'Being $450,000 In Debt To Make Zero Money Is A Bad Idea' - Dave Ramsey's Advice To Business Owner With No Profit

Starting a business can be a rewarding endeavor, but when the numbers don't add up, tough decisions may be necessary. On a recent episode of "EntreLeadership," Dave Ramsey spoke with Jen, a business owner from Ontario, Canada, who found herself in a difficult financial position despite running a business with significant sales. Ramsey’s advice was clear: "Being $450,000 in debt to make zero money is a bad idea."

Business Bringing In Sales — But No Profit

Jen shared that she had left a successful 20-year career to focus on her side hustle, which had grown into a full-time business. After moving the business from her basement to a physical location, sales reached approximately $870,000 last year. However, despite the strong sales figures, Jen wasn't paying herself — and her business was still struggling financially.

Don't Miss:

• ‘Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. You can invest today for just $0.26/share with a $1000 minimum.
• If there was a new fund backed by Jeff Bezos offering a 7-9% target yield with monthly dividends would you invest in it?

"I have an opportunity to go back to work in my previous field," Jen said. "Make 100 grand again and get back to earning for my family instead of now having what feels like my business just drain me."

Jen explained that her business expenses, including payroll and overhead, were about $20,000 a month. On top of that, the business had accumulated around $450,000 in debt, including a mortgage on the building, renovation costs, and startup inventory expenses.

Business Model Challenges

Ramsey pressed Jen on whether the business would be profitable without the mortgage. Jen admitted that the mortgage itself wasn't necessarily the problem — the issue was that sales were declining.

Trending: BlackRock is calling 2025 the year of alternative assets. One firm from NYC has quietly built a group of 60,000+ investors who have all joined in on an alt asset class previously exclusive to billionaires like Bezos and Gates.

"[$875,0000] is what we did last year, I would say we’re down to [$550,000] – we’re on track to make [$550,000] this year," Jen said. She attributed the decline to shifting customer behavior. During the pandemic, the business had successfully generated revenue through online courses. But as people returned to in-person events, the business was struggling to scale the same level of revenue with smaller class sizes.

Ramsey pointed out that while owning the building might seem like an investment, the business itself needed to generate enough revenue to cover expenses and provide a profit.

Ramsey’s Advice: Make a Change or Shut It Down

Ramsey's advice was straightforward: If the business model can't be adjusted to turn a profit, it's time to walk away.

"If you can figure out a business model that gives you hope — a business model shift, a pricing shift, a delivery of product shift, whatever it is, the way you’re doing the classroom thing — to where you actually are making a profit and you are paying yourself and you can see your way to that," he said. He said if Jen can't do something to turn her profit around, it's time to close the business. 

See Also: The average American couple has saved this much money for retirement — How do you compare?

Jen asked Ramsey what he thought about keeping the business open to pay her employees, even if she couldn't pay herself. 

"It's not your job to just create jobs," Ramsey said. "It’s wonderful that you create jobs. And that’s a cool thing. But you’re supposed to be making money owning a business. That's the point."

Ramsey suggested that Jen take 30 to 45 days to brainstorm solutions, such as adjusting pricing or scaling the business model. If those changes don't work, Ramsey recommended closing the business, selling the building, and returning to a steady income stream through her previous career.

Read Next:

• Have $200K saved? Here's how to turn it into lasting wealth
• Inspired by Uber and Airbnb – Deloitte's fastest-growing software company is transforming 7 billion smartphones into income-generating assets – with $1,000 you can invest at just $0.26/share!