Three Ways to Start and Fund Your Own Business

Apr 7, 2014, Written by Sue Miley

iStock_000018267266SmallWhen I worked for someone else I always worked lots and lots of hours.  I mean 60 -70 hours for years and years.  I wasn’t even a doctor, but it felt like I was on call 24/7.

When you work those kind of hours and your spouse has a professional job too, you need lot’s of services to keep your household going.  We had some services:

  • a nanny to take care of our kids
  • a housekeeper to keep everything clean
  • a pool guy to make sure the water didn’t turn green
  • a yard guy to cut the 1 and 1/2 acres

It was crazy the amount of people in and out of our home each week to keep things running.

We just threw money at it.

Thankfully, we were making money because the hours we were working required a bunch of help.

The big problem with the whole set up was that someone else was spending more time with my three kids than I was and working that many hours consistently for years is a recipe for burnout.

It only made sense.  I needed to start my own business.

I’d have more flexibility and free time.

I could find something that matched my values.

I could be my own boss.

All of this was true if I planned it right.

I had started several businesses for other people.  There was one key difference though…..

they funded it.

They capitalized the start-up and paid for all of the operating costs until we were profitable.  I knew how to work on a frugal budget, but the scale of business I was used to opening was significantly higher than anything I could imagine investing on my own.

I needed a plan.  And I needed my plan to be in place before I left my job and our household income plummeted for a season.  Here is my learning and advice to you if you are planning to start your own business:

1. Live on Less While Starting Your Business

Reduce your standard of living to a level that requires minimal cash flow to live for a couple of years while you’re starting your business.  No excuses.  We were not young starry eyed kids who started our own business in our twenties when our living expenses were low to begin with.  We were living off of over $300 thousand in income per year and were getting ready to give up over half.  This meant major changes.

  • We put our dream house up for sale and downsized.
  • We gave up the nanny, the pool guy, the yard guy, and the housekeeper.
  • We trimmed the cable, the cell plan, the health club memberships and the eating out.
  • We traded in for less expensive vehicles.
  • We reduced our consumer spending to next to nothing….at least it felt that way.

By selling all of our stuff and buying a house, without a pool and massive yard, our cost of upkeep went down substantially.  I wrote about the high cost of all of our stuff and why minimalism is so attractive here.

2. Find a Low Cost of Entry Business To Start

We all have different dreams and passions.  Fortunately, I had many interests and finding a calling and a business to start was one thing.  Finding a business of my own to start that didn’t have huge start-up costs was a little more challenging.

I went through every career self-help book and exercise I could find to figure out “my calling.”  God in His grace showed it to me in many different ways.  I just had a few barriers.  The big one was getting my head and heart around reducing our standard of living.

To have low start up costs, it helps if the business:

  • doesn’t require large inventories
  • doesn’t require significant brick and mortar investment
  • has reasonable equipment needs

Basically, you need a business that has low start up costs.  This is usually a service business.

3. Line up Resources for Your Business’ Cash Flow Needs

Many business owners start their own business with capital they saved or borrowed but don’t have enough reserved for many months of operating cash flow.

I watched a local bakery be built around the corner from my house.  They literally built it by hand.  It looked like the owners grabbed friends and family to help work on it whenever they had spare time.

It took over a year to open.  It was called something like The Happy Baker I think.  I remember walking in the first time and being delighted over a warm triple berry muffin just out of the oven.

Every bite from this bakery was a taste of fresh baked goodness.

For about 6 weeks.

I enthusiastically drove to my new favorite bakery one Saturday morning and the doors were closed.

Maybe they overslept.

To my dismay, they never opened again.

They took a year to open their dream.  It was probably all of their savings and so much of their time.

All I can think is that they forgot about cash flow needs.  They must have thought that initial traffic without advertising would cover all of their operating costs day 1.

It could happen.  But it isn’t the norm.  It takes awhile for most businesses to start making money.  Especially if you have rent and employees to pay.

If you are going to start your own business, make sure you can stay in business long enough for it to be successful.

I took out a home equity line of credit just in case.  By using a home equity line I was able to get a really low interest rate and still deduct the interest.

Business loans (unless it is an SBA loan or some other business grant) are usually higher interest rates and require collateral, especially for a start up with no track record.

Depending on your business, you may need more credit to carry your operations than a home equity loan can provide.  You may need to get a line backed by accounts receivable or assets if your business does require that type of investment.

The point here is to think about your needs upfront and make sure you have resources available.  I have had so many people who want to start their own business come to me for coaching, yet cannot afford a basic coaching package.

If you can’t afford the education to start your business successfully, you are probably not adequately capitalized to start your own business. I had to fund graduate school for two years and basically have no income to contribute to the household.

Even If You Are The Only Employee in Your Own Business

Today, many people start their own business as a solopreneur out of their home.  This is a way to keep business costs low, but I still advise the above three strategies even if you plan to bootstrap or pay as you go.

It’s simple.

It reduces your stress substantially.

There is so much required of you to start your own business.   You are surely an expert in parts of your business, however, not likely in all areas that small business owners must manage.  That takes time and focus.

Starting out with a lower income, or no income, creates pressure and tension at work and at home.

You want to be able to make the best decisions to grow the top line, since revenues are what create profit.  You don’t want to postpone hiring an employee, skip marketing, or cut corners in any way when you  are starting your business.  The startup is what sets the stage for your credibility and success.

Worrying about funds creates an environment for decisions that do not grow your business, and sadly, close many businesses.

And the worry also impacts your health and your relationships.

Plan It Out First

I know there are many blogs that encourage you to quit your day job and take that leap of faith in starting your own business.  And sometimes we are too scared and cautious to trust God and move towards our calling.

However, I think planning is prudent.  It is good stewardship. It improves your chances for success and reduces your stress and potential burnout.

And, most importantly, it leads to a business of purpose and clarity.

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Sue Miley

Sue Miley MBA, MA, LPC helps small business owners build successful businesses on a foundation of Christian values. After 20 years in business, and 10 years as a Christian counselor, Sue uses a combination of faith, business and psychology to help clients in business and in life.

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