Ever since Jobs and Woz set up shop in their parents’ garage with an idea that turned into one of the world’s most successful companies, millions of would-be entrepreneurs have dreamed about starting their own business. And in this age of the entrepreneur, Silicon Valley has given us plenty of images to mythologize the all-American start up: plant the seed of a brilliant business idea in a garage, add water, and voila! Fame and fortune. In real life, however, it’s not quite so simple. While many of us may fantasize about starting our own company, fewer actually pursue it. More often than not, dreams of entrepreneurship get squashed by fear: What if I can’t make payroll, the business fails, and then I have to start all over?!
It’s no wonder most of those legendary stories are about 20-year-old college dropouts — they didn’t have mortgages to worry about yet! You might, but adult responsibilities don’t mean you can’t pursue your fabulous idea. Being an entrepreneur doesn’t mean you have to risk life and limb — you can have it all if you follow these steps to a slower path to building your own company effectively.
Don’t Wing It
In business, there’s no replacement for good preparation — and in start ups, there’s no replacement for a good business plan. Do you need to keep working full time and conduct your startup business on weekends? Or can you go part time? Do you have a spouse to consult with and tweak your commitment to your household budget together? Remember, you cannot use debt to fund your operations on an ongoing basis. Debt is best used for a one-time expense, like one piece of equipment — not a monthly lease for office space. So if your household still needs $5,000 per month from you, and your new business needs $2,000 per month, then you need to find a way to source that full $7,000. Base your timeline on these specific needs.
Don’t Cross the Line
Don’t trust yourself to remember which costs on your credit card are for your household, and which are for your new business. Keep your business and household finances separate! Set up credit cards and a bank account immediately for your new business. Not only will this make it easier to see how things are progressing, and not let debt or funds seep through in either direction, but come tax time it will also help to identify all potential deductions quickly and easily.
Practice Your Runway Strut…and Then Measure the Runway
This is a marathon, not a sprint, so prepare for the long haul — and do your best to project how long of a “runway” you’ll need. Using your business plan, talk to your potential partners and get realistic estimates for the time needed for technology development, product testing, marketing, and customer acquisition.
You could be in building mode for months — or even years — so it’s best to get a realistic idea up front. Not only will this help you build the patience required for the slow-build startup mentality, but more importantly, you need to know how long you’ll be in funding mode, versus cash flow mode. And if family members are involved, help paint an accurate picture for them as well. If they’re helping to fund your business, this will give them even greater confidence in your ability to run a profitable company.
Go on a Diet
A spending diet, that is. Trim as much fat from your lifestyle as possible to reduce the amount you’ll need for household cash flow. That being said, don’t trim everything. You’ll be working two jobs, so you will absolutely need some fun money to blow off steam every once in a while. Just try to balance those twenty dollar martinis with long walks in the woods — not all fun has to be expensive. And reduce ongoing high expense items like personal trainers or season tickets.
Hitch a Ride
There are some things you can’t cut, and at the top of that list is health insurance. You may be young and healthy, but it’s a risk not worth taking. If you have anyone in your family like a spouse or a parent (if you’re under 26) who can put you on their insurance, do so now. Or consider staying at your full time job until your own company can provide that insurance. However you manage, just make sure you don’t risk your health and safety for this fabulous business idea. It only takes one crisis to prove it isn’t worth it.
There’s a great old saying that applies here: Luck is where opportunity meets preparation. When you’re building your start-up, prepare appropriately — but any entrepreneur also has to be ready to make the leap when the opportunity presents itself. That is your winning combination.
Lori Atwood, CFP® is the Founder & CEO of Fearless Finance, a personal finance platform and app that gives users a complete 360 degree view of their financial situation. Working with individuals to help them understand their financial situation and what they can do to create a brighter financial future is Lori’s passion. Follow her on Twitter: @LoriAtwoodSays
This article originally appeared in our Fall 2019 MONEY Issue. Download for FREE here!
