I'm $300,000 In Debt From My Dog-Training Business

Summary

Podcast Summary: The Ramsey Show Highlights - "I'm $300,000 In Debt From My Dog-Training Business"

Release Date: April 1, 2025

In this engaging episode of The Ramsey Show Highlights, hosted by the Ramsey Network, a young entrepreneur shares his struggles with substantial debt accrued from his dog-training business. The episode delves into the intricacies of managing business finances, the pitfalls of rapid expansion, and the critical advice needed to navigate out of debt while maintaining personal responsibilities.

1. Introduction to the Situation

At [00:10], a 21-year-old dog trainer introduces himself, revealing that he is expecting a baby on July 14th. He owns a pet care business specializing in dog training and is currently facing a significant financial challenge: he is $300,000 in debt. His primary concern is whether to continue expanding his business by hiring employees and making it self-sufficient or to focus on reducing his debt to be more present for his growing family.

2. Breakdown of the Debt

The Business Consultant probes the source of the debt at [00:43], confirming that the debt originated from building the business. The young entrepreneur elaborates:

• [00:54]: He started his business at 19 years old, operating a mobile dog-training service to minimize costs, primarily using his truck.
• [00:54]: As the business expanded, he relocated to a 4,000 square foot rented facility, which required extensive renovations.
• [02:13]: To finance these expansions, he took out a home equity line of credit loan of $225,000 from his father. Additional funds were allocated to employee salaries, renovations, marketing, and a $30,000 van for business operations.

3. Financial Performance and Overhead

Despite the hefty debt, the business has shown profitability:

• [03:18]: The trainer reported $300,000 in sales last year, with a $40,000 profit.
• However, the overhead costs amount to $17,000 per month, raising concerns about sustainability and debt management.

4. Advisors' Critical Analysis and Advice

The Financial Advisor provides a candid assessment of the situation:

• [03:47]: Advises against further expansion, emphasizing the need to increase revenue without additional spending.
• [04:01]: Criticizes the trainer’s spending habits, stating, "You have never seen anything you wanted that you didn't go buy it. Stop it."
• [04:48]: Highlights the unsustainable nature of the lease, noting that after five years, the leasehold improvements could become worthless if the lease isn't renewed.
• [05:24]: Emphasizes that hope for extending the lease is unreliable and advocates for a more grounded financial strategy.
• [06:03]: Questions the allocation of the $300,000 debt, pointing out discrepancies in reported expenditures.
• [06:05]: Encourages the trainer to double his revenues and identify the most profitable areas of the business.
• [07:12]: Reiterates the importance of focusing on generating income rather than expending more resources: "Spending does not equal income."
• [07:13]: Advises eliminating unnecessary expenses, such as the $30,000 van, to allocate funds towards paying off the loan.

5. Key Recommendations

The advisors collectively recommend the following strategies to the young entrepreneur:

• Focus on Revenue Growth: Prioritize increasing sales and optimizing profitable services without incurring additional debt.
• Cost Management: Reduce unnecessary expenses, such as expensive equipment or non-essential renovations.
• Debt Repayment Plan: Develop a clear and actionable plan to repay the existing debt systematically.
• Sustainability Over Expansion: Avoid further expansion until the current financial obligations are under control.
• Leverage Core Competencies: Concentrate on the trainer’s unique skills and services that provide the most value, rather than reliance on expensive assets.

6. Notable Quotes

• Financial Advisor at [04:01]: "You have never seen anything you wanted that you didn't go buy it. Stop it. You're going to run yourself out of business so fast, it's unbelievable."
• Financial Advisor at [07:13]: "Spending does not equal income. And so you've bought everything fresh and shiny and new and now you need to go make some money and you probably ought to dump the $30,000 van..."
• Financial Advisor at [07:13]: "Breakthrough in business. If you are not the secret sauce, you're screwed."

7. Insights and Conclusions

This episode serves as a cautionary tale for young entrepreneurs about the dangers of rapid expansion without a sustainable financial foundation. It highlights the importance of:

• Prudent Financial Planning: Understanding the long-term implications of debt and ensuring that business growth aligns with the ability to manage financial obligations.
• Balanced Prioritization: Maintaining a balance between personal responsibilities and business ambitions, especially when family life is involved.
• Strategic Decision-Making: Making informed decisions about investments in the business, focusing on activities and assets that directly contribute to profitability.

The advisors underscore that while ambition is commendable, it must be tempered with financial discipline and strategic foresight. For listeners navigating similar challenges, this episode offers valuable lessons on prioritizing debt repayment, managing overhead costs, and leveraging core business strengths to achieve financial stability.

Transcript

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[Young Dog Trainer]

So I'm 21 years old. I have a baby on the way.

[Zander Insurance Representative]

Congratulations.

[Financial Advisor]

When's it due?

[Young Dog Trainer]

July 14th.

[Financial Advisor]

Good for you.

[Young Dog Trainer]

I have. Thank you. I have my own business in pet care. I'm a dog trainer and I am $300,000 in debt from what my question is. So my question is, do I focus on expanding the business, hiring and trying to be able to make the business self running so I could be as present of a dad as possible or focus on paying off debts?

[Business Consultant]

Is the debt business debt? Is it from you building this business? Is that where it came from?

[Young Dog Trainer]

Yes. Yes, that's where it came from. Most of it.

[Business Consultant]

How explain is it?

[Financial Advisor]

Why does it take $300,000 to train a dog?

[Young Dog Trainer]

Yeah, so we started mobile. So I started the business when I was 19. Doing it mobile, kept cost low, did it out of my truck. And then as we expanded we decided that we needed a facility. So we rented and then kind of renovated a 4,000 square foot facility. That was in April of last year. So we, I took a home equity line of credit loan from my, from my dad, which I know now from listening to you guys is a known know.

[Business Consultant]

Just give me, give me a quick synopsis. If I bring my dog to you and say I'm dropping my dog off, train him, what does it cost me? What do you cost for a service? I'm just curious.

[Young Dog Trainer]

Our lowest package is 3375. And our most expensive package is 8000.

[Financial Advisor]

Okay. And these are house pets. They're not service animals or anything?

[Young Dog Trainer]

Some, some are service dogs, some are protection dogs. We work with a large range.

[Financial Advisor]

You're doing protection dogs for eight grand? That's low. Okay. All right. So you, you spent money renovating someone else's building that you rent?

[Young Dog Trainer]

Yeah. So getting. We did like walking kennels we had to put in.

[Financial Advisor]

But you don't own the building?

[Young Dog Trainer]

No, it's a rental.

[Financial Advisor]

Okay, so where's the three? You spent $300,000 on someone else's building?

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[Financial Advisor]

You spent $300,000 on someone else's building?

[Young Dog Trainer]

So the home, every line of credit, the total of it was 20. I'm sorry, was 225,000. And then we used some of that to do employee salaries. When we first moved in, we had some. A lot of that for renovations and then also into marketing. Then we have $30,000 for a van that we use.

[Financial Advisor]

So are you profitable?

[Young Dog Trainer]

Yeah. So last year we did $300,000 in sales. 40,000 of that was profit for our first year.

[Business Consultant]

Wow. What's all the overhead coming?

[Young Dog Trainer]

Well, so our total overhead per month is 17,000.

[Financial Advisor]

Okay. And so what's your question, hun?

[Young Dog Trainer]

So do I focus on expanding the business?

[Financial Advisor]

No.

[Young Dog Trainer]

Hiring? Trying? No. Okay.

[Financial Advisor]

You need to make some money with all this money you've spent.

[Young Dog Trainer]

Mm.

[Financial Advisor]

Like you need to double your revenues with your existing facilities and your stupid $30,000 van that you did not need. Okay. You. You.

[Young Dog Trainer]

You.

[Financial Advisor]

You have never seen anything you wanted that you didn't go buy it. Stop it. You're going to run yourself out of business so fast, it's unbelievable. You need to learn to organically grow the business. Ramsey Invest. Ramsey Investments. Ramsey Solutions has grown from a card table in my living room to a $300 million business. And we've never borrowed a dime. 100% of our growth has been funded by profits. A little bit and a little bit and a little bit and a little bit and a little bit and a little bit. And so now you've invested leasehold improvements in someone else's building. What's the length of the lease you have?

[Young Dog Trainer]

It's five years.

[Financial Advisor]

At the end of five years, all that money's gone. If that guy wants you out, you've got to amortize all of that cost in 5 years on 40k profit. You can't even come close.

[Business Consultant]

Did you know that? Did you realize that or you just didn't care? I'm just curious.

[Young Dog Trainer]

Realize which part? The part that you're.

[Business Consultant]

The part that you're leasing and that you don't own the building. So when your lease is up, there's no guarantee that you get to stay there with all the renovations you've made.

[Young Dog Trainer]

So what I figured while going through the process of it, like, I believe that the total cost of renovations alone that we did was between like 1565,000. But the goal was to then extend our lease once that five Years was up.

[Financial Advisor]

That's a goal, that's a wish, that's a hope. It's not how you run a business. Okay, so what you, as a young entrepreneur, what I would have you to do is I want you to concentrate on getting revenues up without spending any more money. Stop, quote, expanding. No work.

[Business Consultant]

How many employees do you have?

[Young Dog Trainer]

It's just me. I work completely by my.

[Financial Advisor]

I thought you said you spent some of this on salaries. Where the heck did the 200 grand go? All I got is 30 in improvements or 40 and improvements and a $30,000 van. Where'd the rest of it go?

[Business Consultant]

You paid yourself out of the loan?

[Young Dog Trainer]

No, no, no, I didn't pay myself out of loan. We had employees. We had up to three at one point. But then in October we got pretty slow. So I let everyone go. Went down to just me working.

[Financial Advisor]

And then you have a $40,000 a year job that you own. So your job is to make it an $80,000 a year job that you own and then $100,000 a year job that you own. You need to find out the most profitable areas of your business and grow those areas. And yes, you need to do it. As far as you being at home with the baby, fathers, since time has begun have gotten up and gone to work and babies have survived. And you're going to work, my son, you have $300,000 in debt. You've made a mess and you need a shovel. And you is the shovel.

[Business Consultant]

How much is the lease every month?

[Young Dog Trainer]

Lease is 4, 200.

[Financial Advisor]

Yeah, that's why you brought in 300k. And you're only. And you're only making 12% margin on a service oriented business because you've used it all up. Your margins ought to be double, triple what they are. In a service business. You don't have any cost of goods sold except dog food, for God's sakes.

[Business Consultant]

He needs your book, Dave.

[Financial Advisor]

And so, yeah, I'm gonna send you a copy of the entree leadership book, but. And jump in on the entree leadership podcast and start listening to it that I do on small business and so forth because we've coached people exactly like you for 20 years. And I love small business people, but the disease that you have is the idea that if I spend more, I'm always going to make more. And that is a disease that doesn't work in business. Spending does not equal income. And so you've bought everything fresh and shiny and new and now you need to go make some money and you probably ought to dump the $30,000 van and get rid of it and get some of the money back towards your dad. Anything you can get rid of and still operate the business and get money back towards your dad. I want you to concentrate on making money, not spending money. And quit telling yourself you just need one more marketing plan or you need one more purchased for this to go. Breakthrough in business. If you are not the secret sauce, you're screwed. The other stuff around the dog training is window dressing. Your ability to look at an animal and teach it to behave is the secret sauce. And your ability to teach other people to do that, that work for you is the secret sauce. It is not whether you have a van and it's not whether you have a rental property with a kennel in it. It's your ability to do your job. And so if you'll go do that and make a bunch of money, you're going to be a great dad financially and you're going to be fine. But you got a lot of work to do and it's not unusual for a young dad to be working. It's not a bad thing if anyone.

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