Entrepreneurship is risky, particularly from a financial perspective. You can reduce some of this risk by following some friendly financial guidance. Had I followed all of my advice to a Tee (especially number 4) I probably …no I definitely would be experiencing less stress.
- Screw debt: get rid of as much debt as possible while you still have a steady paycheck. Debt payments and entrepreneurial paychecks are like oil & water…they don’t mix. Building your brand is stressful enough. Don’t add the burden of having to pay consumer debt to that mix. I did this and it was very helpful. But then I charged everything back up again #facepalmheaddesk
- Save: Back to that entrepreneurial paycheck…sometimes it does not exist in the beginning. If you are still working, save now while you can. Build a cushion for the future and manage that cushion wisely. If this current economy taught us anything- you will need it and its great to have. My cushion saved my ass on numerous occasions. Having gutted my cushion, I am slowly (like the speed of frozen molasses) working to build it back up again.
- Clean up your credit: You will most likely need it. Small businesses rarely- if ever get credit on their own accord and the owner(s) most always have to put up their own credit as a personal guarantee (I am working on a post on how to start building credit W/O a personal guarentee…it can be done). Also- if you do run into some lean times- it’s easier to negotiate with your creditors if you have been a “good customer” and have just hit a temporary rough patch.
- Calculate how much money you need to (a) maintain your current standard of living (b) a modified standard of living (c) a basic standard of living. Based on your assets, cash on hand, savings etc, figure out what you can sustain. May I suggest that when you do take the leap, start with B and then go to C. Trust me on this. Unless you are independently wealthy, your paycheck lifestyle will be different from your entrepreneurial lifestyle.
- Cut back your expenses now. Train yourself to live on less. Even having six figures in the bank does not guarantee anything. Live modestly- enjoy what you have and spend on what matters to you.
- Dedicated cash: start putting aside money for your new business. Business cost and not everything can be bartered (nor do you want to barter because time is also money). What ever you think you need money wise to start the business- double it, cut back your wants to the basic needs to get up and running, and use some of the money for a cash cushion (what we call working capital/ free cash flow).
- Use social coupons & cut real life coupons: If the show Extreme Couponing does not motivate you to spend less, your inner Scrooge may be dead inside. But seriously- I once challenged myself to live on nothing but social coupons and it was pretty easy (being a single, childless woman of course). The takeaway is Coupons Save. Hell- that $50 trip to Target can be brought down to $25 with masterful use of coupons. Get you some.
Check out my article at Examiner.Com: I talk with an expert who gives the ins and outs of financing a start-up business!Any other tips to financially prepare for entrepreneurship?