It’s easy to get excited about starting a business when you think you’ve got a good product in hand, or a service that can solve a real world problem or a skill that few people have but need.
At the beginning of an entrepreneurial journey, most entrepreneurs often focus on building a sustainable business. Some focus on getting funded and exiting the business to start another business.
While focusing on making your business profitable which may take some time especially if you’re in a saturated market, you must also think about building a sustainable personal financial situation for yourself and your family.
Here’s a look at some money management tips you can use at any stage of your business:
PAY YOURSELF ENOUGH
Many entrepreneurs understandably feel pressure to reinvest all or most of their earnings back into the business – particularly women.
For 10 years of being a solopreneur, I didn’t have a fixed salary. When I had projects, I’d use some of the profit to pay my bills and a little travelling. I’m pretty frugal so there was no issue.
It’s totally normal to want to put your business first, but you shouldn’t do so at the peril of your personal finances. Make sure the salary that you determine for yourself is sufficient to maintain your lifestyle, but also to fund your retirement.
Four years ago when I formed a Private Limited Company with my event business partner, we started to pay ourselves. This motivates us to earn more money for the company and take calculated risks when it comes to company expenses.
We contribute to the Employees Provident Fund (EPF) and were happy that middle last year EPF made the adjustment of rates from 9% to 11%.
Compounding interest over time is powerful for everyone – including business owners. You need to both pay yourself and reinvest in the business to advance its growth.
Just how much should you set aside? The answer depends on your lifestyle, and planning how much to save requires an honest conversation with yourself and your family about “needs” vs. “wants.” In other words, you may have to sacrifice some of today’s immediate “wants” in order to sufficiently plan your financial future. (But it’s totally worth it!)
START WITH RETIREMENT, THEN THINK BIGGER
While EPF is a terrific vehicle to save for retirement, it has an annual contribution limit and therefore are only one piece of a bigger retirement strategy. If you find yourself with extra money after contributing to your retirement accounts, you can consider investing in income-producing assets, such as stocks or real estate.
If you’re comfortable taking on additional risk, then you may want to consider investing in individual stocks or even in private businesses. You may also want to put money into a money market account. It may be time to engage a financial advisor to help you with your investment strategy.
YOU WANT TO SELL YOUR BUSINESS. NOW WHAT?
Regardless of how the economy is performing, strong businesses are always desirable. Especially if your company is in a popular vertical like tech, construction, artificial intelligence or healthcare, your firm may even get approached by prospective buyers.
When getting ready to sell, one of the most important things you can do is find people who can help. You’ll learn best from other entrepreneurs on what they did and the mistakes they made. Most importantly, you’ll need to determine what to do with your new pile of cash after your sale. Ask yourself: What’s the mission and vision of this newfound wealth? A financial planner can help you decide on your best money moves, but saving and investing for your future are paramount. Also, because so much of your life was focused on building the business, you’ll need to reorient your mission and vision.
BUILDING A LIFE WITH PURPOSE
Purpose is key. Ask yourself: What can my money do for me, my family, and my community?
When it comes to my events business, we produce events with some form of impact. Our first production three years ago was a trade show bringing industrial drone companies together with a conference. We know that local drone companies have the skills to go global but might not have the confidence to take the leap to go global so we invited international customers to the show to give local and international drone companies a platform to grow and learn together.
This year we are producing three new events (and again I’m having restless nights thinking of ways to get sponsors in!).
The first is a Fun Walk where a portion of ticket sales goes to Environmental NGOs who are partnering with us. The second is an Art Exhibition highlighting the challenges facing our environment and the human impact on our planet.
We’re also promoting local artists to share environmental messages via their art installations at the show.
So these two projects give me purpose. Also, with these projects, we are able to sustain our business as we have started to grow our tiny team from two to four!
Soon I hope this can be applied to My Money Insights. We’d love to have more writers contribute to our blog. If you’re an expert in financial matters, come talk to us!
So in summary: Pay yourself first. Invest your money. Think about purpose. Now, go climb!
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