Essential Financial Tips for Aspiring Entrepreneurs: Are You Really Ready?

I have a few nuggets of wisdom specifically for people who currently are living the 9-5 corporate world dream of being their own boss and want to jump into the world of entrepreneurship. I have both some tangible physical tips along with some deeper internal questions to ask yourself as you decide to dive in.

By: Mike Poulin - Wealthness Guide at Q&P Wealthness Collective

Over the last five and a half years I have worked as a personal financial coach and small business coach working at both a startup and non-profit. I’ve worked with over five hundred individuals to help them better their relationship with money along with teaching people the basics of a business plan. So I’ve seen it all when it comes to finances. I have a few nuggets of wisdom specifically for people who currently are living the 9-5 corporate world dream of being their own boss and want to jump into the world of entrepreneurship. I have both some tangible physical tips along with some deeper internal questions to ask yourself as you decide to dive in.

First and foremost, You don’t need to open an actual business checking account to start your business. A business checking account means you have applied for an EIN and you should only do that after you have a viable product/service and name. You just need to keep your business financial activities Separate. Open an additional checking account at the place you already bank and ensure everything related to your business or business idea is in that and NOT in the account that your everyday spending or current personal bills come out of. Eventually, it's important to have a business account - you don’t need it right away. Having the discipline to do this from the get-go is going to save you a lot of mental energy or time when you have to file your taxes.

Speaking of taxes, ANY income you start making, make sure you are setting aside ~30% of every transaction. I do this with any 1099 income now. I use Ally Bank, and their savings and checking accounts have a bucket system that you can automate where deposits go. So I have a separate account where my income comes in (I labeled it 1099 income) and I have every transaction to put 30% in one bucket (taxes) and 70% (income) While I may not need 30% for taxes, I know that I will be covered when I file my taxes. While everyone’s strengths are different, I highly suggest creating a relationship with a qualified tax professional to ensure you are crossing your t’s and dotting your i’s and not stressing about your taxes.

How are your personal finances? While this seems like a no-brainer, oftentimes we are so caught up in our idea and excited about the journey, we sometimes ignore the important things. While I often suggest my personal finance coaching clients have 3-6 months of expenses in a high-yield savings account, for clients looking to jump into being a business owner, I suggest trying to have as close to a year of your personal finances saved in a HYSA. The reason I suggest this is often times your first year of operating a business you won’t make money, and starting a business is stressful enough, that you don’t want to worry about how you're going to pay your personal bills. This is especially important if you do not have a partner or other streams of income outside of starting the business. If you’re looking to access capital, you need to make sure your personal credit score is super important and can make or break your ability to scale your business.

Take an honest look at your habits and feelings around money - you will bring them into the way you run your business. You don’t need to necessarily have everything figured out, but you need to understand your strengths and weaknesses around money so you can be aware of how you’re going to operate around your business finances. Take inventory of how you feel thinking about your finances, your spending habits, and how you organize and pay your bills.

Do you have buy-in from those in your circle as you start this journey? Being a business owner is not for the faint of heart. Having open and honest conversations with those closest to you whether it’s your partner, your kids, your parents, your close friends, and other family - they need to fully be on board and understand being a business owner is going to change so many aspects of your life including personal dynamics between you and them. It truly takes a village, and you can’t be a successful business owner by yourself. A quick reminder that some of the most successful business owners of our time often had huge support from family.

The final piece of advice I can give aspiring business owners. Don’t forget to pay yourself a salary. Often times we think it's just important to run the business, but you need money to survive. When you are in the feasibility portion of your business plan, ensure a livable wage for yourself is part of your expenses and overhead to help accurately set up your budget, your profit and loss, and your cash flow projections. So many people don’t do this and it’s extremely important for the longevity of your business.

Don’t forget to check the Small Business Administration, they have so many no-cost or low-cost resources for small businesses, they are truly a treasure trove of information. And if you feel like you could benefit from the accountability a personal finance coach could provide, feel free to reach out to me via Instagram @‌the_wealthness_collective.