If that is you, then mayberevolving debt is just not an
option and you should probablymove toward a debit card and
just paying for things with cash.
So debt again, it's an anchor,and so if you're finding
(18:20):
yourself struggling with debt,please reach out to our coaches.
That's what we are experts inhelping people like you turn it
around, get the money in orderso that you can grow a perfectly
financially healthy practice.
Thanks for joining us on theTherapy Business Podcast.
Be sure to subscribe, leave areview and share it with a
practice owner that you may knowIf your practice needs help
(18:42):
getting organized with itsfinances or just growing your
practice.
Head to therapybusinesspodcomto learn how we can help.
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