Will Kelly grew a $1.5M lawn-and-landscape company without loans. He argues early debt magnifies mistakes when you don't know your customer-acquisition cost or cash-flow patterns. Paying cash for a $7,500 spray rig forced him to think hard about ROI, and being debt-free during COVID let him stay liquid while others panicked.
We built a $1.5 million business without ever borrowing a single dollar in the business. No truck loans, no equipment loans, no line of credit, no business debt at all. But I don't actually believe all debt is bad. The reason I stayed away from it is because when you're building your first business, debt doesn't magnify growth. It magnifies your mistakes, and I made plenty of them. Had I borrowed a bunch of money early on to grow faster, I would have just made bigger mistakes faster. When you're first starting a business, you don't know what you don't know. You might not know your customer acquisition cost. You might not know the lifetime value of a customer. You don't know what your busy season is really going to look like. You don't know how bad your slow season can actually get. You probably haven't been through 5 years of the normal ups and downs that come with running a seasonal business. So when somebody says, why not just finance another truck? The truck is going to make money. I understand the logic. A truck that produces revenue can absolutely be productive debt, but the truck payment is the easy number to calculate. What's harder to calculate is whether you actually have enough profitable work to feed that truck payment every single month. You don't know what's going to happen tomorrow, and when you have debt, tomorrow still wants its payment. That's why I personally choose to grow slower and pay cash. And yes, Growing debt-free probably did slow us down in certain ways, but looking back, I think that was actually good for me because I needed time to make smaller mistakes. I needed time to learn. I needed time to understand the numbers. I needed to go through the seasons. If I had access to unlimited money while I was still figuring things out, I could have created much larger problems. One of the hardest checks I remember writing was for our spray rig. It was about $7,500, and at the time we were treating lawns with backpack sprayers. It worked, but it was way too slow. We needed more efficiency if we wanted to ever increase our volume. The problem was that we didn't have enough spray work to use that new rig 5 days a week. We might use it only 2 days, then it would sit for another 3. And that's painful when you're looking at a $7,500 investment sitting in the shop doing absolutely nothing. I remember thinking, how do I justify spending this much money on something that might sit more than it works? But this is where staying debt-free Taught me something important: debt-free does not mean being afraid to invest. There are times when you have to invest ahead of the demand. If a piece of equipment dramatically improves efficiency and gives you the capacity to grow, sometimes you have to pull the trigger and make the investment before the volume is completely there. The difference is that when you're writing the check with your own cash, you. think differently and really hard about whether the purchase actually makes sense. That $7,500 mattered to us. We had to ask whether the efficiency justified the investment. That kind of pressure can make you a better steward of the money you have. But the biggest advantage of being debt-free didn't show up when the business was good. It showed up when things became uncertain. When COVID hit, the entire state of Texas shut down. Nobody knew what was going to happen tomorrow. Nobody knew how long it would last. And imagine being in that position with a truck that you financed, equipment that you financed, lines of credit, and a pile of monthly payments that don't care whether the truck Or the state is making money or the state is shut down. We didn't have that pressure. We had no business debt and we had cash on hand. So while a lot of other businesses were running into a crisis, it turned a crisis into an inconvenience for us. We were able to look at the situation much differently from how we played our cards. We could ask, is this actually an opportunity for us to invest while everybody else is operating out of fear? That was one of the moments when being conservative financially became an offensive advantage. Not because we predicted COVID. We didn't. That's the whole point. You cannot predict every problem that's going to come tomorrow. You prepare for problems you cannot predict. That's also why I've generally tried to keep around 10% of gross revenue in cash reserves at all times. I want money in the bank for payroll, operations, equipment failure, expansion, unexpected problems, and opportunities. I personally like sleeping well at night. That matters to me. I don't want one slow month or one bad piece of equipment to turn into a crisis. and go through this emotional roller coaster that most people do when they leverage a lot of debt. And I don't want to be forced into making desperate decisions because we built the company with no margin for error. I want to be very clear. I am not saying every business owner or side hustler who borrows money is making a mistake. I believe there is good debt and bad debt. You see, bad debt can be borrowing money for liabilities that don't produce anything. For example, you bought a brand new fancy car or a boat. Okay, these are liabilities. They're going to take money out of your pocket every single month. To whereas good debt can be using money to buy something that actually puts money in your pocket every single month and generates revenue. There are smart business owners who use leverage extremely well. My caution is for the person who is still trying to figure things out. If you do not know your numbers yet, debt does not fix that. If your pricing is wrong, debt can make the mistake even bigger. If your marketing doesn't work, debt can help you waste a lot more money on it. If you buy equipment before you have the demand, debt gives you another payment While the machine sits idle, if you hire too fast, debt can let you carry bad decisions longer. You see, the problem usually isn't debt itself; the problem is the combination of debt with the inexperience or wrong decisions. That is why, if I had to start over tomorrow, I would personally build the business debt-free again—not because it is necessarily the. Fastest possible path because I personally know it's not. I value financial peace. I value having reserves, margin for error. I value being able to make a decision without wondering whether the bank payment is coming due. And I know that I am able to make mistakes and still keep the business in operation. I just don't want leverage making those mistakes more expensive than they need to be. So if you are starting a business and everybody's telling you that you need more trucks, you need more equipment, more money, and more debt so you can grow faster, listen to me. I would be very, very careful. Know your numbers first. Understand your customer acquisition cost. Understand what a customer is actually worth. Go through the seasons. Build some cash reserves and learn how the business actually behaves before you start pouring more gasoline on the fire. Then make the decision from a position of knowledge instead of optimism, because going slower isn't always slower. Sometimes going slower keeps you alive long enough to actually build something big. Thank you guys so much for watching. Make sure you subscribe to the channel if you want to build a more successful lawn and landscape business. We'll see you in the next video.
