Managing Your Debt Even successful businesses have debt, but how much is too much? Learning how to manage debt is what can put you ahead.
Opinions expressed by Entrepreneur contributors are their own.
Only a short time after husband-and-wife entrepreneurs Karen Cooley and Eric Favier bought a friend's restaurant in 1991, they had their first taste of success. Sales at their Tallahassee, Florida, restaurant, Chez Pierre, had more than doubled in response to savvy marketing and expanded kitchen hours. But after five successful years at the location, the federal government acquired the restaurant's property to expand a nearby courthouse. "We were given one of those 'When life gives you lemons, make lemonade' kind of scenarios, and we had to move our business," says Cooley, 48.
So the couple took another leap of faith, buying and renovating a commercial building for $1.2 million to house the restaurant. It marked a major entrepreneurial milestone for Cooley and Favier, who had previously leased restaurant space from the original Chez Pierre owners. Not only did they now own their own building, but they were also knee-deep in debt because of the purchase. "It was really challenging, and we weren't sure where to go next [or] what to do," says Cooley.
For help managing the debt and charting a new course for the business, the couple turned to The Jim Moran Institute for Global Entrepreneurship at Florida State University. Among other things, they were advised to intensify marketing and build up sales to help offset the loan payments. Eventually, sales more than doubled to nearly $2 million annually in response to their strong marketing efforts. Marketing strategies included community networking, such as raising money for causes like cancer research, and publicizing the restaurant's off-site catering and other services. "We had many sleepless nights," Cooley says of their decision. "But it has turned out to be absolutely the right thing to do. We have so many different avenues for growing our business right now."