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Chris LoCurto

By

June 21, 2012

Maybe I Can Save You 37 Million Dollars As Well

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?!

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  • http://www.seomanipulator.com/ Seo Manipulator

    Wow what a great catch, and also a great way to help the man see it for himself rather than just hearing it. I am sure it sunk in more.

  • http://www.ontargetcoach.com/ ontargetcoach

    stay small (well 8 franchises) and debt free..Great lesson in what you do every day. I bet his family life will be better too by not growing as large. 

    • http://uma-maheswaran.blogspot.com/ uma_maheswaran

      That’ss true coach

  • http://LouiseThaxton.Net/ LouiseThaxton

    All I can say is WOW!  it is all about crunching the numbers – and this is powerful – powerful! 

  • Skropp2

    @ChrisLoCurto man, I think it’s such a cool thing you’re doing, pointing out people’s individual comments on the blog! #CLoBlog

  • MattMcWilliams2

    Holy crap. As you said yesterday Chris (http://fyre.it/1ahX), “If you can’t learn from this story, you can’t learn.”

    • http://ChrisLoCurto.com ChrisLoCurto

       @MattMcWilliams2 No doubt! I don’t know what else to say to this. :-)

  • MattMcWilliams2

    Holy crap. As <a href=”http://fyre.it/1ahX”>you said yesterday</a> Chris, “If you can’t learn from this story, you can’t learn.”

  • cabinart

    With the exception of that one line of credit paid off in a few months time, I’ve only used “internal financing”. Why am I not rich?? Probably because I don’t know what any of the terms on the charts actually mean.
     
    Next time, I will be a business major and an art minor. Tell all your children and your friends’ children who think they want to be artists to major in business or marketing.

    • http://ChrisLoCurto.com ChrisLoCurto

       @cabinart Hahaha…would that make them schizophrenic? Aren’t those two different sides of the brain? ;-)

      • http://www.lilykreitinger.com/ lilykreitinger

         @ChrisLoCurto  @cabinart  It would make them well rounded people, I think

        • cabinart

           @lilykreitinger  @ChrisLoCurto Balanced. 

  • http://jonahenry.com/ Jon Henry

    How does this “hit” me? Well, all I can think about are the people who go out shopping for a TV, see one “on sale” for $300 off $1000 and try to explain to me how they “saved” $300 while all while managing to decrease their bank account by $700. 

    • http://ChrisLoCurto.com ChrisLoCurto

       @Jon Henry WURD!!

    • http://hardandsimple.blogspot.com/ Skropp

      @Jon Henry That reminds e of when I go into a convenience store to buy a soda and candy bar…totals to like $2… And if I’m paying with debit they sometimes tell me if it’s less that $5 they’re gonna charge a $.50 fee. So I say ok, but they always say, why don’t you just go get a couple more candy bars so it totals $5 so you don’t have to pay the fee?? They somehow don’t understand that even with the few, $2.50 is STILL less than $5.00… Haha

  • Chris

    It will be interesting to see if they followed the advice and if they did how it turned out.  It would be neat if they did and the result was even better than the projection.  Will there be a 5 year update? 

    • http://hardandsimple.blogspot.com/ Skropp

      @Chris I would venture to say it will be better…but what if net profits stayed the same??? You’re STILL debt free!!!

    • http://ChrisLoCurto.com ChrisLoCurto

      I fully believe they will do better than projected. When you get intense about it, it just happens that way. 

      • Chris

         @ChrisLoCurto Oh, agreed.  Will you be staying in touch with the company and providing updates?  Sort of an ongoing case study

        • http://ChrisLoCurto.com ChrisLoCurto

          I sure hope so. 

  • http://www.lilykreitinger.com/ lilykreitinger

    I’m reading “Switch” (among like five other books right now… wow, I must be out of my mind) and this is a perfect example of how to make your brain grasp what the consequences of debt are…. and kick you in the gut to stop the nonsense.  I’m horrible with math, but even I can understand this! NO DEBT. Period.

    • http://ChrisLoCurto.com ChrisLoCurto

       @lilykreitinger HAHAHA…but look how good you are at Photoshop!

      • http://www.lilykreitinger.com/ lilykreitinger

        @ChrisLoCurto don’t tell anyone, but I can’t use Photoshop to save my life. I have other cool tricks I use instead : )

        • http://hardandsimple.blogspot.com/ Skropp

          @lilykreitinger Hey, people pays hundreds to have their hair regrow…I think Chris has gotten a bargain!

        • http://www.indueseason.net skottydog

           @Skropp  @lilykreitinger @ChrisLoCurto  Yes, and not only am I a member of “The Blog”, but I’m also a client!   :^}

        • http://jonahenry.com/ Jon Henry

           @skottydog  @Skropp  @lilykreitinger  @ChrisLoCurto I want gum balls!

        • http://ChrisLoCurto.com ChrisLoCurto

           @Jon Henry  @skottydog  @Skropp  @lilykreitinger “You’re killin’ me Smalls!” :-D

        • http://hardandsimple.blogspot.com/ Skropp

          @ChrisLoCurto @Jon Henry @skottydog @lilykreitinger Haha. THAT, my friend, was a legit movie reference!!

        • http://www.lilykreitinger.com/ lilykreitinger

           @Skropp  @lilykreitinger Next time I’ll do braids :)

    • http://hardandsimple.blogspot.com/ Skropp

      @lilykreitinger Wouldn’t that be a cool phrase on the door to your accounting department?? “NO DEBT. PERIOD!!”

      • http://www.lilykreitinger.com/ lilykreitinger

         @Skropp  @lilykreitinger  I’ll make a little card to put in my wallet in place of a credit card :)

        • http://hardandsimple.blogspot.com/ Skropp

          @lilykreitinger You should sell that idea to Dave!!

        • http://www.lilykreitinger.com/ lilykreitinger

          @Skropp Chris can probably mention that to him :)

        • http://hardandsimple.blogspot.com/ Skropp

          @lilykreitinger You think he really knows Dave Ramsey?? Or does he just hang out in the cafe and mooch free wifi and TELL us he knows him?? Haha

  • http://www.indueseason.net skottydog

    Staggering!   Yes, there are certainly more zeros than I’ll ever see, at least on THAT side of the decimal point!  It’s amazing that many people follow Dave Ramsey’s financial plan (the Baby Steps) with their home finances, yet many of those same people fail to utilize the same principles in their business.
     
    In the example given here, when you take your focus off of “assets” and concentrate on eradicating debt instead, the results are overwhelmingly in your favor.   Then, once you wipe away your debt, you can do the things you want by using cash, not credit.  Just like in your personal finances.
     
    Isn’t that a coincidence?    NOT!

    • http://ChrisLoCurto.com ChrisLoCurto

       @skottydog AAAAAMEN!!

  • efosterw

    WOW!  We are in the early stages of doing the EntreLeadership process with our business (and the TMM process with our family), but we’re already seeing this same effect.  However, MANY fewer digits :)  
     
    My wife and I own a music school / retail store with a four-person instructor team.  When we started this process, we thought we would have to double our student load to bring in the revenues we needed.  However, as we’ve eliminated debt, focused on serving our customers (very influenced by “Thou Shall Prosper” and “Platform”) and began planning to grow debt-free, we’ve seen our end of day totals from retail sales GROW and we’re realizing that our student load does not have to be so heavy to reach our goals.  Benefits – less students per instructor, less stress per instructor, more lesson planning per instructor, much higher quality experience for each student!  Plus, we can hire slowly as we grow our student roster at a more manageable pace!
     
    I LOVE this process of slow, intentional, quality growth.  Chris, thanks for producing content that changes lives.  There’s no way I can express what the Dave Ramsey team has done for our family without sounding like another Ramsey/LoCurto fan boy :)  Seriously, thanks so much.

    • http://hardandsimple.blogspot.com/ Skropp

      @efosterw I love the way you tied reduced/no debt to a higher quality product for your customer! I hadn’t thought of that, but it makes sense that If you’re not focusing so much time and energy keeping the bank happy you’ll have way more time and creative energy to make your REAL customers happy!

      • efosterw

        We’re finding that the “less is more” maxim is true in lots of ways! We enjoy the process more… we aren’t worked to death and neither are our instructors.  Plus, our reputation in the market becomes stronger because our quality of service keeps going up.  Thanks for your input, Skropp!

        • http://hardandsimple.blogspot.com/ Skropp

          @efosterw Another great benefit you mentioned!! Enjoyment! I’m guessing if you are debt free being in business for yourself is a lot more fun…

    • http://www.BaptistEducation.org/ JoshuaWRivers

       @efosterw Great story! It is encouraging to your and other stories that prove the Bible’s way of doing things.

    • http://ChrisLoCurto.com ChrisLoCurto

       @efosterw Uhhhh, I’ll take it!! Thanks for sharing!! 

    • http://www.lilykreitinger.com/ lilykreitinger

       @efosterw Slow, intentional, quality growth. LOVE THAT!  A crockpot meal tastes much better than a microwave TV dinner!

      • http://hardandsimple.blogspot.com/ Skropp

        @lilykreitinger @efosterw Do you think commenters begin to take on the mannerisms of the blogger they follow? Cuz we seem to use a TON of food references here, and we all know how CLo feels about great food…just an observation…

        • http://ChrisLoCurto.com ChrisLoCurto

           @Skropp  @lilykreitinger  @efosterw HAHAHA….that’s awesome!

        • http://epicenterlanguages.com.mx/our-blog Aaron Nelson

           @ChrisLoCurto  @Skropp  @lilykreitinger  @efosterw LOL  – I know I find myself throwing ‘BAH’ around more these days. Hmm. I think there’s something in these posts….

        • http://hardandsimple.blogspot.com/ Skropp

          @Aaron Nelson @ChrisLoCurto @lilykreitinger @efosterw I catch myself exclaiming “PREACH IT!!” to my twitter when I like a quote haha

  • tbric1

    After learning about Dave and applying his principals at home, I am doing that here at work with similar results as above.  (not nearly as many zeros!)  I took my plan all laid out to the bank and told them the month I would end our relationship.  (wayyyy earlier than the loans say)  They were caught off guard!  Can’t wait for the freedom of being debt free in the business also!

    • http://ChrisLoCurto.com ChrisLoCurto

       @tbric1 BAH!!!! Would have loved to see that conversation!

      • http://hardandsimple.blogspot.com/ Skropp

        @ChrisLoCurto @tbric1 Haha ya! “I’m breaking up with you…no not today, but on xx…so start getting your junk out of my life!! And don’t forget your toothbrush!!” sorry, had kind of a tangent there… Haha

  • http://lcdublin-myprivateuniverse.blogspot.com/ CarolDublin

    Easy to gloss over the benefits of living debt-free until you see such a vivid example. You’d have to be nuts to not go that route.

    • http://hardandsimple.blogspot.com/ Skropp

      @CarolDublin True, but if you don’t analyze it you would only see the expansion and increased gross profits and you’d FEEL like you were accomplishing more. Even though you’re obviously not! That’s why it’s so vitally important for us to change how we THINK not just act!

      • http://lcdublin-myprivateuniverse.blogspot.com/ CarolDublin

         @Skropp  Agreed – kind of comes back to culture again, don’t you think? The culture needs to be that you do things debt-free. Then you can stay on course and not be sidetracked by the lure of society to borrow to expand.

        • http://hardandsimple.blogspot.com/ Skropp

          @CarolDublin Absolutely!! And being connected to others that think that way!! Just like Chris said in the last podcast, most owners don’t even THINK you can operate debt free and are amazed when they meet people who are doing it!! We’ve gotta be around and influenced by those who think how we wanna think!!

      • http://www.BaptistEducation.org/ JoshuaWRivers

         @Skropp  @CarolDublin Changing the way we think is vitally important for every area of our life. Changing actions without a change in thinking will always lead back to former actions.

        • http://lcdublin-myprivateuniverse.blogspot.com/ CarolDublin

           @JoshuaWRivers  @Skropp That’s part of why this community is so great – everyone encourages each other and helps maintain that change in thinking. Constant reminders help reinforce new habits.

        • http://hardandsimple.blogspot.com/ Skropp

          @JoshuaWRivers @CarolDublin “changing actions without a change in thinking Will always lead back to former actions” WOW! Love that Josh!!

        • http://ChrisLoCurto.com ChrisLoCurto

           @CarolDublin  @JoshuaWRivers  @Skropp That is so true!!! That’s the reason I do this. I love that so many people are getting help not only form me, but from YOU guys!!!

        • http://hardandsimple.blogspot.com/ Skropp

          @CarolDublin @JoshuaWRivers So true!! Because there are certainly not many EntreLeaders where I work and among whom I associate in person…so you guys are definitely my life line!!

        • http://hardandsimple.blogspot.com/ Skropp

          @ChrisLoCurto @CarolDublin @JoshuaWRivers Hey there Mr. LoCurto…don’t blame ME for all the people YOU help! You’re names at the top of the page, not mine! Haha. In all seriousness, I hope something I blab about helps someone not to the dumb things I have :)

        • http://ChrisLoCurto.com ChrisLoCurto

           @Skropp  @ChrisLoCurto  @CarolDublin  @JoshuaWRivers I can promise it does!

        • http://www.lilykreitinger.com/ lilykreitinger

           @ChrisLoCurto  @Skropp  @CarolDublin  @JoshuaWRivers  Mark is going to start getting fan mail pretty soon :P

        • http://hardandsimple.blogspot.com/ Skropp

          @lilykreitinger @ChrisLoCurto @CarolDublin @JoshuaWRivers HAHAHA lily I didn’t realize “comedienne” was on your resume too! Hate mail perhaps, but fan mail I doubt haha

        • http://www.lilykreitinger.com/ lilykreitinger

           @Skropp  @lilykreitinger  @ChrisLoCurto  @CarolDublin  @JoshuaWRivers  I’m a person of many talents…

        • http://ChrisLoCurto.com ChrisLoCurto

           @lilykreitinger  @Skropp  @CarolDublin  @JoshuaWRivers I second that!

  • http://hardandsimple.blogspot.com/ Skropp

    Man Chris, I think that is what Mike Hyatt would call building in the “WOW!” never in a million years would I have expected that outcome! We’ve been conditioned so thoroughly in this country that you HAVE to go into debt that we don’t even try out the numbers! This isn’t even “slow and steady wins the race”…this is the same amount of time with simply a different philosophy wins the race!!
    What a powerful object lesson! Now are they heeding your counsel? Or will they start chasing the supposed carrot dangling in front of them?

    • http://www.BaptistEducation.org/ JoshuaWRivers

       @Skropp Work smarter, not harder!

      • http://hardandsimple.blogspot.com/ Skropp

        @JoshuaWRivers That’s hard for a lot of people!! I slip into just working hard sometimes!!

        • http://www.BaptistEducation.org/ JoshuaWRivers

           @Skropp  If we grow up with a good work ethic (which I think that most reading this have), it’s easy for us to think that we always have to be working hard. It’s not just “keeping busy” it’s accomplishing something. A rat running on a wheel “works hard” but doesn’t accomplish anything unless the wheel is a generator.
           
          At work, there’s some people that look at me an think I don’t do much because I’m not always running around. But I’ve just learned to work smarter, combine steps when possible, etc. Why should I make 3 trips, when I can spend a couple minutes to organize it a little better and make 1 trip?

        • tbric1

           @JoshuaWRivers  @Skropp That is what we say around here.  “Be lazy, in a good way!”  Same thing as you said, work smarter not harder!

        • http://hardandsimple.blogspot.com/ Skropp

          @JoshuaWRivers So true!! “looking busy” and being productive are two very different ideas!! It drives me nuts to do stuff just to do stuff!!

        • http://hardandsimple.blogspot.com/ Skropp

          @tbric1 @JoshuaWRivers Haha I love that!!! I think that way…why do it now and have to do it again in 15 min when I could just wait and get it all done at once???

    • http://www.lilykreitinger.com/ lilykreitinger

       @Skropp  Trust me when I say it happens in other countries too :)

    • http://ChrisLoCurto.com ChrisLoCurto

       @Skropp No, they totally are. They discussed it and it was crazy to them how much sense it made. 

      • http://hardandsimple.blogspot.com/ Skropp

        @ChrisLoCurto Definitely an “Aha!!” moment I’m guessing?

        • http://ChrisLoCurto.com ChrisLoCurto

           @Skropp  @ChrisLoCurto oh yeah!

  • Llewellyn Martin

    Wow that is powerful! Another thing that isn’t included in that equation is all the stress from debt and also the risk factor. 

    • http://hardandsimple.blogspot.com/ Skropp

      @Llewellyn Martin I think if you add in all of those ancillary benefits its an ABSOLUTE no brainer, but can they resist the pile of real money (gross profits) being dangled in front of them by taking on debt and expanding rapidly?

      • http://ChrisLoCurto.com ChrisLoCurto

         @Skropp  @Llewellyn No doubt! How freeing will it be to have all that cash, no debt, and nothing to do but help people?!

        • http://hardandsimple.blogspot.com/ Skropp

          @ChrisLoCurto @Llewellyn My educated guess is pretty darn freeing…I’ll report back when I get there and let ou know for certain ;)

  • livebeyondrich

    Chris,
    Holy buckets batman – that is incredible!
    Jen

    • http://ChrisLoCurto.com ChrisLoCurto

       @livebeyondrich HAHAHA!!! Nice!!

  • http://epicenterlanguages.com.mx/our-blog Aaron Nelson

    I’m with Joseph – wow! I mean, I totally am living out how restrictive debt is right now. We got into it when ‘times were good.’ (That’s the trap part.) But now, things are tight and getting tighter around here. We’ve lost business thanks to the recession. 
     
    Instead pushing us forward, our debt is dragging EVERYTHING down. 
     
    I loved the most recent podcast. Filled me with hope = getting out of debt won’t happen over night even if you want it to. You have to process your way out. But flip that switch! No more debt going forward! 
     
    Thanks for the graphic lesson today.

    • http://hardandsimple.blogspot.com/ Skropp

      @Aaron Nelson Roger that Aaron!! It’s crazy how debt has been sold to us? Talk about being oversold on the benefits!!

    • http://ChrisLoCurto.com ChrisLoCurto

       @Aaron Nelson absolutely!! 

  • http://www.jmlalonde.com/ Joseph Lalonde

    That hits me like a ton of bricks. Amazing how debt holds us back!

    • http://ChrisLoCurto.com ChrisLoCurto

       @Joseph Lalonde Crazy thing is, it’s doesn’t matter the amount.