Using Debt Incorrectly and Expanding Too Rapidly

When you begin your business, some debt will be inevitable. Few business owners have the savings to fund their own new businesses. Startup costs just by themselves will rack up huge amounts of debt if you use it too much.

“[New contractors] see other people with a brand new truck, a fancy house, or all new equipment, and they make the mistake of using credit and debt to keep up with the Joneses.” –Joe Everest

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Funding Startup Costs

How do you start in the fencing business and economize to avoid overpowering debt, all without sacrificing quality? It’s a vicious cycle: you need to present a professional image to get new customers, but you need debt to fund new customer outreach, but at the same time, you don’t have the income for your debt repayments.You are not the first contractor to feel this particular pinch.

There are ways to start your contracting business without getting swallowed by spiraling debt repayments:

  • Don’t give up your day job until you can pay yourself, your crew and your creditors. This is obviously the hard way, but it gives you the power to do startup right the first time, your way.
  • Have a solid plan in place to pay off your debt before you take it on, and that includes both revolving debt like credit cards, HELOCs, and fixed payments.
  • Focus on what you want out of your business to ensure that you have realistic expectations. This is where your business plan will prove essential.

Find Investors

The one source of funding we haven’t discussed is finding investors in your startup. This can be tricky because you don’t want to change the way you run your business based on what your investors want. However, the right investors can significantly aid you in startup costs.

Family members, colleagues and friends, and local startup incubators are all possible sources of investment. Just make sure your investors agree to your business plan and sign off on it. This means you might have to create a full business plan. You can find out more about business plans at SBA.gov. 


A Word of Warning

If you choose to save and leverage your personal net worth to fund your business, be absolutely sure not to overextend yourself. Many contractors make this mistake, and when the business fails, the industry usually loses you for good. No one wants to go backward.