Ideally, you would create a separate bank account (even if it’s just a separate account within your current bank) that is dedicated to your business.
The lack of separation isn’t just a good financial practice. It also trains you to start seeing your business as a separate financial entity from your household. This is crucial for creating “boundaries” between your personal and business finances.
Without this, it’s easy to lose sight of how much personal cash you are putting into the business. You can end up continually drawing on your personal savings to support the business instead of pushing yourself to make the business stand on its own two feet financially.
3. Clean up your personal finances. The mistake I see a lot of small business owners making is totally neglecting their personal finances in preference for chasing more sales and business growth.
That is, after all, the dream that business owners are sold into: more sales solve everything.
Here’s the thing though – it can take time (sometimes years) to get your business to a point where it is consistently and predictably profitable enough to give you financial security.
You have to have the stamina (not just mentally and emotionally but also financially) to withstand the ups and downs until you reach that point. Business is a marathon, not a sprint.
The stronger your personal finances, the more “financial stamina” you will have to endure the journey and the inevitable storms and challenges.
If you are carrying credit card debts, don’t have a strong savings capacity, barely have any super (or it’s in a fund that’s bleeding money), have no investments outside super, aren’t savvy about tax savings…then you simply don’t have as much financial stamina.
You’re then continually forced to choose between your dreams and your financial security, which will wear you down over time (both financially and emotionally).
4. Don’t take on too much personal financial risk. If you’re trying to buy a house, and start a business, and you’re carrying credit card debt, and you have a car loan…you might be taking on too much financial risk, all at once.
One mistake I see business owners making is wanting it all, right now. They don’t want to be “left behind” in terms of their lifestyle. They want the house, the car, the holidays, the lifestyle.
The more financially demanding your lifestyle needs are, the less capacity you will have to tolerate the financial ups and downs of your business journey.
The game of wealth is largely a game of delayed gratification. Can you make a few short-term compromises for the potential longer-term payoff?
All of these financial tips are ultimately trying to strengthen your financial foundation and manage the financial risks that are in your control, which will give you more “staying power” in your business longer-term and increase your capacity to weather the ups and downs.
Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.
Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
