Keep Your Head Out of the Clouds to Avoid Going into Business Debt

By Rhonda Campbell

Taking a gamble, a chance that product development and marketing strategies will pay off and generate sizable revenues, is a key part of operating a company. Seasoned creative business leaders know how to size up a gamble; they know when to walk away, when to stay. They also know that, as Forrest Lucas, owner of Lucas Oil Products, realizes, going into business debt is not part of good gamble.

Steering Companies Away from Debt

Millions of Americans became familiar with the Lucas Oil Stadium on Sunday, February 5, 2012, the day that pitted the New York Giants against the New England Patriots in Super Bowl XLVI. Lucas Oil Stadium is where the big game was held. What people may not know is how involved in drag racing, particularly National Hot Rod Association (NHRA) races Lucas Oil is involved in. In fact, it’s not uncommon for race car drivers looking for a reliable sponsor to consider Lucas Oil, a name that has almost become synonymous with drag racing.

It cost Forrest Lucas a cool $122 million to buy the naming rights for Lucas Oil Stadium, home of the Indianapolis Colts. It’s no wonder he and his company bid to have the Super Bowl hosted at the stadium. The Super Bowl brings area businesses money, lots of it. Yet, Forrest Lucas was a man who had an aversion toward business debt. It didn’t matter what debtors promised; he wasn’t interested in sinking his company, soon or late.

As reported in the February 6, 2012 Fox Business “A $122 Million Super Bowl Bet: Lucas Oil Stadium” article written by David Mielach, Forrest Lucas had money to enter a larger stage because he’d spent years watching his cash flow, knowing where his money was going and keeping his business out of debt. In the article, Forrest Lucas, the man who started in the trucking business, shares this bit of advice, “I always tell people, don’t go out there thinking you are going to go out there and finance everything.” He continued, “Then you are in debt up to your knees to start with. I never went into debt when we got the thing off the ground and running. I can’t tell you how extremely important that is.”

Avoiding Debt Calls for Keeping Your Head in Reality

Rather than daydream about a spectacular future, Forrest Lucas kept his mind in reality. It likely kept him from spending money before he had it. His story is worth repeating, worth reviewing. By taking a similar approach, other creative business leaders can fund their businesses, paying off regular expenses like payroll and monthly or quarterly taxes, with profits from product/service sales. Of course, publicly owned companies can also sell shares to increase funding.

The point is to avoid using credit cards (can’t you see your new monthly bill laden with interest fees) and taking out loans (oh, no – there are those pesty interest fees again) to fund creative businesses. It may keep a company from having to hunt for a buyer years later. It’s also a good way for creative business leaders to ensure they sleep good at night.

Having Money to Make a Big Splash as a Creative Business Leader

By avoiding business debt as a small business owner, creative business leaders may also discover that, years after launching their companies, they have enough money to take a gamble that will allow them to make a big splash. This is what happened to Forrest Lucas.

As he says in the Fox Business article in reference to taking a gamble by purchasing naming rights for Lucas Oil Stadium, “My first reaction to being asked about the naming rights was that it would be way too much and we couldn’t afford to do it.” He continued, “But, as I was driving home, I started thinking about it and I didn’t even know how much it cost to sponsor a stadium at that point, but I began to think that this could be the thing I was looking for to make a splash.”

Forrest Lucas purchased the stadium in his home state of Indiana in 2006. Wonder if he knew the Super Bowl would be held there six years later, a Super Bowl that pitted the brother (Eli Manning) of his home team’s star quarterback, Peyton Manning, against another future hall-of-fame quarterback, Tom Brady. It almost sounds like a Cinderella story, the winnings of a good gamble, made by a creative business leader who’d spent years managing his cash flows, keeping his company in the black.

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Sources:

http://smallbusiness.foxbusiness.com/entrepreneurs/2012/02/06/122-million-super-bowl-bet-lucas-oil-stadium (Fox Small Business: A $122 Million Super Bowl Bet, Lucas Oil Stadium)