10 October 2011

3 Financial Tips for Startups that will Save their Marriages

I find it ironic that one of the most appealing factors of Entrepreneurship is the potential for raising capital, going public or selling for millions, yet people also try to claim it isn’t about the money. Let me clarify: Entrepreneurship isn’t ONLY about the money. Money is a natural incentive. It’s not everything, but it is something. And if you are married to an Entrepreneur it is worth understanding.

During the Startup phase, it shouldn’t be surprising to find yourself asking, “Where is the money at?” over and over again. That’s because a salary -- or lack thereof -- creates a stressful pressure point that entrepreneurs and their spouses experience on a regular basis (sometimes even daily). You’re most likely working harder than you’ve ever worked, with WAY less compensation.

Welcome to entrepreneurship.

The financial pressure to survive can pit Spouse against Entrepreneur or Spouse against Venture and ultimately kill all parties involved. Brutal huh?...and just in case that sounds better than the boat you are in now, it happens to be a very slow and miserable death. So, on that note... to save things before it's too late, here are 3 Financial Tips for Startups that will save your Marriage. Being prepared mentally for the financial investment of the Entrepreneurial Life will lower the financial stress and pressure tremendously, thus allowing you and your Entrepreneur to focus on moving the business forward not mourning the loss of unrealistic expectations.

Tip #1: Prepare for a Year. Adjust your standard of living and plan to go without a regular salary from the Startup for a year or more. Scary, right? I know. Now, while my Entrepreneur and I didn’t formally sit down and write a list of ways we could survive for a year, we did have a frame of reference that it would take at least 6 months to get to profitability (Two years in and we are laughing about that goal). Truth is, you will most likely not be able to take a real salary for the first 12 months. Even when you reach profitability taking out the first $100 you make to buy groceries for the family isn’t likely the first expense that the Startup needs to tackle. After a year evaluate things...then prepare for another year. :)

Which means:

Tip #2: Get some of your ducks in row. While a financial advisor would instruct you not to start a company unless you had the cash to sustain it, the very idea of Entrepreneurship is the exception to this theory. What you should do is have access to enough in savings or reserves to cover your living expenses so you’re not relying on your business income to cover personal expenditures.  We have maxed credit cards, taken out loans, paid our mortgage 29 days late, gotten employment, flipped cars, traded items and the list goes on and on, all in the name of Entrepreneurship and to keep our Startup alive. I don't necessarily recommend that for everyone, nor do I believe in other Startups enough to do that, but I did have an understanding of the resources we had available and our ability to stay afloat. One of the best things you can do is evaluate your resources (whether they are assets, skill sets/abilities or employment opportunities) and understand how you can utilize them to cover your booty.

And don’t forget:

Tip #3: Pay the minimum, not the maximum. When you do start making money it’s easy to get caught up in the excitement of growth and want to increase your standard of living the minute the company starts performing well. Believe me, after years of no living room furniture it can be exhilarating to be able to walk into retail shops again. While you may feel you deserve it, you need to start small and work your way up the compensation scale as your profits allow. Don’t increase your compensation just because the business has become profitable or has some extra cash. That money should be saved for expansion purposes and unforeseen situations. If you get in the habit of always taking out the extra cash as compensation, you may not be able to monetarily handle any unforeseen circumstances that could be harmful to your business.

Being in a Startup indicates that you are preparing to be in it for the long haul. While you may not initially get compensation for "what you are worth" you are creating something that is greater than a paycheck every two weeks. Focus on the Overall Return of Investment and don't forget to evaluate the value of experience in that equation as well.