Case Study: Thinking About Cash Flow the Wrong Way

Do You Have a Problem Hidden in Plain Sight? How a New Mindset Helped a Business Owner Go From $100K in Debt to $1.8 Million in Cash

The Problem

Relying on a $100,000 Credit Line to Pay Quarterly Business Taxes

We first met John in October 2019 as a referral. He was well-established financially, and already had two financial advisors and a CPA he met with each month. The first thing he said was, “You’re not going to show me anything I don’t know.”

Everything did look good on paper. He was making over $600,000 a year between four growing business locations and had nearly $1 million saved in a retirement account. True to his word, everything looked great on the surface—until we examined his debt and cash flow.

In total, John had four mortgages on each of his business locations, two business loans, and a $100,000 credit line. John’s biggest problem? He was using the credit line to pay his quarterly income taxes every three months.

By borrowing against his credit line, John was caught in a cycle of using his credit line to pay his quarterly taxes, converting the credit line to 5-year loans once the credit line was maxed out, and then gradually owing more and more with an increasing number of loans over time. In short, he was caught in a cycle that never solved his problem and only added to it.

It was sadly ironic—despite earning three times what he had ever hoped to make with his business when he first started, John wasn’t able to pay his quarterly taxes without taking out a loan. Like most other business owners, he had fully accepted that taking on debt to fulfill his regular cash flow needs was simply part of playing the game. In short, he had been conditioned to accept as normal something that wasn’t normal at all.

Cash Flow is a Near Universal Small Business Struggle

Like John, living with accumulating debt is a problem more and more small business owners find themselves forced into. Indeed, 79% of small businesses have outstanding debt, with 44% owing over $100,000. This translates into 32% being unable to pay vendors, loans, themselves, or employees due to cash flow problems.

In fact, over half of firms (51%) say they’ve even paid business expenses with personal funds. Besides the personal stress factor of cash flow and accumulating debt, having debt is also a major stressor on marriages. A recent survey found 54% of Americans believe having a partner in debt is a major reason to consider divorce.

Although John wasn’t in hot financial water now, if he kept accumulating more and more debt to pay off his quarterly taxes, there would come a day when he might find himself under a mountain of loans. To get out of the cycle he was in, he needed to rethink his financial strategies and set himself up for long-term success.

Our Solution

Adopting a New Mindset to Adjust Cash Flow, Access Money, and Build Cash Reserves

The most important thing we did with John was help him recognize the problem at hand. He was making more money than he had ever dreamed, was maxing out his 401K, and had investment properties, yet he was still living paycheck to paycheck. It didn’t make sense.

John, like all of us who take the system at face value, had put himself in a position where he was giving away control of all of his monthly cash flow. Yes, he was saving for the future. Yes, he was investing. But what did it matter if he didn’t have access to money when he really needed it most—to pay his quarterly taxes?

By relying on conventional financial wisdom, his focus was on things that weren’t truly core to his financial success. Like anyone caught up in mindless-by-design financial systems, John had given the bank a golden ticket right into his checkbook every month before he could set anything aside for himself, his family, or his future.

John was caught in what we call the triangle of financial doom. By following the conventional advice to save his money in retirement accounts, all his money was in accounts he couldn’t access. Because he couldn’t access it, he had to borrow whenever he needed money. Then when he retired one day, he’d have no idea what it would cost to get his money out. John was saving his money in a place he didn’t control, so he could borrow at rates he didn’t control, and with terms he didn’t control.

Like most business owners, John thought he would have to outearn the problem by making more income or reducing overhead. However, his real problem was cash flow efficiency. Without making your cash flow more efficient, your problems simply compound as expenses increase alongside increased earnings. Luckily for John, making cash flow more efficient is what Tier 1 Capital is all about.

The shift finally clicked when we asked John the question we ask all of our clients: Would you rather be in control of the process, or be controlled by the process? John agreed he wanted to take back control.

We applied the Tier 1 Capital’s Growth Process™ to help John’s business as well as his individual goals. Our focus was putting him in a position where his cash flow was such that he would never have to borrow on a credit line to pay his taxes ever again—while allowing him to save more money without reducing his lifestyle.

The Results

Paying Quarterly Taxes in Advance, Saving $1.8 Million in 3 Years, and Welcoming New Opportunities

After we put a plan together for John’s situation in October 2019, he started seeing results within just nine months.


    • By July 2020, John not only had enough money set aside to pay his entire tax liability for 2019, he also had enough to pay the next nine months of quarterly taxes ahead of him.

    • By December 2022, a little over three years later, John had saved up over $1.8 million in cash reserves.

    • Because of his secure financial situation, John was regularly presented with various opportunities to invest his money, expand his business, mentor others, and give back to his community.

The most impactful change John experienced was his mindset. By switching from a mindset of scarcity to a mindset of abundance, he was empowered to fully take advantage of all of the opportunities that came his way—and more and more seemed to present themselves. He was no longer limited by the conventional financial wisdom that had conditioned him to believe there wasn’t a better way.

John experienced the power that comes when you view things from the lense of being in control of your money. With this view, your decisions become much more clear and you can easily achieve greater results. After all, who wouldn’t want to realize the potential of $1.8 million that was already in their business?

Adopt a Mindset of Abundance With Tier 1 Capital

Your Biggest Disadvantage Is Your Conditioning

Without a different perspective on his financial situation, John might have never recognized the biggest problem facing his financial situation—his mindset. Too often, business owners are shamed into believing the reason they’re failing at their financial goals is because they don’t make enough money. However, that doesn’t tell the whole story. The truth is much more simple—it’s how you use your money that puts you at a disadvantage.

At Tier 1 Capital, we help unravel your conditioning from the systems that want to exploit you. We believe that you—not the bank, investment firm, insurance company, or government—should have control of your financial situation. By simply adopting a new mindset about your cash flow and financial possibilities, you can achieve much more than you ever thought possible.

If you’re ready to break free by rethinking who your financial strategies are actually benefiting, visit our website to learn more about who we are and what we do or schedule a call with us today.