How Recording Studios Can Get (and Stay) Out Of Debt

Brian Hood (0:00)

This is the 6 Figure Home Studio Podcast, episode 57

SPEAKER_3 (0:07)

You're listening to the 6 Figure Home Studio Podcast, the number one resource for running a profitable home recording studio. Now your hosts, Brian Hood and Chris Graham.

Brian Hood (0:19)

Welcome back to another episode of the 6 Figure Home Studio Podcast. I am your host, Brian Hood, and I'm here with my assistant to the regional manager, Chris Graham. Chris, how are you doing today, buddy?

Chris Graham (0:30)

Hey, guys, I'm having a good week. It's been a period of growth for me. We've got a bunch of stuff going on family-wise and otherwise. It's been pretty intense, to be honest, but it's been a good opportunity to sort of lean into that suck and grow through it. So I'm good, but for bad reasons.

Brian Hood (0:49)

Yeah, dude, I'm sorry to hear that. Everyone of us, including myself, have hit periods like that, but getting the good out of the bad is something we all go through and getting growth periods and painful periods is something we all must endure through.

Chris Graham (1:03)

And hey, I'm an audio engineer. It happens, right? This is true.

Brian Hood (1:06)

This is true. So speaking of taking bad things and turning them into good things, today's episode is all about getting out of and avoiding debt.

Chris Graham (1:18)

So we've talked about this in the podcast in the past, debt, and obviously we're a business podcast. Debt is an important part of either how a business will fail, has failed, or how avoiding debt made them successful. So debt is this crazy thing. It's not a one-size-fits-all answer. This is one of those advice buffets where we're going to say some stuff, and you're going to say some of that was stupid, but some of it was cool. And that's sort of our hope here. First of all, we're just going to rehash some things we've talked about previously on the podcast.

What's good debt? What's bad debt? And then anywhere in between. So a home mortgage, in many cases, is good debt. But not always.

If you took out a loan to buy a mansion in Gary, Indiana, or Youngstown, Ohio, probably not good debt. Probably not a good debt. No offense, my wife's from Youngstown. You know, I've been there. I'll never go back.

Brian Hood (2:13)

You've alienated tens of our listeners.

Chris Graham (2:16)

Tens of our listeners, maybe 12s. So if, on the other hand, you're buying real estate in, say, Nashville or Columbus, Ohio, what, what?

Probably a pretty good idea, especially if it's in a good part of town, you know, with a lot of growth in it. So I own a house. I've got a mortgage. But as a result of that mortgage, I bought it the right time in the market, and my home value has gone up.

When I finally sell my house, if I sold it today for what it's worth, I would have spent nothing to live here. I actually would have made money living in this house over the past 10 years or so.

So there's good debt, there's bad debt. But let's get into the business side of things. When it comes to your business, our advice to you is debt is almost always bad. Specifically, pre-cash flow. Now, what do we mean by that? Cash flow is your business is regularly making money each month. You're making deposits consistently. So that means you have money coming in, and that's cash flow. If you are pre-cash flow and you're like, well, I'm going to start a studio, so I'm going to go $50,000 in debt in order to start it.

Not recommended by the 6 Figure Home Studio podcast. So let's talk about that. There's a couple of things that you could do to go into debt. Brian, what are some things I could go into debt to make myself feel good today and bad tomorrow?

Brian Hood (3:34)

Yeah, there's going to be a number of things here that people that we've seen will typically go into debt for. The first and the most obvious, I think, is gear. People love to buy gear on debt. That's just something that has always been a trap that people fall into simply because they don't necessarily want to practice something called delayed gratification. So gear is one thing. Another thing that people spend a lot of money on to go into debt is a commercial facility or even sometimes spending a lot of money renovating their home for their home studio needs. And again, if that's pre-revenue or pre-cash flow, this is where it's even worse idea than anything else you could possibly do.