While writing $1,000 Start-Ups, I wasn’t surprised when many of the business owners I talked to answered the question, “Why did you start your own business?” with, “Because I had to make a living.”
In this case, necessity is indeed the mother of invention and if you’ve ever been in this situation you understand very quickly how essential it is to get that business up and running. Even if you have plenty of money put away, if there’s more going out than there is coming in, and you live long enough, you’ll eventually exhaust it.
If you’ve already made the leap and started your own business, begin right now to set yourself up for long term financial success. When you’re starting a business and don’t have much of a financial safety net it’s essential to get your product or service offering defined and out there in the market place. Limit the amount of your savings that you invest in your business by:
- Reviewing (and documenting) what you’ve already spent and what products or services you have ready to sell.
- If nothing’s ready to be sold or offered, listing the remaining steps and making a plan to get it done.
- Limiting or delaying discretionary business expenditures.
- Beginning now to use low-cost (free) methods to market your products or services.
- Making those first sales and winning those first clients.
Cultivate and practice wise financial management habits.
- Draw up your personal monthly budget and stick to it. If you don’t have enough in savings to make it through the next three months, get a part-time job to cover your expenses. (If possible get this at a company where you’ll learn more about the business you’re starting or a business that’s related so you can sell them your products or services.)
- Draw up your recurring monthly business budget and stick to it. Your business needs to make at least this much, as well as what it costs for materials, to remain solvent.
- Keep track of everything you earn and spend on a daily basis.
- Do not co-mingle your business and personal finances. Your business needs to be self-supporting.
- Put aside 10% of your earnings and save at least three months of both personal and business expenses. This is your emergency money.
- Continue to save 10% of your business earnings for future investment.
Once your business is clearing more than the recurring business expenses and you have three months of recurring business expenses saved you can afford to start paying yourself.
Even better you’ll have established financial practices that will help assure your continued success.