Do you feel the need to set a goal for your business? Are you are struggling to pick a goal that is meaningful enough to pursue that will get you out of bed in the morning? How about considering the opportunity to relieve your balance sheet of the debts and liabilities that might be listed? Many entrepreneurs assume that debt is a good leverage however many fail to realize that their business probably isn’t leveraging debt properly. Leveraging debt would mean borrowing money at an interest rate that is lower that the return the business can generate using those same funds. Most entrepreneurs use debt as a stop gap to bridge cash flow problems in their business, not as an investment.
A 15% drop in its share price has a large investor in Berry Global, the manufacturer of packaging for companies like Starbucks, Proctor and Gamble, PepsiCo and Kraft Heinz Co., suggesting that the company focus on what it is good at, sell any assets that don’t relate to its core competencies and focus on paying down its debt. The debt shown on its balance sheet has primarily been a result of the acquisitions made by Berry Global to meet it growth targets. Given its global reach and innovative manufacturing processes, Berry Global is being encouraged to leverage what it is good at to get an investment grade rating comparable to its peers which could easily happen by paying down its debt.
For any small or medium sized business, cash matters. The faster you can pay off your debts the faster you can grow your bottom line. There is always a need for debt however its important to understand why your company is using debt and what challenges it has that debt is helping alleviate. Debt can be easy to ignore especially when you obtain it in tough times but when your business is on stable ground one of the easiest goals to set is to reduce debt to a level that makes sense and can be used properly by your business. How much debt could your business pay off this year? What would it take to double that result? These kind of questions may lead you to a strategy that sees your business paying off its debts sooner that expected and watching its bottom line increase.