If you’re uncomfortable talking about, thinking about or dealing with money, do not open a business. As an entrepreneur, you’ll need to constantly run numbers, as they are indicative of the success and growth of your company. The numbers also tell you what you can and can not do with advertising, rate increases, building/office/storefront rentals, etc. If you’re reading this series and think you can skip over this post and “figure it out later,” that’s a bad move. You’ll be in for a rude awakening, because there is something you need to know.
You’re going to be broke.
How broke you will be and how long that will last depends on your living costs, any financial backing, your debt and the net profit from your new business. But I feel confident saying that most entrepreneurs experience being in the red at some point. My first few years in business were a major financial stressor for me, but I knew that I’d eventually have a real income. I was always able to pay my rent but there were times when I had a budget of $0.00 for my social life. So I had to turn down invites for dinners, trips, comedy shows, even going to visit out of state friends because I didn’t have money to put gas in my car. Even if I didn’t have a client or work commitment and had the time to do those things, my bank account told me otherwise.
Early on in my boss lady life, I had a friend’s sister ask me to pick up a Christmas gift for my friend from a specific store in Newport (they both lived out of the area and the store rejected the idea of e-commerce). This was before the days of venmo (not that I have that now) and for whatever reason we didn’t do PayPal, so my friend’s sister said she would send me a check for the price of the gift and the mailing. It ended up costing around $80, so not a huge amount. But the thing was, that was a huge amount to me because I was so broke. I think it took her a month to send the money to me, and I had to kind of chase her down for it. I knew she had a good job and money was not a problem for her, and since she was not a close friend and not an entrepreneur, she had no idea that $80 was a hardship for me. I wish I could say that was the only time my sad looking bank account affected anything, but there have been countless times over the years that I had to say no to things I wanted to do because I couldn’t afford to. I’m sure there were people who thought I was being cheap or using the “I have no money” excuse to get out of things, but luckily no one ever said it to me.
There are ways to minimize the impact of entrepreneur-related financial struggle though. The first thing I suggest is to get your financial life in the best shape it can be before you open the doors to your business. I went into my business with student loans from college and esthetics school, but had I waited until I paid those off with the Office Manager salary I was making at the time, I would probably still be paying them off today. (Entrepreneur life allowed me to clear them all by Year 7.) I did have three credit cards, which I had always used responsibly, so I made sure those were completely paid off before I went out on my own. I then proceeded to max them out building my business (then paid them off by Year 7), but if I had gone into boss life with student loan debt and credit card debt, I don’t think I would have made it this far. If you are even thinking about opening your own business, start paying down those credit cards and school loans (starting with whatever charges the highest interest rate) while you think. If you decide you don’t want to open a business, you’ve at least done something that will put you in a better financial position.
After you clear as much of your debt as you can, you have to look at your expenses. Here’s where I suggest going into Barebones Living (shout out to Oregon Trail for that one). I certainly did not do everything in the smartest way, but I knew that there were certain expenses I had–rent, car insurance and school loans–that I couldn’t minimize so I had to cut down other costs. I split Internet with my downstairs neighbor for a while, rarely went out to eat (unless I had done a friend’s makeup in exchange for them treating me to dinner), didn’t buy any new clothes or any non-essentials for my house for a couple years, walked everywhere I could to save money on gas, sold clothes on consignment and did a lot of other things I’m forgetting. Basically, if it wasn’t an absolute essential, I put it on a list of things I would buy someday when I had money. Seriously!
I’m no financial expert, but I think my advice is solid. The point of this post though is to prepare you for the reality that you will likely not have much money at some point during your early years in business. If you’ve always worked low pay jobs and/or been buried by student loans since you graduated, this struggle won’t be new to you and therefore might be easier to handle. But if you are someone who has never had to worry about money, it’s going to be a shock to your system. Hopefully this post will help soften the blow.
I think we hear a lot about the financial success of entrepreneurs, which is good because it can be a reality and is part of the appeal of this lifestyle. But some stories gloss over or glamorize the Poor Years (yes, it’s often years), and how tough that can be. The good news is that if you build a strong business, you will eventually not only have money, but will have no ceiling to your income. That’s worth the struggle, right?
Have a beautiful day 🙂