By David Hehman/Laura Duggan
Here are some of our personal observations on being a successful entrepreneur, and staying solvent.
If you are reading this website, and this article, most likely you have already made the decision to start a new business, or grow an existing venture. You know that you have an idea that you are passionate about, willing to make sacrifices for, and you know that there are risks. Here are some of our personal observations on being a successful entrepreneur, and staying solvent.
Invest yet Protect Personal Finances
As you begin this stage of your company, know clearly how deep you want to go when you reach into your own personal resources. It is all a balancing act. On the one hand, potential investors need to see that you have put your own money into the game. If you are drawing a salary, you need to demonstrate that during the start-up or growth phase, you are drawing what it takes to cover living expenses, rather than a market rate salary.
The exact numbers are important, and this is where having a personal financial advisor can give you some clarity. He can help you see that you can afford $x but not $y. See our recommended article links on how to choose a personal financial advisor.
You also need to include your partner in this calculation. As you make a sacrifice, who else does it affect, and have they signed on. Be very sure that everyone involved is totally committed to the potential downsides as well as the upsides.
Consider Your Stage in Life
Spartina knows some entrepreneurs who have gone right to the edge, mortgaging their homes, risking everything, and in the end it made the difference between success and failure. However, the people were young, single, affecting no one, with a clear back-up plan if things hadn’t worked out. This is quite different from someone who might be forty or more, with several kids still at home. We are not here to give advice, but to point out that entrepreneurship is not about ruining one’s life.
One of the primary reasons to get investors is to lower the personal risk. Of course you give up some of the ownership which will affect your financial rewards in the end, but you will get smart minds to help you succeed if you pick your investors well. They may make the difference between small success and a huge win. Going it alone is not usually sustainable. Make a clear decision to bring in other people early enough so that you are all in it together, sharing both risks and rewards.
It may be clear in the beginning that you have what it takes, personally and financially, to wear the entrepreneur hat. However, take time for a personal assessment, at least every six months, to be sure that the hat still fits. Check with your family, personal financial advisor, investors, and friends, and if you continue, do so consciously.