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Stesso

Compare Debt-Free Profitability

2:56
5:14
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At 2:56 in

Should you Borrow Money to Grow your Small Business

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What happens here

Compare the loan scenario with a debt-free approach. Imagine starting your business with no loans, even if it means beginning with lower sales volume (e.g., $50,000 instead of $100,000). If you achieve a modest profit margin, for instance, 5% on $50,000 in sales, your profit to you as the owner would be $2,500. The video highlights that this $2,500 in the debt-free scenario is potentially higher than the $2,000 (2% of $100,000 sales) left to the owner in the loan scenario, despite having half the sales, because no profits are lost to interest payments. This demonstrates how a debt-free approach can yield a higher net profit for the owner with potentially less financial pressure.

Goal: Determine the potential net profit when starting a business without incurring debt.

Tools and materials

  • Calculator Any — Performing financial calculations (e.g., profit margins without interest)

What they say

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crunching time you've got to understand how important this is you take out a loan for 10% on $100,000 General business loan you do $100,000 worth of work and you opt to uh give yourself about 12% profits because that's what you can eek out in reality you've made only 2% profit on $100,000 you now have $22,000 to show for it let's do a comparison and let's say instead of taking out a $100,000 General business loan you take nothing out but because you've taken no loans out you can only do half of the work you can only do $50,000 worth of work and because you've taken no loans out instead of getting 10% or 12% profits you're only able to manage 5% profits let's do a comparison and show how you're still ahead at $50,000 at 5% profit margin you clear $2500 for the year do you see the difference you've made $500 more dollars you've done half of the work and still put more money in your back pocket you've got half of the headaches half of the issues half of the work more money for you see the

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