But – and it might not occur to most of us – unchecked shopping habits can severely affect your dreams of becoming your own boss.
How many of you, like me, dream of having more money to spend on your family, clothes, lifestyle and holidays?
Would you be prepared to take the initiative, have the courage and put in the damned hard work that’s required to get to that place?
So why then do so many women business owners and entrepreneurs end up feeling disillusioned, scared and disappointed when their business, they feel, fails to deliver this for them?
As someone who has taken that journey, I speak from my own experience.
However, being an expert in finance, I may have travelled a slightly different journey in terms of my approach to the financial aspects of this decision and I believe it is this that has enabled me to stay resilient.
I decided to turn my back on a very successful corporate career in 2012.
I was tired of the politics, the financial “ceiling“ the British taxation system imposed and also the realisation that at my age, I either did it now and reached for the next level on my own, or settled for leaving control of my destiny to a large corporate company.
So I decided to start my own business.
Making the leap from a highly paid, guaranteed monthly salary, to a position of no salary for a time, was very, very scary!
Overcoming Business Challenges: 8 Lessons Learned from Starting a Business on A Budget
Here I will share with you how I got to where I am now by overcoming some common business challenges to realising your business dreams.
Lesson 1: Build A Reserve
The first thing I did was to start saving money. For 6 months I turned to contracting because it offered a much higher rate of pay than permanent employment.
Even though the work was not challenging or satisfying, it was a means to an end. In that time, I managed to save the equivalent of 5 months’ bills and outgoings.
When the time came to make the break, I was in a fortunate position – I had my pot of money.
Your pot of money however could come from a range of different sources, keeping hold of a part time job, selling some unused household items, downsizing, loans from the bank, start-up grants, family or friends and so on.
For me, having access to money helped me enormously. For the first few months I was able to focus entirely on generating quality sales without feeling desperate about “The Sale”.
In terms of confidence levels, I believe maintaining your financial independence is key to you persevering with your business. The emotional impact of feeling you are letting your family down, will be a key determinant of how long you will keep going with your business.Maintaining your financial independence is key to you persevering with your business.Click To Tweet
Lesson 2: Create A Survival Budget
Using an Excel spreadsheet; I constructed a Personal Survival Budget.
This included everything I had to pay, such as costs for my personal commitments, mortgage, bills, food, childcare costs etc.
All the costs I felt I would have to incur just to keep going and survive.
To keep my motivation levels up I also constructed a mid-range budget where I would feel I was comfortable in terms of my spending power and then a High Side budget which really gave me the lifestyle I was ultimately aiming for.
Lesson 3: Create A Start-up Budget
I also plotted out how much I would need to start my business and maintain it. This was based on having No income for the first 6 months.
This included any business start-up costs like marketing, networking, travel, IT equipment and so on. Having this target in mind, gave me a focus point to save towards.
It’s amazing, when you have an actual figure you are working towards, it really does help you to make some hard decisions: shall I book that spa weekend with my friend that’s going to costs me £300 or shall I put it in my savings pot?
Should I buy that new dress or risk waiting for the sales? Should I not go shopping at all, because I know I will spend money and instead read a book?
Every day small decisions were now all angled towards my bigger cause which was about gaining a new lifestyle that would need my commitment to a different spending pattern in the short term.
It is important to prepare yourself financially for having no money, when you still have an income stream.
Lesson 4: Change your Shopping Habits
As for shopping then, my frequent trips to the retail park were replaced by me reading business books, blogs, networking and walking the new dog we had also taken on.
Scrutinising my existing shopping habits and just becoming aware of what I spent my money on, helped me to automatically question myself whenever I was about to make a purchase.
Lesson 5: Create a Cash Flow Forecast
Having calculated the costs included in the above, I then drew up a 12-month cash flow forecast.
This was based on income coming into my business only after month 6 and in a phased growth way. It was a worst case scenario which I hoped would not happen.
For me however, the real test came 5 months after earning no income. This was no longer an exciting ‘game’ – this was reality.
Even though the first few months were worry free, I did however, refer constantly to my cash flow forecast.
From Day 1 I tracked all my outgoings and made sure I was completely aware of how that pot was depleting week on week.
Now, some really hard decisions had to be made; did I splurge on some marketing, did I engage with more expensive networking groups, did I get a business coach?
These were all decisions which would involve further increased costs but with no certainty that this would bring in the much desired sales, in time.
It was a tough time and by this point there was no shopping at all!
Even what I considered as basic essentials were now downgraded, not because we as a family and household couldn’t afford it, but because I couldn’t afford it. I made do with what I had.
It is actually amazing how much you can cut back when you actually try, my personal outgoings fell by over 80% of my previous spending levels.
I was stunned to understand even now, what on earth I was spending on during those heady days of my corporate career!
My second decision, based on having sight of my updated cash flow projections told me however, that this was not going to be enough. I still had bills to pay and If I didn’t secure work by month 7, I was going to run out of money.
Lesson 6: Know How Much Time You Have and Take Action
My next decision then was to secure work at a lower rate. I was asked by a friend to work in association with him and he offered me some work at 50% of my market rate.
Needs must and for the next 8 months this is what I did. This bought me time and in times of cash flow problems, buying yourself more time will be the difference between success and failure.
The first ‘real’ contract at market rate came in month 7 and I got paid in month 8.
My first contract was such a personal achievement it really boosted my morale.
Lesson 7: Calculate Your Breakeven Sales Position
By updating my cash flow projection with my known costs going forward I could see that I still needed to get to a target sales position of 3 or more customers, at full rate or the equivalent in ad hoc project work.
I now had a clear targeted sales position to aim for. I knew when I secured this, the associate work could stop.
I am happy to say 8 months later (and 14 months after first starting my business) I was finally able to move away from the associate work.
My business was now providing me with enough income to be able to come away from my bare bones survival budget to my mid-range budget. I am now moving forward and working to my high side budget!
Lesson 8: The Moral of My Story?
Always put your business needs first, before you increase your personal spending.
I continue however to ensure I firstly put money into my business reserve pot, before I increase my level of withdrawals.
When you run our own business and your monthly income is not guaranteed, having a reserve pot of money is essential.
You may never need it or you may only dip into it occasionally. What it gives you however, is a sense of freedom and peace of mind. It also enables you to make choices about the customers you work with.
In my business that is worth more than any shopping trip!Always put your business needs first, before you increase your personal spendingClick To Tweet
About the Author
Hayley Chiba is a qualified Financial Controller working with small business owners. After over 25 years in industry, working with a range of blue chip companies, she now runs her own business, Better Numbers Limited.
This provides one-to-one Financial consulting to £1m + growing businesses in the UK. She also provides Financial coaching to Entrepreneurs, Home Business Owners and Start-ups via her eCourses and Skype. She is dedicated to helping small businesses grow through increasing their personal and business financial awareness.
She lives and works in Bristol with her partner Jon, son Dominic and much exercised dog Poppy. You can also connect with Hayley on Twitter @betternumbers1
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