Starting your own business and leaving the “safety” of a regular monthly paycheque behind is a big step filled with excitement, uncertainty, freedom, and fear.
The early days of any startup can be filled with what feel like endless challenges as you try to develop a minimal viable product or service, build avatars, find customers, and gain visibility through marketing, all while trying to cover your business expenses, pay yourself, and not sacrifice your life.
Here are four steps you can follow to get started with your new business on a solid money foundation:
1. Calculate your personal survival budget
Once you quit your job and start your business, your job income will fall to zero, and your business is going to need to provide. However, growing your startup and generating regular monthly income takes time. To support yourself (and your family if you have one) in the early stages of startup you need to:
– calculate your minimum monthly expenses.
– calculate your total minimum yearly expenses.
– divide your yearly expense total by 12 to turn these yearly expenses into monthly expenses.
– Add all of these expenses together. This is the amount of money you are going to need, each month, to feed yourself, keep the lights on, have at least a bit of fun, and survive without going into debt.
When you complete this calculation, and you have your survival budget, you may surprise yourself on exactly how little you can survive on each month. If you make more than this number during a given month, you can spend more (or save it for later), but knowing what your absolute minimum monthly budget is, and following this budget, will help you give your startup more time to grow and start providing an income.
Ashlea, Fionn, and I have a regular monthly budget of about $7500. Our survival budget is just under $2500. If the business has a bad month or two, we know we can make adjustments and live on less, giving my business the time it needs to become successful.