Your Greatest Investment as a New Entrepreneur
Most new business owners hire me to help them plan their financials to launch their new venture into entrepreneurship as a new career. The most common question that I get is: how much money should I invest in my business? I typically reply:
“Based on your current lifestyle, how much time are you willing and able to commit to your business?”
Many people worry more about having their financials perfectly lined up before they start a business but don’t pay enough attention to how they use their time to grow their business.
As a new entrepreneur, the investment that has the greatest potential to affect your lifestyle is time. You can change your budget, borrow money from banks or other lenders, or use some of your current cash savings for the initial investment into your business, but most people who want to be a full time business owner don’t realize how much time they actually need to be committed to build a business - especially in the first three to five years.
Regardless of which stage in life you are in, becoming a full time entrepreneur will require a major commitment of both your money and your time. People want to become entrepreneurs to have more control of their time and perhaps spend more of it with their family and friends doing the things they love. What new entrepreneurs don’t realize is that in order to have that, the majority of your time is sacrificed to build your business, especially in the first few years of your business. You have to spend time on growing your business in order to earn time to do the “fun” things you want to do.
Before diving full time into entrepreneurship, it’s extremely critical that you be honest with yourself on whether you are ready to spend more time on building your business in place of spending it on your usual leisurely activities. This may mean taking one less vacation or family trip, or skipping out on a dinner with your friends because you have to focus more time on your business.
Budgeting your time is just as important, if not more important, than budgeting your money. Most entrepreneurs don’t start out with readily available cash, nor are they in a situation where their partner or spouse can fully carry the family financially by himself or herself. If you have limited financial resources to invest in your business, you will need to invest more of your time into it since it’s the only asset you truly have. Take it from billionaire entrepreneur, Bill Gates, who is often quoted for stating that he never took a day off in his twenties while he was in the beginning stages of building Microsoft. Your competition has the same amount of time in the day as you do. Are you spending more of your time growing your business than your competitor is?
In my experience working with new entrepreneurs who have limited cash, I advise them to first invest their time in building their business plan, particularly planning out their marketing strategy. It’s imperative to commit time to develop a strong, strategic marketing plan so you can get paying clients and customers through the door. Novice entrepreneurs spend too much time on administrative tasks and not enough time on marketing.
Moreover, in the initial stages of being a first time entrepreneur, you should spend time vetting a good business attorney and tax advisor to have on your side. These two professionals can help you mitigate future potential risks such as getting sued, getting ripped off by third party vendors or contractors, and filing taxes and managing your accounting improperly.
Once my clients finish the first draft of their business plan, I come in to add the final piece to their business plan by developing an easy to follow financial plan for their business and personal life. Regardless of the industry, I help clients identify expenses that need to be included in their budget projections. By having their business plan with specifics of how they will market and operate, it makes it easier to create the financial plan and estimate more accurately the annual budget to fully run the business. For example, if you are planning to do trade shows as part of your marketing plan, we need to determine exactly how much you can afford in promotional products such as business cards, pens, etc. We create a business budget that estimates anticipated on-going expenses, establishes revenue and profit margin goals, and determines how much cash they need to have on hand to float them through their first year in business and exactly how they can obtain this cash.
You need to figure out how much time each day and week you are will to commit to work to make the business succeed before we can answer how much it takes to run your business. The first and most important investment you need to make is dedicating your time to plan your business. Planning the finances is filling in the fine details after you come up with a marketing and operations strategy.
Start building the life you’ve always wanted.
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