Should You Be Out of Debt Before Starting a Business?
You are in for a treat…I wish I had someone who had answered this question for me many years ago when I decided to leave the military and launch my business. Where would I be today if I knew now, what I wished I would have known back then! There are so many dynamics that impact this decision about your personal financial situation in starting a business, I am glad that Dorethia Conner can shed her wisdom to answering this pressing question. She is also connected with me on Facebook so be sure to send her a friend request too.
Enter guest blogger, Dorethia Conner – Financial Coach
Dorethia Conner - Financial Coach, guest blogger on Money Smart Radio
The answer is NO, you do not have to be out of debt to start your business. (As a side, no you do not have to be out of debt before you get married either. I get this one a lot too!) Anyway, moving right along, here are a few financial things to consider before you jump into the world of being your own boss….
Reality check, you will work harder as your own boss than you ever did as an employee
Have You Mastered Your Money?
- You complete a budget each pay period and you know where your money goes
- You write transactions in your checkbook when they occur or at least by the end of the day
- You balance your checkbook to your bank statement when it arrives (or online)
- You’ve curbed unnecessary spending
- You have a plan for paying off your personal debts
Personal Emergency Fund
I do suggest having at least your initial emergency fund of $1,000 saved. Most common emergencies are between $500 – $1,000; you want to have some cushion if one arises. You can save for this emergency fund by selling items online, getting a part-time job, cutting back to bare necessities, etc.
Saving For Your Business
First, complete a ‘Startup Expenses’ form. You can find one here: http://www.score.org/.
List everything you will need to start your business and the cost associated. Be realistic, then, look at your personal budget and calculate how much can be allocated toward saving for your business each pay. Essentially, you will add a line in your household budget for let’s say ‘Dave’s Detailing’ and assign it a dollar amount. Be disciplined about setting that money aside.
Stay away from debt… I’m the poster girl for the bootstrapper. Bootstrapping allows you complete freedom; no one gets a piece of the pie but you because you didn’t borrow money!
So off you go… get busy … live your dream, start your business, just plan it out!!
For more info and to get in contact with Financial Coach – Dorethia Conner, visit her website:
website: www.connercoaching.com
or send her an email: [email protected]
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This post was mentioned on Twitter by gochris: Should You Be Out of Debt Before Starting a Business? http://bit.ly/9iukl2 via @MatthewSapaula…
Dorethla,
Thank you for posting this information! Personal debt has been the biggest thing holding me back from getting my business up and running the way I would like. This topic has been my main question for a while. I will definitely take your advice and steps to keep pushing and achieve my dream of being an entrepreneur.
Regards,
Camille B.
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Great advice in this article, and this phrase really resonates with me “Bootstrapping allows you complete freedom.”
When I’m asked by fledgling business owners, I always suggest they know their “chin above water” figure; i.e., the amount their business MUST generate in order to keep them from drowning. Add up all of your personal and business expenses and divide that amount by .6, and you have it!