6 Ways We’re Managing Our Finances and Our Emotions While Starting A Business

I’ve related our story time and again about how my spouse has been bitten by the high-tech startup bug. What I haven’t mentioned before was that this is his second jaunt into the world of financial uncertainty, cultivating a glimmer of an idea that may just be worth the risk and enticing us that it’s going to be better this time around. The last time he did this, it took 10 years before something positive panned out, after which he took a nice, stable corporate job that made me sigh with some relief.

So when that that day came in the summer of last year, when out of nowhere the spouse proclaims that he’s got the itch again, I’m once more having a bad case of deja vu. What follows were some angst-filled torturous discussions centered on one subject: MONEY.

After all, it was not just the salary that was going away — it was also the generous benefits, the ESPP plan, the annual option grants and decently matched 401K. All those concrete perks that took care of us all these years have now been replaced by pure faith over an idea that’s still in draft mode.

Now that we have gotten over the shock of change and my grief over the shelving of a nicely constructed 10 year life plan, we have settled into our new roles at home and in the financial front, and are now simply concentrating on the future. I will admit that for a while, I was consumed with thoughts of what we had lost: security, predictability, smooth sailing towards a healthy retirement. But since I lost this battle — I feel like Lynette Scavo in the show “Desperate Housewives” when her husband Tom decides to put all their savings into opening a pizza shop — tentative at first, but now a strong supporter and contributor to this entrepreneurial and household partnership.

So while we’re in the thick of all these developments, what is it that I can impart to you? Maybe some pointers from the entrepreneurial treks we’ve lived through:

How To Manage The Financial Stress Of A New Business or Startup

#1 Really watch your budget and spend carefully.
You may already be a budget hawk, but you may want to hike up your discipline a notch. Though we’re watching the business spending somewhat, it’ll be harder to control this spigot than we would our household spending given startup costs and requirements. So at this time, we’ve focused on controlling our household budget more carefully. So far, we’ve turned away from the usual temptations that trigger our impulse buying and have been more astute about where the money goes. We haven’t travelled in a while and have instead opted for day trips, and have avoided buying big ticket items except out of pure necessity.

#2 Maintain some liquidity.
It goes without saying that whatever you intend to use as capital should be parked in a relatively safe place. Because of our low cash flow, we’ve decided to keep a good part of our savings in cash to keep ourselves liquid. This is to allow us to pay bills as well as to have something at the ready to fuel the ventures we’re trying to run. Another way to fund a business is through loans and obtaining credit; either way, you’ll need some cash on hand if you’re attempting to bootstrap yourself in the initial stages of a business.

#3 Implement a growth plan that you can be comfortable with.
Pace your growth to keep control of your expenses as well as to preserve your equity. There’ll be that point in the business when more hands may be needed on deck; which means hiring people — most likely, consultants — to assist with the skills gap. It is cost beneficial to hire free lancers when you’re not at the stage to employ full time workers, especially when there’s not enough work for anyone else to be able to productively tackle. We learned that outsourcing to another country can be a risk for a small company at this stage, so we’re staying out of that path for now.

#4 Invest in the business with your own funds but be open to other people’s money.
Nothing lends more confidence to an idea than putting up your own money at stake. Even if the spouse is angling for venture capital down the road, by investing some of our money into his (and his partner’s) company, this allows less dilution in equity once outside investors are invited to participate in the venture. But relying on other people’s money at some point will allow for the option of receiving an income stream once more.

#5 Give yourself a timeframe upon which to make progress.
I mentioned earlier how difficult it was for us to decide to let go of the stability of a paying job, especially for this family of four. The only way I’d agree to it was if the spouse promised to give it a go for a certain period of time commensurate to our agreed upon “business budget and schedule”. The plan is to get investors into play within this time limit and if the idea hasn’t made promising progress beyond this period, then we would have to regroup. We can only rely on a portion of our hard-earned savings built for the last 20 years to tide us over; thus, we have given ourselves between a one to two year timeframe to make things happen. This allows us just enough cushion to cover our household expenses without seriously jeopardizing our future if things don’t work out.

#6 Get part-time jobs, contracting work or other side income to tide you over.
I’ve heard of would be entrepreneurs keeping full time jobs while growing a side business. Legend has it that this worked for Pierre Omidyar, who founded eBay ostensibly by accident as he worked full time while maintaining a hobby that turned into that renowned auction site. But we’re doing the opposite: my spouse has ditched the full time employment for full time risk and what he claims is uninterrupted productivity. In the meantime, we’ll supplement our income with whatever’s available, to ease the financial burden even just a little.

How We Cope With Uncertainty

Instead of looking back, we’re keeping our eye on the hopeful prize. I’d like to add as well, that any kind of entrepreneurial effort of this sort is a team effort involving the entire family. After all, it’s the whole family that sacrifices during the “drought”. So yes, we try to be cautiously optimistic and apply some partial suspension of disbelief. Because no matter what, we’re crossing our fingers that we’ll have something left to show at the end of this experience…for our efforts, sacrifices and the chances we’ve taken.

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