At a recent EntreLeadership Master Series event in Tucson, an attendee asked if he could spend some time with me discussing their company’s finances. So we grabbed a spot and I asked him to give me all the details.
We talked through what the company did, what the company earned, and so on. No need in sharing the whole conversation with you, so I’ll fast forward to the ending question. He asked me about moving the company forward by using debt. If they stayed on track borrowing like they had, they would be able to build considerably more assets. And like all who ask me this question, he wondered why he would get debt free if he could leverage and build more than he could with cash.
I started running some of his numbers in my head and came out with some incredible contrasts. So I asked him to go back to his room and run through some numbers himself. All I wanted to know was how much net profit they would have in five years if they paid off their debt and grew with cash, as opposed to continuing and growing considerably larger.
I knew the answer I had in my head, but I wanted to see his real numbers. He chewed on it for a while, talked to his partner, and sent me the following forecast:
You can click the the graphic for a larger picture.
In case you’re not seeing it, at the end of five year, paying off their debt, they will be 37 MILLION BETTER OFF!!!!!! Yes, they will have less assets, but they won’t have 84 Million in debt EITHER!!!! Instead, they will have an equity value of just shy of 90…..Million…….DOLLARS!!!!! I so can’t wait for my commission check!
You see, sometimes we focus on growth and revenue the way that the world does. Which is how big can we grow and how fast. Instead, we should be focused on growing the way GOD wants us to. His way. I realize your numbers may have way less zeros, but I think you can see that the concept is still the same.
Question: How does this hit you?!