The Critical Importance of Borrowing Money to Grow Your Business

You’re listening to the Mastering Money in Midlife podcast, episode 12.

Welcome to Mastering Money in Midlife, a podcast for midlife women in business to overcome financial anxiety and make more money without burning out or sacrificing their families. Join certified life and money coach Debbie Sassen as she shares practical business strategies and mindset shifts that help you dissolve the money blocks that keep you stuck in a cycle of underearning and under-saving, sabotage the growth of your business and prevent you from building the wealth that you desire.

Hello, my friends, and welcome to episode 12. We are now 2 months into the podcast, and I was thinking of this podcast as a newborn baby. As a mom of 8, that’s a great metaphor for me. It comes up in my mind from time to time, and really this journey of launching has been a little bit like bringing a newborn into the world, cuddling it, coddling it, nursing it, diapering it, and with babies, when you get to that like 2-month stage, all of a sudden you get those beautiful toothless grins smiling back at you.

And it’s like that whole hard work that you put in the beginning and the sleepless nights have all been worthwhile because now the baby is responsive and gives you so much light and joy, and there’s a sparkle in her eyes, and all of a sudden everything becomes a pleasure. I wouldn’t say that I’ve had sleepless nights over the podcast, although sometimes my brain goes crazy and I have ideas, and I  can’t slow it down in order to fall asleep, but it doesn’t usually wake me up at 4 a.m., 5 a.m., and 6 a.m.

Also, none of my babies ever slept through the night at 2 months. They were tough; my kids or I was just a softie of a mommy. They never slept through the night until I stopped nursing, and maybe that’s my fault. I’m to blame. We just had this beautiful nursing relationship. It doesn’t matter anymore. My youngest is 14 years old, and most of the time, I go to sleep before he does, and I do have a beautiful, restful night, and he gets to be the teenager, the lovely teenager that he is, but back to the podcast.

Now that we are 2 months in, I decided that today is a great day to come out of the closet as it were about debt, and why I think that debt is number 1, not shameful, and any shameful feelings that you have towards yourself about any debt that you have on the books with the bank, with the credit card company, with your parents, to the IRS, whoever it is, I’m here to unshame debt. Number 2, taking on debt, I think, is critically important for most business owners. And I want you to hear me out. In response to last week’s podcast where I spoke about what I did, the 21 things that I did, breaking down how I created $217,000 in my business in 2021.

Somebody responded that not everybody has $60,000 plus to invest in her business, and I think that is a limited perspective on what it takes to grow a business. If you think about any brick and mortar business, and I like to think of what we call in Hebrew, in Israel, a mekolet, you might call it a mini-market where you live.

But just imagine someone wants to open a mini-market. They have to find a space and rent it. They have to hook up the water, hook up the electricity, make sure they have flushed toilets. They’re going to buy cash registers. They’re going to buy shelves stock the shelves, meaning they have to invest in inventory. They have to hire personnel, right? They have to put a sign on the door if it’s a mini-market they might have to advertise in the local newspapers, the local rag sheets that come around.

I mean, if it’s connected with a gas station, maybe not because it’s right there. But there’s a lot of financial investment in that mini-market before they even sell one candy bar. So, for those of us who have online businesses believing that we can just throw ourselves on to the internet, right? Put up our virtual sign on Instagram, Facebook, on LinkedIn, on Twitter, and say to the world, hey, I’m a going concern. I’m a functioning business without investing a dime in our businesses? I think that’s a misnomer, and it’s leading to expectations that are unrealistic, and I also want to compare to anybody who decides, chooses a career in, you could be a psychologist, a social worker, a lawyer, a doctor, right?

People who go into professions like accounting right, it takes time, and it takes money to learn the trade, to learn the skillset, to learn the profession, and it takes money. Like, imagine somebody going to med school in the United States. In Israel, where I live, university education is highly subsidized. So, I don’t want to make a comparison with where I live. But even still, there is a huge time investment for anyone who wants to become a doctor or a lawyer. But someone goes to med school. First, they go to college, and depending on the college they choose, they might take out student loans for college.

Then, they’re going to go to med school, probably, and they might even study for the MCATS, the test, right? And they might invest, you know, borrow money or pay money to invest in the MCATS, so they have a really good score, and then they apply. All of those applications cost money. Then, they’re in med school, and you’ve got your residency, your internship. It takes time and money to become a doctor.

Then, once you’re a doctor, you have to usually work like long hours, and there are years and years and years of personal time investment in the profession to become highly skilled. So, again to believe that we can jump into an online business, in my case, it’s a coaching business, right? To believe that I can be here where I am today without investing money, and if I don’t have the money sitting in my bank account.

Then, without borrowing money and taking on debt, it’s unrealistic, and it’s a misnomer. It’s not something that you can create, something from nothing if you want a thriving business. So, I want to open your ideas and your mind to the idea and the possibility of borrowing money to invest in your business with the expectation of a long-term return. And again, go back to the episode I did on the difference between savings and investing.

We’re always looking at the long term when we are investing. Here’s another comparison that I can offer you. The house that I’ve been living in, I’ve been here for almost 24 years, and we bought it on paper about 26 years ago. They were just developing the land and the neighborhood where I live. They had started just clearing it, and we bought this apartment—house really it’s an attached house. And we just saw the plans on paper.

We looked at the current house that I live in, where I have been for a very long time. It has 4 bedrooms. We have like an office downstairs which has been like an office and a playroom for my kids, a kitchen, living room, dining room, and after many, many years, we built into the attic. We built another bedroom. At the time that we bought this house, we looked at the other properties that were available by the same builder, the same contractor, and there were bigger properties available; bigger houses, an extra bedroom, more land, and we looked at our finances.

We looked at how much we have in savings and how much we were willing to take on in a mortgage, right? And we decided that this property which was one of the smallest of all of the ones that our builder offered, was the perfect property for us.

Here’s what I’d like to offer if we had been willing to take a larger mortgage, meaning we had been willing to take on more debt, we could have had a larger property. Now, a larger property also comes with more expenses, and that was also part of our calculation. We didn’t want that for us. So, we chose the property that we live in. Thank God we have been very blessed to raise 8 children in this place.

There were times where we had 4 children in 1 bedroom even though we have 4 bedrooms. But when the kids were little, they all really enjoyed sleeping together in the same room. It was kind of like a pajama party every night. Then, as they got older and they needed more room for their shoes and their clothes and to stretch out, and the boys and the girls needed to be separated, they did get separated into different bedrooms.

Now, my 2 boys who live at home have their own bedroom, and one of the bedrooms became my office. So, it has always provided ample space for us and our family. Thank God. Now, it’s even probably more space than we need. But that’s neither here nor there. The thing is, if we had been willing to take on more debt, we could have had a larger property.

Now, I want you to think about your business. If you are investing small in your business, meaning you’re willing to invest, and I’m going to speak specifically about my coach. I have talked about her before, Stacey Bateman, and every 6 months, I invest $25,000 to work with my coach, and my belief is that if I’m investing that $25,000, it’s going to have a huge return on investment.

If I were willing to invest a smaller amount, my expectation would be that I would have a smaller return on my investment. Actually, Stacey offers a program where I initially invested $2,000. Now, people who’ve invested in her $2,000 program have achieved multiple 6 figure businesses, and then sometimes they go on to invest with her more. Sometimes they go on to different coaches. It doesn’t matter, but usually, there is a correlation between the amount that you’re willing to invest and the scale of the returns that you can anticipate and expect on the other side.

And let’s think about why that is. And I think about the relationship that students and teachers in my tradition have with each other. So, my tradition is the Jewish tradition, the Torah tradition. I look at the relationship between Moses and Joshua, or I look at the relationship between Elijah and Elisha, right? There’s a student-teacher relationship, and the student follows every move of the teacher and learns not just the learning by like, reading the books and hearing the words, but watching the movements, the interactions on a day to day basis. Right?

There’s a continual learning process, and there’s an absorption in the body, mind, cells, bloodstream, I don’t know, whatever it is. There’s that like, fineness, that je ne sais quoi, and that’s something that I can’t even quantify in money. But when I observe my coach, teacher, and role model, I see how she coaches, how she thinks, and it’s not just listening to her podcast. It’s not just reading the materials that she puts out on the internet or watching her videos.

It’s me being able to absorb her vibe, listen to the words, and watching the way she thinks and applies her coaching day in day out, and that’s something that I know is inside of me. And I will be able to carry with me as a coach for the rest of my life. Whatever I’m investing in myself and my business now, the long-term return is going to be huge. It’s going to be exponential.

Because of that unquantifiable something, that little variable N at the end of the equation, I am willing to invest. If need be to borrow money to invest in my business for the long-term return. Now, I want to give you some reasons why I think that debt is a wonderful thing to take on in order to invest in your business, and not only that, I might say it’s actually of critical importance to borrow money to take on debt.

Number 1, back in the day when I worked on Wall Street. I worked on the fixed income training floor. Fixed income is a fancy word for bonds. Bonds are a fancy word for obligatory notes. Obligatory notes are a fancy word for I owe you. Basically, I owe you money. Debt, fixed income, it’s borrowed money, and companies use debt all of the time in order to manage their cash flow.

And a couple of months ago, we were in the middle of the Christmas season, so imagine a department store like Macy’s, for example, and they’re gearing up for the Christmas season. Right? Before, let’s say October, November, they’re buying and buying of inventory. They’re stocking their warehouses. They’re filling their shelves because they know there’s going to be demand, probably from, like, Black Friday all the way through the first weeks of January.

But they haven’t yet made the sale. So, they need to borrow money in the short term in order to buy the goods so that they can have the sales they anticipate a month or so later. So, debt is used to manage short-term cash flow in brick and mortar businesses.

Number 2, companies use debt all of the time to invest in their long-term growth. Again, I’m going to go back to a brick-and-mortar example and imagine Coca-Cola. Coca-Cola wants to build a new bottling factory in the far east, right? Similar to my story of the mini-market, Coca-Cola is going to have to find some land that they want to rent. Maybe they buy land if they’re building a new factory, probably renting it.

They’re going to have to build their plant. They’re going to have to connect their electricity and water. They’re going to have to hire workers, train their workers, pay their workers while they’re in the process of training. They’re going to have to buy the raw materials, right? They’re going to need the bottles and cans and sterilization equipment.

They’re going to have to bring over whatever they need to make those fizzy drinks. I don’t—You know, maybe it’s just an air pump that you pump in the CO2 into the fizzy drinks. I don’t know how you make Coca-Cola. But you’re going to have to have the sugar; I don’t know the quality of the water if you need to purify the water, wherever they are, and whatever stuff. Whatever ingredients you need to make Coca-Cola brown. Right?

You’re going to have to send all of that overseas or buy it locally, right? Before you even sell one can or one bottle of Coke. I don’t know how long it takes to get a factory up and running, but whatever the initial investment is in that bottling plant, right? It might take 5 or 7 years for Coca-Cola to have earned back the money to pay back the loan.

So, I think this is really a way of just shifting the way you think about how debt works in the building of your business. And let’s just take an example, okay? Let’s say that you want to build your business, and you want to borrow $50,000 from the bank to build your business. And let’s keep this example very simple. You’ll be able to write it down on paper. I’m going to keep the numbers multiples of 5.

Alright, you’re going to borrow $50,000 and the bank, let’s say, charges you 10% interest, and you take out your loan for 5 years. Now, I did a quick calculation on my calculator. If you pay back your loan monthly, you’re going to pay $1,062 over the course of 60 months. Sorry, that’s not a multiple of 5, but you’ll stay with me. Over 5 years, you will have paid back the bank $63,741.

Okay. So, you borrowed $50,000. You’ve paid back the bank $63,741. The difference between those numbers is $13,741. Thirteen thousand seven hundred and forty-one dollars is the price of you borrowing $50,000 today. That’s how I recommend that you like rethink your thoughts about debt. Debt isn’t something that’s bad, and that’s shameful. Debt is a way for you to buy money today so that you’re going to have more money in the future.

Now, imagine that you took that $50,000 that you borrowed from the bank. That you bought from the bank, and you invested it in your business. You grew by $20,000 a year for the next 5 years, and that’s a very simplistic calculation because the assumption would be that as you grow, and as you refine your skills, and as you meet more people, you’re going to be able to increase your prices and expand your business.

But, again, we’re keeping it simple for the purposes of this podcast, but if you make $20,000 a year in your business in each of the next 5 years, you will have earned $100,000. So, $13,741 is the price that you pay in order to grow your business to $100,000 over the course of the next 5 years. Now, I think that is an incredible return on investment and that debt is just a beautiful way of buying money so that you can continue to grow. You can continue to learn, refine your skills, watch people who are further along on the journey that you are, and really imbibed their vibe, watch how they move, watch how they think. Watch their trainings, really be in their space. Learn from them. Right?

And sometimes, you might have several mentors. I do recommend that you limit yourself because your mind can get all mush-cabobbled, right, if you’re trying to work with too many people and take on too many new ideas. Better to get yourself, you know, really focused on one type of training and one type of learning and one type of role model, and then after a few years when that’s internalized then, you might want to move over and learn from somebody else. We have years and years ahead of us to learn what we want. Whatever you have today is good enough for today. You’re already serving your people, and there’s going to be time in the future when you can learn from a new mentor and a new teacher.

In closing, I want to offer you the following story; I said in the very very beginning, on the first podcast, that part of how I got into the work that I’m doing now is because my husband had cancer 19 ½ years ago. He went to the doctor complaining of back pains, and the doctor, a general practitioner, had a feeling. Had that sense, that je ne sais quoi, as I said before, that there was something going on, and you know, I’m the wife. I’m just like, you have a back pain, go get a massage.

But the doctor’s like no, go and get yourself an ultrasound, MRI, and let’s find out what’s going on because he had his years of experience he could sense that something was wrong. He is still today a very good pathologist, and that’s something that continual investing in yourself will create inside of you. The more you learn, the more you apply.

Doctors do have to continue going to continuing education in order to maintain their licenses, right? Anytime you go to a doctor or a dentist, a lawyer, right, you’re going to see all of these beautifully framed certificates on their walls that show you how they have continued to invest in themselves over the years. So, as you continue to grow, as you continue to serve, as you continue to become more of who you already are, be willing to borrow money to invest in yourself, to invest in your future, to invest in that whole package that we can’t even break down into little bits, right? In order, so you can serve your clients on a higher level.

Alright, my friends, thank you for listening in today to my thoughts about debt and the critical importance of borrowing money to invest in yourself and your business for future growth. Have a great day. Bye.

Thanks for listening to Mastering Money in Midlife. If you want more information on Debbie Sassen or the resources from the podcast, visit masteringmoneyinmidlife.com.