That means your personal life is going to play a role in your business success.
To be successful in business, you have to be all in–in all aspects of your life.
Case in point: I’m working with a bright, dedicated entrepreneur who has a great idea for a business and has enjoyed some initial success. The problem he’s facing is the extremely expensive debt he’s using to finance his company. That debt severely limits his flexibility, and not only prevents him from expanding, but also from taking advantage of any impromptu opportunities that arise.
But there’s a solution.
The $100,000 monthly debt service could be trimmed to a far more manageable $10,000 if the entrepreneur refinanced with a loan backed by the Small Business Administration.
But there’s a catch.
The entrepreneur lives an extravagant lifestyle: He owns three Ferraris among other expensive goodies.
Why does that matter?
When lenders consider making loans, they need a full picture of their potential customer. They want to see demonstrated responsibility and maturity. A person, who in their personal life spends every last dime, may well adopt the same philosophy when it comes to their business. That adds a huge element of risk for the lender who is, after all, in the business of making money and would prefer making a safer bet.
There’s also the possibility the entrepreneur is living beyond his means, which might be reflected in his personal credit score. That score is considered by lenders, who will wonder why they should offer a loan if the client is unable to manage their personal credit. Do you blame them?
To compound problems, the entrepreneur refuses to scale back his lifestyle. He’s happy living the high life and believes he can make his business work despite the crippling debt.
In other words, he wants to have his cake and eat it, too.
Show some restraint
I get it: Entrepreneurs want to enjoy the fruits of their labors, but there’s a time and place for that. And that time and place is not when you are involved with a fledgling business.
If you want to obtain reasonably priced financing, you’re going to have to sacrifice to some extent.
My Ferrari-loving client doesn’t need to sell all three Ferraris, his expensive home, and the other pricey perks he owns and replace them with a 1983 Chevy Chevette while living on a cot in his parents’ basement. But he’s going to have to show he’s serious about wanting to make his business work at all costs to get better financing.
Just remember that Warren Buffett still lives in the same house in Omaha, Neb., that he bought in 1958 for $31,000. Although that house is now worth about $650,000–and he’s also selling a Laguna Beach, Calif., beachfront home for $11 million–Buffett is a prime example of the power of restraint.
It’s never a bad idea to emulate Warren Buffett and bide your time before enjoying future riches.