Archive for February, 2010

Entrepreneurial Spirit

Can Your Spouse Survive your Entrepreneurial Spirit?

Starting a business is an exciting adventure full of new challenges that many of us have never experienced before. For the entrepreneur it is often a liberating experience. Many people start their own business because they know they can do it better, faster, cheaper, or “Why hasn’t anyone ever thought of this?” An even more common time to start a new business venture is because they are unemployed at the time and feel it’s the perfect time to start the business they’ve always dreamed of. Whatever the reason for venturing off into the entrepreneurial world the result can be a very satisfy and rewarding one.

But what about your spouse?

Most spouses are very supportive when you first start your new venture (because if they weren’t you wouldn’t be starting anything). The beginning stages of a new venture are filled with a lot of positive energy, new ideas, new freedom, and the excitement of creating your own business. However, as with all new endeavors the initial excitement wears off and the money continues to flow out faster than was expected. Your new position as the family CFO (Cash Flow Out) begins to bother your spouse.

So what can you do to avoid or at least minimize the impact your Entrepreneurial spirit has on your family’s finances?

Whether you are just starting out or have been in business for a few years the following 6 steps can have a profound affect on your family’s finances.

1. Determine what your household expenses are

    Try to be as accurate as possible in determining what your monthly household expenses are. Make sure not to miss expenses that occur once a year such as; Insurance premiums, Birthday/Holiday gifts, family vacations, property taxes, etc…Add up all expenses for the year and divide that by 12 to determine your monthly expenditure.

    2. Determine your portion of the household expenses

      This is subjective based on your spouse’s income and job situation. So determine what the split should be to pay for household expenses (50/50, 25/75, 60/40, etc..)

      3. Calculate how long your current assets will support you

        Based on your portion of the household expenses and the amount of money you have set aside to start your company calculate how many months you can continue to meet all your financial obligations.

        4. Define a Quantifiable plan

          Set several financial milestones on your business calendar that will help you keep track of your progress. These milestones have to be measureable, for example monthly gross income of $1,000 after 3 months, $2,000 after 6 months, break even after 9 months and generating a salary of $1,000 after 12 months.

          5. Track and report your progress

            By far the most important step in this process is the tracking and reporting stage. First off you need to be able to determine if you are falling behind so that you can make changes early and quickly to reach your goals. Secondly you need to be able to show your spouse that yes in fact you are making progress. This will help to reduce the tension at home.

            6. Have a fall back plan

              If your business plan just isn’t working at all and you are not seeing the type of growth you need to make your business a viable one then you should have a plan to fall back on. Ideally know your fall back plan at the outset which will allow you to build your business in such a way that the skills you are learning and improving can be directly transferable to a new career path.

              These steps are straight forward but are often overlooked as the excitement of building a company dominates an entrepreneur’s time. There are many tools and advisors that can help an entrepreneur address these issues. A few keys to keep in mind when defining your process are:

              • Have someone review your plan that can provide you with unbiased feedback – whether this is a trusted family friend or a paid advisor, make sure they can be objective.
              • Make sure you understand the tool(s) you use – There are a lot of really good tools available but many of them try to be all things to everyone so make sure it’s the right tool and one that you fully understand.
              • If you do hire an advisor make sure you understand the advice they provide – There are professional advisors of all sorts out there and many love to use acronyms that people outside their field just don’t understand. So look for someone who knows their stuff and can explain it to you in a way that you can understand.
              • Get your spouse involved – this doesn’t mean she/he has to build the widgets with you but ask them their opinions, thoughts and suggestions. This will go along way to reducing tension within the household.

              Lastly make sure you enjoy the time. Starting a business is a process which should be enjoyed. Learn from your mistakes and improve yourself as you build your business.