I'm going to start in the middle of the conversation. I'm going to start in the middle of this conversation because I just was getting on a riff of how in the boutique industry and in the retail industry, we have really glossed over what is the difference between how a business survives and how a business operates. I am in this whole thing for survival and thriving, honestly. There's events around that I just think in seeing going to shows, going to magic, going to all these places, I can't help but think how many people in this room feel financially insecure even though they're here shopping for inventory because that's the thing they have to do. You have to keep going, right? You have to keep going. At the same time, I don't want to gaslight anyone anymore and say that retail is easy and it's fun. And I don't think I've ever been that person. But it is certainly not glitz and glam. And it's one thing to celebrate our really great achievements. It's fun to celebrate ourselves and the work we put in. I don't want to gloss over that either. But I think that we all have to get serious because four years ago was COVID. We all seem to forget. And a lot of us are still in debt or recovering or have a lot of inventory left over. Or we're just in a funny financial spot because we don't know what to expect. And if you're newer and you're like, well, I started after COVID. Okay, cool. But like, I think we all have to come to terms with it's time to get responsible about our money. Our financial future relies on how we run our business. And honestly, if we don't know the financial piece of our business, in and out and have a mastery of it, We're going to fail, period, end of story. We are going to fail. And when I was looking up statistics to report this, I mean, most businesses do fail. Let's be honest, right? Now, I want to be clear. Do I think I failed my business? No, I don't. Honestly, let me start. I want to normalize the idea of debt. And I want to start with my own story. I want to start with saying that to start my own business, I left $100,000 a year job. I was working in New York City. I was 27 years old. And I didn't leave it. I'm sorry. Let me be clear. I got laid off. I got basically fired. They were like, we don't need you anymore. And a year later, the company closed. So they weren't in a good spot anyway. Fine. I still went from having $100,000 salary coming in to nothing. And I had to figure out how to replace that income very quickly. I knew I could use unemployment because I got laid off and I knew that I could live with my parents for free. I also knew that I had a 401k that had some moolah in it that was free cash, right? I had absolutely no savings. I was living in New York city. That was not cheap. And I was having fun in New York City. I was eating out. I was living my life. And all of a sudden, I was like, you know what? I actually am going to start this business. I'm going to buck up. I'm going to move home for free into my parents' house. I'm going to drain my 401k. I'm going to take out some loans from some family from a bank or two. And I'm going to buy a truck and start my business. And within six months, I had done that. I had no fear around taking out debt. I knew it was going to cost money to buy a truck, period. I knew there, we'd have to buy a truck. So I knew I was going to have to invest some money. These days, it's a lot easier to start, especially if you're not starting mobile. You can start online. You can start with a very small investment.

You can start with an incredibly small investment these days, especially if you're starting online. I'm talking under $5,000, under $6,000, at the most. You could start very, very small. I took out around $30,000 loans. I pulled about $10,000 from a 401k. And we had some credit cards here and there, little ones. But I don't remember using those. I don't feel like we ever needed to, for whatever reason, to start up. So $40,000 and 30 of it had to be repaid for sure. I mean, I would love to pay more 401k. But you know, at the at the time, the two loans for were the most important. Now what I did do on those is I set them up really smartly where I paid them back over time. So instead of saying, Oh, I'll pay you Actually, I think that's what I originally planned. I was like, I'll pay all this back in one year. I mean, that was silly. My dad was like, listen, pay them back over five years. It's going to be okay. Like just you need to make sure you have cash flow. And listen, my dad and I, we have our moments of brilliance. We have some sort of connection where he says these things in the right way where it doesn't trigger me. It sticks with me where I'm like, okay, yeah, yeah, you got it. Okay, let's do that. So my monthly payment, I believe was around So I could easily buy inventory. And like I said, I had a six figure business, I could support myself, like I ended my journey as a boutique owner, in the positive, I paid all my debt back, any loans I had, And I sold my truck, and I sold the inventory in it. So I must have netted out, I want to say, around $30,000, which, honestly, I never sold the name of the business. So I still own a lot of the assets. I could still restart it if I wanted to. But honestly, it was a really successful business. I would say that was a success. I closed by choice because I wanted to. I was kind of out of it for the moment. And I may get into it soon. Again someday because I love it and I love good product. But I ended positive, right? So I just want to like gut check with you. I am not speaking to you from number one never having owned a retail business. I've owned at least one if not a couple and been a part of a lot of startups. And at the corporate level, right? So I've seen money big and small. I've seen people making very little money. I've seen people making multiple millions a month, a day, right? We've seen this happen. I've been a part of it. And I think at the same time, I want to come from a place of like, let's normalize debt. Let's normalize the investment costs that it's going to take to run your business. And that's really what my dad was saying at the beginning. He was saying to me, Emily, listen, like you're going to just carry this debt. It's okay. Don't let it drown you. Let it work for you. The more cash you have available to buy inventory, to make investments, to like fix the truck, to buy gas, to sign up for events, all that stuff. The more cash you have from your sales, the better off you're going to be. Paying a smaller investment back into, wait, sorry, paying down the loans that you took out, right? So let's start with some statistics or So let's move on to some stats around debt, because I think this can also help ground us. So number one, I want to normalize it because I've been there. I had a retail business, had multiple retail businesses, had debt, paid it off, ended netting out positively. So there is one gut check. The next gut check is going to be some of these. Stats because you guys, I was looking up stats and I was shocked to see how much debt people have in small businesses. So first and foremost, the statistics show that half of small businesses actually ever meet their finance needs, meaning that they're not really able to ever support themselves. Half of small businesses are able to run at a cash flow positive state. So if you are even close to that, you're doing great. The truth is that most businesses have some debt. They have some kind of line of credit where they are paying payroll like that. And some of them have loans just to start that need to get paid off. I think also we've seen the uptick of COVID, unpreparedness, preparedness, PPE loans, like a lot of stuff has happened since then. There's been a lot of like assistance. But really what they saw was not many small businesses actually took loans or took PPE loans while COVID was happening. So this also played into the fact that the financing needs during times when revenue was slow weren't met. So a lot of businesses did fail because they weren't prepared. They didn't have whatever they needed, or they didn't think that they wanted to take a loan out. And so they just truly didn't have the cash that they needed. So we have to normalize the fact that there's going to be ups and downs in our business. And most businesses, like over half of all businesses are running with some form of debt, okay? I wanna give you some like true stats here. According to the Small Business Administration, right, we call it the SBA, their average loan size is about $417,000, okay? So they're lending on average like a 500,000, million dollars to each small business, right? In, I wanna get this year right.

In 2020 alone, the Small Business Association distributed over 14 million loans for $764 billion in value. We're talking about how normal this is. This is normal. I'm telling you million loans were given out in one year alone, okay? And that's not even, they say that's just a bit higher than normal years, okay? So the truth is, is that to survive, some businesses need to have some funding over the years, right? Most small businesses don't survive because they don't have the funding that they need. I'm gonna pull up these two.

Now, let's talk about in your actual business. What's the ideal situation? Now, across the board, it's between 30% and 35% is the debt to income ratio that you want to have in your business. Meaning, if you are making about year, $100,000 you really don't want any more than about $33,000 in debt. So credit cards, loans, capital expense, like loans, any of that. A lot of people that may make you feel better. Like, okay, I made a hundred thousand last year and I have 10,000 on a credit card. You're fine. Like you're okay. You're better than the average. Right. And you might, again, sit here and say, but Emily, I don't have debt. I don't believe in it. I, you know, whatever, whatever. Listen, if that's you, like this podcast isn't for you. And I, I'm not laughing to like be funny. I'm laughing because like, We have to be serious. Women were not raised to have financial acumen. This was not what we were taught. We were taught to go out and make money and work hard and achieve these things. I mean, 40% now of all American households, the woman is the breadwinner. Meaning they make more money. So we owe it to ourselves, especially when our money is coming in from our small business, to understand every which way of how this business can and should work. I think a lot of us started these businesses for fun, and then we're like, wait, we're actually making money. We should know what's going on. And that's not a bad thing. And it's not also something to feel ashamed about if this is the first time you're analytically thinking about it because I'm bringing it up. That's OK, too. I want to meet you where you're at. And I think understanding that debt is not bad. It can be of service to your business. It can help you grow your business. It helped me grow my business. But it's also a situation where if you are in debt, let's get you out of it. Let's get you to that debt-free boutique that you really want. Because at the end of the day, is it OK to have debt? Yes. Is it ideal? Not really. We would like to be in a cash flow positive situation. So the thing is, is I know that I could support myself and my business for those first five years. And if I kept going with my business, I would owe nothing. And I would make now that month $500 back to myself or to profit or whatever, right? So the thing is, is as long as you're paying down that debt, you'll get to the point where like, there is no more debt, you will be a debt free boutique, you can run in cash. That doesn't mean you can't use a credit card to get your points. But it does mean that you are in a spot where You don't feel like you owe anyone anything. The business is yours. You own it. Most of my owners that I work with, they own their business full on, full outright.

Okay, so let's talk about how much is too much, though. How much debt is excessive? I've given you that 30% number, right? But if you are running on a credit card, if you're paying If you're making money in your business and immediately then paying off a credit card, having to use the credit card to buy more inventory, and that cycle is going around, that's just a bad habit to be in, right? So I don't necessarily think it's excessive debt, but I also think we've got to rein it in. We must be able to pay for our inventory with cash, period, end of story. If you have a high enough margin, you should be able to do that. So most of you that have been following me for a while and you're listening, this is not a new conversation, right? I think at the end of the day, Good debt and bad debt like it's all kind of the same. It's all neutral debt, right? That's how I like to look at it My brain says, you know debt is not good or bad when I put bad energy into it It's gonna affect me if I say it's good. I don't know if that's great either, right? Like I I think we have to stay sort of like a neutral about debt, meaning that if we're going to take money out via a credit card, a loan, whatever, to spend on something for our business, is that going to make us money back? Is that going to lead to us being more insightful in our business? Is that going to lead to us being more profitable in our business by making that investment with the money that is now called debt? That's what you have to think about. You as a business owner are in a position where you've got to analyze what's your next right move, okay? Because the goal is, obviously, to pay yourself, to be profitable, all that big stuff. But I can't even enter those conversations with you until you feel safe from whatever debt or outstanding things that you have around you, right? So we have to take the power out of that stuff and put it back into you. You have inventory. Inventory makes money. So you need to sell that inventory, right? That's the basics. And you're like, duh. Of course, I just sell my inventory, right? But I think at the end of the day, you are in a spot where you can figure out how to manage money, manage debt, manage profit, manage inventory, in a really powerful and insightful way. You can be intuitive and database at the same time. That to me is the beauty of owning this kind of business. You get to be creative. You get to be in a place where, honestly, clothing is pretty profitable. I'm always shocked when people run on a negative in in fashion, even beauty and cosmetics and gifts. I'm always a little surprised because these kinds of products have pretty high margins. And so if you're running at a negative or you're running where you are never able to pay off the debt, there is a margin problem. There is a cash flow issue that we have to fix on the inventory side too. So how do you start to get out of this debt? How do you start to work your way out? Well, you need a plan. The plan has to first look at the inventory you own, and then once you understand inventory and what your turn rate is, you can start to see where you can pull more profit out. When you can pull more profit out, that profit then goes to paying down your debt. Now again, I am not the person who's going to say, you know, make $5,000 this month in your business. And go pay a $2,500 chunk on your credit card. Don't do that. That is where people get in trouble. We've got to make this manageable. Like I said, the longer term things that you can pay down are going to help you have more cash flow to buy inventory. Because remember, Debt does not make you money, but inventory does so when we have access to inventory We can make a profit and then pay down our debt right like hopefully I'm not oversimplifying this and you're like Emily I'm smarter than this. There are smart people in the room. Very very smart people. I don't want to put you down The thing is is if we do not get more financially accurate with our business It's just not going to survive Or we are not mentally going to survive because the crushing weight of debt and feeling like I'm digging through this hole constantly, right? Like maybe this sounds like you. Maybe you think like I'm drowning in debt. Like I'm just fighting to keep my business alive all the time. Like I just, I don't have breathing room. I'm like every month feels crazy. Like I'm running month to month. I'm stealing from Peter to pay Paul. If that's you, I bet it's starting to take a toll on you. I don't want you to be in this spot. I know that I have helped so many clients fix what they see as a problem. Again, I'm going to look at it neutrally and say, that is not a problem. It's just something we have to deal with. It's like cleaning the kitchen. We've just got to clean the kitchen every day. We have to deal with our debt every day until it's gone. It's something that we wish would go away quicker, but we need to make our business work at the same time.

I guess that is a great transition into me telling you about my newest free masterclass that I'm teaching

Okay, what we've found out recently is that one of our best performing ads said, credit card debt is not a business strategy. And what I realized is that it is a business strategy for a lot of people. And that led me to say, you know what, I need to teach a masterclass to show people how you can create a framework to run your business and work down your debt at the same time, where it doesn't choke your business and it doesn't take you over. This is all part, no, I really get too nervous, okay. So this new masterclass, so the new masterclass is called Rise Out of Debt

OK. OK, so this has led me to starting this debt-free boutique concept, right? I am teaching a new masterclass where I'm going to teach you this framework. It's very simple. And the goal is for you to have a debt-free boutique business. So the name of this new masterclass is called Rise Out of Debt. A simple framework to a debt-free boutique business. This is for you if you're someone who feels like you're drowning in debt. Whether that's $1,000 $10,000 or $100,000 or $500,000, amount of debt is good or bad.

It's just how do we create a framework that you can follow with taking your revenue and supporting your business and paying down your debt. Both can be true at the same time, right? We can have a profitable business that is paying down debt. That can exist. And I'm going to show you how that can exist and what the framework of that looks like in this new masterclass. So all you have to do is look down in the show notes The link actually is www.boutiquetrainingacademy.com forward slash rise. When you go to that page, you'll be able to sign up and either get like a media access or it will be happening live soon depending on what cycle you're in. So sign up for it. You will get on the list to have it and the replay all that jazz. And I hope to see you on it. I'm really excited. I am getting more and more interested in Speaking about finances and inventory management and buying plans, I mean, I have been for years, but I think at this point, it's really the survival of the most financially savvy out there. You can have all the engagement you want. You can go viral. You can be the biggest person in the game. And then you can be gone tomorrow because you didn't manage the money correctly. You didn't deal with the inventory ups and downs in a way that, you know, created a sustainable business for you. And that's just, I don't want that. I don't want to see more businesses saying they're growing out of business because they like kind of ran out of money. So let's avoid it before it happens. I can't wait to see you in that webinar. I hope, I can't wait to see you in that masterclass. I hope that this episode of the podcast has helped you at least feel a little bit calmer around debt and knowing that the potential for you to be out of debt is, is really closer than you think. Um, and there are specific steps you can take. Hopefully I've kind of gotten you on that, that journey already of thinking about it differently, looking at it differently and understanding that you're not alone. Like, look around the room, everyone has debt. And it's just about how you do it and how you plan to sort of pay it off and how you decide to leverage it to grow and scale your business. All of that stuff can be true all at once. And you can still be happy and hopefully feel successful in your boutique business. Thanks for joining me. I'll see you on the next one.