A small business owner from a suburb of Cleveland recently called into Dave Ramsey‘s “EntreLeadership” podcast with a financial nightmare: her husband had racked up $80,000 in debt behind her back. Now, their once-thriving business is hanging by a thread.
Separate Businesses, Shared Problems
Sarah and her husband launched a furniture business seven years ago. Over time, they expanded by opening a separate hardware store under a different business entity. Sarah runs the furniture store; her husband manages the hardware side. But despite the split responsibilities, their finances are deeply entangled.
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“We didn’t do the math as closely as we probably should have,” Sarah admitted. She only recently started looking into the books and was shocked by what she found. “We’ve got more debt than what we can handle.”
Specifically, they owe around $42,000 in high-interest credit card debt—some charging 27% to 30%—and another $40,000 in loans through QuickBooks at 14% interest. Ramsey asked who borrowed the money—her or her husband.
“The debt is all the furniture,” Sarah said, indicating it was her side of the business carrying the load. However, she noted that her husband is the one who handled all the bookkeeping and loan decisions.
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Falling Revenue And No Marketing Budget
At its peak, the furniture business brought in $3 million in revenue. Last year, it earned just $1.5 million. Sarah believes the drop happened because she can no longer focus on marketing or growth.
“I’m the only employee here. I’m doing the sales and the estimates and the ordering and everything,” she said. After firing her only employee due to behavior issues, she couldn’t afford to replace them.
Meanwhile, her husband employs two people at the hardware store and is aggressively paying off a building through a land contract—a type of purchase agreement Ramsey called “the worst possible deal you can do.”
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Ramsey’s Take: What a Mess
“There’s so much bad going on here, I don’t know where to start,” he said. “You guys have so separated this and then not separated it, and don’t know what the flip is going on with your numbers.”
He believes Sarah’s business still has potential if she takes full control. “If I had just your business, I could recover it in 20 minutes,” he said. “You can get that business back up to two million by yourself… and you can pay off the $80,000 in debt in 20 minutes.”
As for the hardware side, Ramsey warned that it could be the bigger threat: “I think this hardware business is hell. It sounds like it’s going down the tubes, and nobody knows what’s going on.”
“I think your best bet for survival is for you to separate your efforts,” Ramsey said. “But he may take the whole family down with that.”
Ultimately, Ramsey advised the couple to put everything on the table and get real about the numbers on both sides. “You need lots of clarity and lots of detail, both of you putting everything out on the table, and then from that the plan should emerge for you.”
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