'All of it's debt?!': Texas man opened a gym with credit cards and personal loans. Has $58k in total debt. Caleb Hammer believes he’s headed for financial doom

“All of it's debt?! You didn’t save up any money to put into this thing?” host Caleb Hammer asked while looking at Jose’s finances on an episode of his podcast "Financial Audit." “That’s an interesting way to open a business."

Jose’s story serves as a cautionary tale for entrepreneurs looking to start a business without a clear idea of the risks involved.

Risky business

When one of his clients offered to loan him $50,000 to start a business, Jose jumped at the opportunity.

Unfortunately, this private loan was only enough to get the gym started. Jose used personal and business credit cards to finance ongoing overhead expenses and bought some equipment on financing. This relentless debt binge left him with roughly $57,945 in total borrowed capital.

Whether or not this risky investment was worth it remains unclear. Jose admitted he has a “bad habit” of mixing his personal and business finances. His best guess was that the business generates roughly $10,000 a month in revenue but he hadn’t calculated his gross margin or profits yet. “Dude, you’ve been in business for a year and you don’t know what your overhead is?” Hammer asked.

Since he isn’t tracking or managing his business finances appropriately, Jose seems to be exposing his venture to risk. A U.S. Bank study found 82% of businesses fail due to cash flow mismanagement.

Fortunately, Hammer believes there is a chance Jose can beat the odds and salvage his venture.