Entrepreneurship sounds exciting, doesn’t it? Waking up when you want, making your own rules, and most importantly, being “your own boss.” On the outside, it looks amazing, but behind closed doors, there is so much the world does not know.
No matter how many degrees or certifications you have, what matters most in entrepreneurship are those invaluable life experiences; also known as the million mistakes you WILL make. If you are a young entrepreneur, or if you’re ready to quit your job to become an entrepreneur, here are four money lessons you can learn from:
Entrepreneur Lesson #1: Don’t make financial decisions based on future income
Entrepreneurs are visionaries, who believe that the inevitable is possible. This is actually what makes them amazing! However, sometimes we believe that we can do so much more than what our bank accounts allow us to do. During the beginning phases of your business, both money and people are unpredictable. Don’t over estimate your limit, because you’re overly ambitious. Make business decisions based off what you have been consistently doing, and not by what you could one day have.
Tip: For every investment, always make a spreadsheet that outlines all your needed expenses. If you are able to cover those costs as well as your fixed costs with a little cushion, move forward.
Entrepreneur Lesson #2: Strive for the best, but plan for the worst
I hate to break it to you, but you are not invincible. You are human, and things can and will happen while building your dream. We often hear those horror stories from other entrepreneurs, and we think to ourselves, “That’s not going to happen to me!” Now, it is great to be optimistic, however, it is also important to understand that you will make mistakes.
When building a startup, always remember that nothing is constant. One day you’re expecting revenue, and the next day, the deal doesn’t go through. What you thought would cost one price, ends up costing you double. During the early stages, you must be open to irregularity. Be ready for things to financially fall apart right when you need them to be perfect.
Tip: Invest in physical activities to help stabilize your mind when things go wrong. Take mental time away from the problem. Try taking a walk outside, and then come back. This allows you to clear your mind and develop a solution.
Entrepreneur Lesson #3: Sometimes having a physical location isn’t always the smartest idea
I know you want the nice shiny location. The thought of not only seeing your hard work, but also being able to touch it makes it that much better. Having an actual brick-and-mortar site feels amazing, but it is not always the best financial investment. Working out of your home, a library, or somewhere that doesn’t require a lease can significantly cut the amount of money needed to get started.
When you do not have to pay monthly rent, get computers, or buy new office furniture, you can use the extra money to implement additional plans for your business. It is okay to use your cell phone for a while. It’s quite alright if you use someone else’s copier or printer, if you do not have one. DO NOT commit to a lease just because it makes you “feel” or “look” good.
Tip: As you grow, there are many spaces to work, and they do not require large investments (i.e. community work spaces and church office spaces). Additionally, ask your friends and family about space. Working in these communal spaces often help you to network with other like-minded individuals, who are also growing their businesses.
Entrepreneur Lesson #4: Don’t wait until you “start making enough money” to get an accountant
Just because you have never created a budget for your personal funds, it does not mean that you shouldn’t build one for your business. It is important to know where every dollar is coming from, and to also know where every dollar is going. If you are not keeping track of your business cash flow, how do you know if you are making a profit? How will you know where to make changes if you have no structure? When it comes time for you to get funding for your business, your financial statements will be required. Why wait until you’re making more money in business to begin tracking the money within your business. Hire a certified public accountant that will guide you in the right direction.
Tip: Many community centers offer free accounting services. There are also many accountants that will assess fees based on the size/annual revenue of your company. You can even utilize your network to see if they can refer you to someone they trust.
Ashley M. Fox is a former Wall Street analyst, a Howard University grad, and she is now an expert in her field as a Financial Education Specialist. She is the founder of Empify (merging of the words EMPower and modIFY), an education- based organization created to help both adults and children understand financial literacy. Since leaving her Wall Street career, Ashley has become an award-winning financial coach who has helped her clients collectively save and invest over $1.4mm. She is a highly-sought after speaker who has been featured on empowerment tours, college campuses, and keynote speaking platforms. She has been featured on Jim Cramer’s “The Street”, Yahoo Finance, AOL, Philly.com, Huffington Post, and Glamour Magazine.