So you’re thinking about taking that leap of faith and starting your own venture. You either feel unfulfilled at your current job, doing something unrelated to your field of study, or just think you have a great idea and the leadership qualities required to create a successful startup.
Business over the last decade has transformed and the ability to start your own business is now easier than ever. According to Forbes, over 50% of the working population works in a small business. There are a ton of articles online that will guide you in your first few years of business, but often they leave out a crucial aspect of how to survive financially when juggling your new responsibilities.
Here are a few tips that you can take to the bank to help you to survive financially when launching a startup.
Don’t Do it Alone
Sole proprietorship is pretty awesome because you get to call all the shots. If you’re a control freak then doing it alone might be your best bet. But if you’re like the rest us and don’t mind sharing ideas and wealth, creating an LLC or Partnership is a better idea. While you’ll share the profits, you’ll also share the risk, and in the case of a corporation or limited liability corporation, the burden of liability is put upon the business itself. In other words, if your business goes bust then the only thing liable to debt collectors is the business assets and inventory and not your own personal bank account.
On the same note, while many startup businesses use their own equity to cover initial costs, taking out a loan or getting investors is a better way to fund your business because of the shared risk involved. Not only will it limit the amount of burden put upon yourself, it also will indicate whether your business is viable, and a good idea in the current market. If you’ve been searching high and low for investors and no one bites, it might be a good indication that your business idea isn’t as good as you initially thought.
Don’t Quit your Dayjob
This is a balancing act. After you have your business plan and investors set, with funds allocated aside for initial startup costs, you need to make sure that you have some alternative or even main source of revenue for at least the first year. Having funds set aside for yourself personally for up to five years will ensure that you can live comfortably during the first years of business, a time which may not be profitable. According to the U.S. Bureau of Labor, 50% of businesses fail in the first five years, and even giant companies like Twitter struggled to turn a profit during the first few years of business.
Taking a part-time job or consulting position may allow you to have the time to invest into your new venture without sacrificing your way of living.
Budget
If the whole budgeting thing isn’t “your thing” it’s time to get over it. Just like a business, your personal finances need to be accounted for. It’s crucial that if the business needs an extra injection of capital to stay operational, or something significant happens in your own life, that you have the extra funds to take care of it.
Starting your own business is unlike any other job. The burden of responsibility is ultimately and totally on your shoulders and any mistakes are significant and affect others. It’s important to realize that in order to lead the people in your startup that you need to be mentally ready to go, and that includes having your own finances in order. Don’t assume anything. Before you begin your own company make sure you know how to survive financially.
