Small Business Matters | Episode 13
Taking on debt can be a necessary part of growing a business, but it also comes with its fair share of risks. Rising interest rates, a decline in sales, and even unexpected global events like Pandemics and Supply Chain crises can change the dynamic of financial obligations we took on when things looked stable. So in this week’s episode of Small Business Matters, we’re going to talk about the small business matter of taking on debt with Financial Coach Christina Edel.
Christina left the corporate world to follow her passion, which is helping entrepreneurs create a clear path to accomplishing their financial goals. She does this through her business, Picture It Profit and Financials, and she’s also published a book, a Beginner’s Guide to Win with Money. Christina, welcome to Small Business Matters.
What follows is a lightly edited transcript of our interview.
Emily Garman: Well, let’s dive right in. So, can you tell us a little bit about your story? How did you come into the business of financial coaching and consulting?
Christina Edel: Yeah, absolutely. So it is a little bit of a long-winded story and I’ll try to keep it pretty short. But I would say that it started with me becoming, or, or really starting my career in a corporate setting. I was very much so the company girl. I was in a Fortune 500 company and I was determined and highly motivated to climb that corporate ladder and eventually get to a C-suite position.
I did a lot of the right things. I went through a leadership development program, I got an MBA, and I said yes to every great opportunity and leaned into a lot of promotions. And, ultimately by 2015 I was in mid-level management responsible for critical systems for this Fortune 500 company, and I was in a really lucrative spot. But my motivations had really diminished. I was no longer that company girl. I tried to talk myself into thinking I would come back into being that person, but life threw me some curve balls, and so probably the first one that happened that shed some understanding toward needing to reevaluate my life goals was that when I was nine months pregnant with my first child, my mom passed away.
And, you know, people say it all the time, but when you’re in those life or death situations, and in that scenario, I really was where we experienced death. And very shortly after that, we experienced life. Things that I thought were previously very important to me quickly were not so important to me after. Like I said, I tried to really lean into this idea of like, “well, I’ve worked so hard, I’ve built so much momentum in my career. I’ll go back to being that other girl.” But in 2015, it really came to a head because at this time I am now a mom to a toddler and an infant. It’s a few years later. My mom had passed in 2012 and my father-in-law became ill.
And when he was ill, he was in ICU for a little over a month. My husband went up to see him up in Montana where we’re originally from, and after about a month of him being up there, I called him home. I was like, “I can’t do it, babe. I’m very stressed out. I need you to come home.” I have these two small children, I’ve got a very, I would say, very stressful technical position. And I called him home, and it was just the worst timing possible. My father-in-law passed away just a couple days after he came home and I at that point I realized like, something’s got to give. I felt completely terrible. And that made me like sit down and really get into the nuts and bolts of our life. Like, what could we change? And I realized part of why I had been so hesitant to step away from that corporate career was, we had the car loans, we had the home loans, we had the furniture debt, we had credit card debt, and we were shackled to that salary that I was earning. So we started to learn all about personal finance and I leaned into just everything I could find about it and we ended up becoming debt free in 2019.
And I had decided through that process, like you couldn’t get me to stop talking about financial anything. Like if somebody even hinted they were interested in personal finance, it unleashed me to the point where my husband was like, you need to stop with that a little bit. You know? So that told me, okay, clearly this is something that I have a passion for.
I was certified as a financial coach through Dave Ramsey’s program. And then in 2020 when Covid came, I would say that’s where we were prepared for me to leave, but I was still kind of being a chicken, I was afraid to walk away from that high income salary. And then Covid just changed everything. It made us have to, again, reevaluate. My children were sent home. I was trying to work 50, 60 hour work weeks while doing online learning and it completely eroded my health. And finally my husband said, do it. Like absolutely you have to do it. And I said, okay. So in July of 2020, I left corporate.
And it took me a while. I had to take some breathing time, but after a little while, I started up my coaching business, and while I thought I was going to be coaching me 10 years ago, helping people that were in the predicament that I used to be in, what happened was a lot of people that came to me were small business owners, and I just absolutely loved the complexity of their financial situation.
And I realized that helping people understand how to sort of go their own way, and do it in a way that can afford them the lifestyle they’re accustomed to was something that was extremely meaningful to me. So then I received a bookkeeping certification and I gobbled up anything that I could read about CFO or understanding financial statements. And that evolved my business into, now I’m a business financial coach. I still help people on the personal side if they’re interested, but I also do bookkeeping and advisory services. So that’s kind of the shortest way that I can explain how I ended up where I am today.
Emily Garman: Well, you can sure tell, hearing you talk about it, that that this is something you have a passion for. Though it is hard to walk away from that paycheck. But, it sounds like you found something you really love to do. For our small business owners listening out there, just to start out, what are some basic rules around taking on business debt if a business owner decides to do that?
Christina Edel: Yeah, so as you guys heard from my story on the personal side with the consumer debt, I saw debt as a pretty significant burden in our life.
And so I recognize that can happen on the business side as well. And I think there are some simple guidelines that you can apply toward business debt that will help it not be a burden. But rather be a way of increasing the productivity of your business. And so the first rule that I have is that you should always look at debt as an opportunity to be an investment in your business.
So said another way, I guess I would say rule number one is don’t use debt for operations. And to put it more into layman’s terms, it’s kind of like, let’s say you use your credit card in your personal life or your groceries and for your gas in your car, and then one day you look at your credit card and you’re like, how did this get to $5,000? I have nothing to show for it. And it’s because you were using it for the “overhead” of your personal life. And this can happen in businesses too. So if you are used to using debt to pay for things like your salary or a team member’s salary, or just for those overhead items that are recurring monthly expenses in your business, you will find that eventually you’ll just look at your credit card and be like, oh, that snuck up on me.
So if you make sure that you are not employing business debt for those reasons, but instead using it for things that are investments in your business, you’ll find that it’s much easier to look at debt as a way of increasing the income or the revenues of your business. Just a couple examples of what that might look like.
If you are a handyman business, this might look like investing in a new truck. So taking out a car loan so that you can get a new truck that will help you hire more for your crew or expand into different areas in your community that you haven’t previously been able to reach. Because if you only have one truck and one person working for you, then it can be hard to support everyone.
Another example would be if you’re a coffee shop owner, you know, you might want to invest in a new espresso machine and be able to pump out more of those customized drinks. And then another example that I’ve specifically seen is a chiropractor who ended up investing in a holistic health degree. So this would be an opportunity where it’s not like a practical item, but it’s actually something that permits you to offer increased or more valuable services or a variety of services. So these are all ways where you can spend the money, take on the debt, and ultimately you’re going to produce more income.
Emily Garman: Yeah. I like what you said about looking at it as an investment and, and that, you know, was one of the questions that I was going to ask you, should you use debt for those just everyday kind of overhead expenses? And so it sounds like the answer is no, that’s not what you want to use it for.
Christina Edel: Yeah. Um, I mean, ultimately if you do that, you can quickly find yourself in a pickle. And sometimes you find yourself in a pickle and you have to do it to get by. But if you can avoid it, it’s always better to avoid that.
Emily Garman: So I’m thinking about a new business owner out there. Maybe their business doesn’t have a business credit rating yet. Would it be a good idea for them to go ahead and say, get a personal loan to cover some of their business expenses, whether it be an investment, like you said, or just kind of those daily operations? Is that a good plan?
Christina Edel: So, I would say that it’s a reasonable plan. I mean, it’s always a little bit tricky when you take out personal debt for a business, but to be perfectly candid with you, that’s what the vast majority of businesses have to do. A business has to prove itself dependable. It needs to build a credit score, which is essentially saying that you can manage debt, and that doesn’t happen overnight. So what ends up happening is that most business owners have to take out personal debt in order to make these investments, or they have to be a personal guarantor on their, on their business debt. So typically speaking, yes, it’s perfectly normal and reasonable to take out personal debt for your business, especially when you’re just starting out, because in the beginning, most businesses, even in taxes, are going to be an extension of you as a person.
Emily Garman: So once a business has some debt, whether that’s a credit card debt or whether it’s some kind of loan, do you have any strategies for paying that off? Obviously you’d want to pay it off as quickly as possible, right?
Christina Edel: Yes. Yeah. And to be candid with you there, I look at it like there’s four strategies for paying off debt and frankly, these mirror the same strategies that you’ll hear about on the personal side. And so the way you can think of it is there is the debt snowball. So this is essentially where if you have multiple debts, you are taking the one that has the smallest payment, or the smallest balance, and you’re paying that off as quickly as possible, and then you’re taking that payment and applying it to the next debt that you have.
The next one, which is the one that most people probably think of is the debt avalanche. And this is where, again, if you have multiple debts, you pay the one with the highest interest rate first. This is the way that will save you the most money. Uh, and then the next one, and this is the one that I encourage the most. This is the one where you look at what are the payments that you have to make and you really analyze, okay, if this payment is $400 a month and this one is $50 a month, would it serve me to pay off the $400 one sooner or the $50 one sooner? And think about it from cash flow? What’s gonna free up my budget enough to help my business have an easier budget for down the road. So this goes into more of the forecasting perspective of business, which I know is pretty complex for a lot of people, but there are ways to make it easier.
Oh, and then I guess I’ll also add, um, the last one, which kind of makes me chuckle, but I call it the emotional baggage approach. It’s like sometimes you, and this happens in real life, you make an investment or you do something, you think it’s gonna go perfect and then things go sideways and you think, oh my gosh, like every time I make this payment, I’m so frustrated by it. So sometimes I have some clients who just have one debt that is infuriating to them, and I’m like, ” listen, you don’t wanna get that mad every month. Let’s pay it off as quickly as possible.” And so we get that one out of the way first, just so that you can have some peace in your business.
Emily Garman: Makes a lot of sense! So, what about consolidating debt? I’ve heard of that. Is that something that is good for a business owner to do as well?
Christina Edel: This is a subjective question and different people will have strong feelings about it. I think that consolidating is a way for you to make the payments more manageable. So sometimes this happens when you have a persistent decrease in income and you can no longer cover your obligations or the payments that you have to make, and in that situation, a debt consolidation makes sense. You will ultimately combine a bunch of debts together, and then space out how long you have to pay it off, which will make the individual monthly payments less. This is a really useful approach, but I always like to tell people that they have to be going into it with eyes wide open. They have to recognize that even though they’re paying less on a monthly payment, they will pay more over time. The only time this isn’t the case, is if you’re able to consolidate high interest debt into low interest debt, which sadly is not very likely right now. I mean, we’re going through a period of inflation and we’re seeing interest rates higher than we’ve seen for quite some time.
Emily Garman: So it sounds like to avoid taking on unnecessary business debt, and using it to cover expenses that you wouldn’t really want to use debt to cover, you have to keep a good handle on the amount of money coming in and out of your business. When we were talking before this interview, you mentioned something about keeping a really tight handle on your accounts receivable and accounts payable. Can you talk a little bit more about that? I think so a person could have an idea of, you know, what kind of debt can I afford? What kind of debt should I take on?
Christina Edel: Yeah, so absolutely Emily, you’re spot on. There’s a couple of ways to think about that. I think the best way to think about it is remember that cash is one of the sort of lifebloods of your business. And so as you, when you work with a bookkeeper or an accountant, they will oftentimes tell you, there’s several statements you have to look at. One’s your profit and loss. One’s gonna be your balance sheet, and then the last one will be your statement of cash. The reason that statement of cash flows is important is you need to understand where your cash is coming from and where it’s going.
Now, accounts receivable and accounts payable, that’s going to tell a lot of the cash flow story. Your accounts receivable, put simply, is the money people owe to you because of invoices you’ve sent out. So your accounts receivable are, let’s say, let’s say you’re a plumber and you’ve done some work and you’ve sent out your invoice and they haven’t paid you yet. That outstanding invoice is considered an asset to you. It’s an account receivable. It’s essentially you’ve loaned this person money that you’re going to pay them back, but you’ve loaned it to them in the form of the service you’ve provided.
The opposite side of that is accounts payable. This is where somebody has sent you a bill and you haven’t paid them yet. So it’s almost like you took their service on loan, but it’s not, it’s not technically a loan, it’s just that you’re holding onto that money until the bill is due when you’re thinking about cash flow. What you want to do is you want to shorten the amount of time that you have things in accounts receivable. You want people to pay you as quickly as possible, and then you want to lengthen the amount of time that you have accounts payable. So you want to take your sweet time paying people, the invoices that you have to pay. So, When you do that, you’re essentially bringing in money quicker and sending money out slower.
So I always encourage my clients, especially when they’re in a season where cash is very tight for them, that they want to shorten their accounts receivable. So if you’re typically sending your invoice and giving people 30 days to pay the invoice, Shorten that to 15 days or even to 10 days and make sure you have a strong collections process. And you know, to be candid with you, I find that I have some clients that haven’t paid attention to their invoices and they have invoices that are outstanding for months because nobody’s looking at the aging invoice or the aging accounts receivable report. That’s a report that you can pull in your bookkeeping system that will tell you, these are the invoices you have out that are 30 days out or 60 days out, or 90 days.
You want to pull that report up with some frequency and then have a procedure for calling on the old invoices. And this is kind of like a collections role in your company and it makes a lot of people very uncomfortable. So I strongly encourage people to just script out what they wanna say and just make it a matter of procedure. No hard feelings. You didn’t pay this. I’m simply informing you. It hasn’t been paid and I expect to be paid. And you say it as kindly as you like, or maybe some people like to say it a little bit more firmly, depending on the type of type of industry you’re in. But the goal ultimately is be aware of the money people owe you. Make sure that it doesn’t stay outstanding for very long. And when you notice something’s outstanding, have a process and a procedure for contacting that client and requesting payment.
And then on the flip side, I know a lot of people who get a bill and they immediately pay it. They’re like, well, if I just pay it right away, it’s not a problem. But they’re not thinking about the other expenses they might have coming up in the month. So you kind of want to pair accounts payable with having a budget. You want to know what do you have to pay still in the month? And then if you can pay it right away, then I’m not terribly opposed to that, because that indicates that you have ample cash available to you. But if you know you’ve got other things coming up, especially a debt payment, then you wanna push off the accounts payable for as long as possible. So if it gives you 30 days, pay it on day 29.
Emily Garman: Makes sense. I’m imagining myself as a small business owner, and thinking that you’ve made a really good case for your services! So I want you to tell me a little bit more about Picture It Profit and Financials, because it seems like as a small business owner, I’d want to have somebody like you who I could call up and say, oh, I feel like maybe I need to get a loan right now, or should I use the credit card for this? Or, I’ve got these invoices outstanding, I’m not sure what to do. Is that the kind of service you provide?
Christina Edel: Yeah. So I, I offer a variety of different things. The main offering that people are working with me today is a mix between business financial coaching, which is typically a six month program where I’m teaching these concepts and these ideas to people who want to DIY. But it’s a lot to go find all the materials and all the books and read them yourselves, and frankly, it’s much easier I think a lot of times, to have somebody who can tell you the technical term for it and then explain it to you in layman’s terms. So that’s one of my more popular offerings is that they come to me and say, okay, spell this out for me. Give me some easy templates, show me how to use them. And then what happens is as their business grows, they start employing these tactics. Maybe they do invest in something like a new truck or something that will help them expand their business. They’ve got more money coming in, but they’re also much busier, and then they’ll come back to me and say, Hey, would you mind just doing this for me?
So in that situation, I will offer the bookkeeping and advisory services where I kind of help them do the budgeting and I help them do the cashflow projections and I help them set realistic goals about how to make money in the future given the offerings that they have. And that’s one of the rules I probably should have brought up earlier too, with taking out debt. You know, we talked about it as an investment. I always want to encourage people that you expect a return on investment. You expect the investment to give you something in return, whether that’s a collateral item or whether that’s increased revenue, and for most people it should be increased revenue. So that should be considered when you’re coming up with your repayment plan as well.
Emily Garman: Yeah, that makes a lot of sense. Well, you’ve really made a compelling argument here for your services and I think it would benefit every business owner to have somebody like you that they could call on. So can you tell us where we can find you? Social media, website…
Christina Edel: Yeah, so I offer a lot of free content out on YouTube. You can find my channel, it’s PictureItTina. And then I also have pictureitpf.com, exactly how it sounds, picture it, and then PF for profit financials. And on that website I’ll have all of the information on how you can contact me, some information about financial coaching, and then likewise some information about the bookkeeping and advisory services that I offer.
Emily Garman: Fantastic. Well, thank you so much, Christina, for being here with us today. I’ve learned a lot today about business debt, and I know that our listeners have too. So thanks again to Christina Edel from Picture It Profit and Financials. We’ll find you on the web.
Christina Edel: Thank you.