One of the most difficult things is that we need to cover personal expenses when we start a new business, especially during the start-up phase. Often, it takes more than one year for us to reach the breakeven point. It means that it takes more than one year before our business can start earning sufficient income to cover its ongoing expenses. The financial condition can be difficult enough that the business owner is the last person who gets paid. Often, business owners don’t get their paycheck for a number of months and they need to rely on personal savings or loan to cover for their personal expenses.
If we are in this situation, it means that we are not in proper position to have a fully working small business. We may need to keep our day job and work on our small business part time. It may need to be performed during the startup phase. Our business may need to limp along until it is able to properly sustain itself. In order to keep ourselves motivated, we should be aware that it’s only temporary. Our goal is to make sure that we can make full-time transition. After we reach proper financial positions, we should be able to quit our primary day job. We will also be able to fulfil our desire of spending quality time with our family.
Without enough personal income, it would be very stressful for us to run our own small business. As an individual, we should be able to cover our own personal expenses, while putting enough money to our business as needed. Many business owners simply take too much money from their own company, potentially forestalling their long-term growth capability. These business owners are like vampires who take too much equity from their company for their personal expenses. Entrepreneurs should understand how much money they should take from their company to ensure that stable rate of growth can be achieved.
When financial conditions of our company aren’t so good, we may be forced to use our own savings. In this situation, it is possible that our company may not qualify for a business loan. Business owners may need to rely on their personal resources to fully fund their companies, which is not always an easy thing to do. As a last ditch effort, these business owners may need to rely on their own savings. In reality, this is a best source of funding, because business owners don’t need to worry about future debt payments. However, not all business owners have enough personal savings to sustain their operation of the small businesses in the long run.
Other personal savings accounts, we could also rely on other sources of funding, such as selling off our personal assets, including bonds and stocks. Anything that has monetary value can be sold to sustain the operation of our business. If we are confident enough about the success of our business, we could also borrow from our retirement funds.