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We all live between the poles of freedom and safety. Small business owners experience the pendulum shifts for more frequency than those with ‘normal’ jobs. The simple fact, W2 jobs offer protections, such as workman's comp and FLMA, and benefits, like PTO and 401Ks. Starting your own business means you need to create your own safety net. I found this out the hard way when my caretaking role took over my life during a medical emergency and I lacked a safety net to keep my business moving without me. Don’t repeat my mistakes. Here are three things to help get you started.
Step 1: The Talk
Does someone (or several someone's) count on your business?
Most business owners (including the one I face in the mirror everyday) unintentionally hoard important information about their business. While it’s just you, that works, right up until any emergency happens. If someone will be affected by your illness or injury, you need to have a plan in place for who does what when (and it will, that is a mindset you’ll have to embrace) it happens. That includes:
Spouses
Adult children
Key employees
Business partners
Are these talks fun? No. Face it, nothing that with the title of ‘The Talk’ is fun. Necessary, yes. And let’s face it, most of us wish our parents had covered the other big talk better. One lessen to learn from them, take the time to plan them out and give them space. Schedule at least two hours with your stakeholders to talk about your current situation, what you need and figure out how to keep the lights on if you’re out of the picture. Once you have a plan, create an agreement in writing as to what happens. OH, once you have the plan, you’ll need to commit to keeping your key people in the know about your business, so they don’t have rude shocks when they step into a more supervisory role.
Step 2: The (Break Even) Point
Now onto the second hard thing you need to do, looking at your bank account. To start, download the last 3 months of statements for your account. Why? To give you a picture of what you really value rather than what you say you value. Then pull out everything you must pay monthly including loans, subscriptions, networking groups or continuing education. All of them. Add them up. These are for fixed costs and covering themes is your break-even point. You must earn this each and every month to keep your business treading water. By looking at where you spent your money, you can see in black & white where your funds go and if it’s the best use of where you earned your hard-earned dollars & cents?
Now that you have a clear picture of what your money goes toward, we come to step two where you ask yourself some important questions: Do I need all of this? How often do I really use this and does that justify the cost I pay? Is there something cheaper? Can I cancel one outright? Don’t bare all the bones, but make sure what you spend money on are things you really need.
Step 3: Start Your Vault
I prefer this term to an emergency fund because it speak to abundance rather than lack. One of the perks of many jobs is the ability to call in sick or go on vacation and still get paid. This reserve is part of their budget. You’ll need to make it part of your budget until you get to the number you want. What is that number? Well, typically experts advise that any emergency fund should cover between three and six months of expenses. Decide what you want to have in reserve and add a set amount until you reach it..
Look, I get it. It can seem wasteful to let the money just sit there when you have a large purchase or new opportunity at hand. It’s tempting to steal it and promise yourself, ‘I’ll pay it back.’ Yeah, right. Admit it, we’re our worst loan officer. And it’s ALWAYS better to have and not need than need and not have. Not when karma seems determined to punish us the second we forget this fact. To give yourself some distance from temptation, direct deposit your set amount into a different account.
These are the first steps taken on step one: the money pillar works, and I’ll say it again, expect discomfort! That is the price you pay. You wanted the ability to choose your income limit so started your own business. One of the prices you must pay is the requirement to make hard choices. Need some back-up? Then let’s chat.
Sign-up for a 30-minute Anything session and let’s make you a happy duck with a safety net.
Photos:
Seesaw by Antranias on Pixabay
Safe by Paul Springers on Pixabay