Stop Spending Money Your Company Doesn’t Have

One of the major hurdles to overcome when you want to enjoy being an entrepreneur is achieving financial independence. In simple terms, it means not having any debt and an almost certain income for the foreseeable future. It is a goal that all business owners aim to reach and succeeding involves a lot of self-discipline, determination and patience. Today I will focus on self-discipline.

 

You’re just starting your company, or perhaps you got a new cash injection, the future looks bright! You’re planning what to do with the funds and your mind, almost inevitably, encourages you to present your company better than the competition. Whilst this is normal, it can cost you a large part of your funds.

 

Before we delve in further I want you to remember something; the money which you have for your start up or have received from other third party sources (such as investors, loans, etc.) does not belong to your business, but is only a loan. Your company only has money when it starts selling products or services and starts making a turnover. Until then, the money in the company’s account is all debt.

 

Keeping this in mind will help you make an important distinction; what is a necessity and what is a luxury. Here are a few examples, although they may vary depending on the business type and client base.

 

  • Instant coffee in the office is probably a necessity, having an espresso machine that uses expensive capsules is a luxury.
  • Having chairs in the reception area is a necessity, whilst having ergonomic leather sofas and a large LED television is considered a luxury for many start ups.
  • Whilst providing employees with a decent area to enjoy their break time (such as a small canteen) is a necessity, having a playground of the Google headquarters type is most definitely a luxury!

 

By making smart choices on how to use the money you will not only help your business grow faster but also show the entity which provided you with the funds that you are responsible and can think long term.

The money you have must be invested in your business in a way that will generate or increase turnover. If your business sells goods, then consider expanding your stock variety or quantity. If you offer services then get better equipment to provide better services. And let’s not forget marketing, which is also an important investment.

 

Having self-discipline when it comes to spending or investing money your company doesn’t own can make that all important difference.

The FUN Entrepreneur

Having started my first business at the age of 16 I was always eager to dive into the exciting world of entrepreneurship, but seeing so many others fail I sought ways to succeed, not only by making money, but also by having fun whilst doing it!

4 thoughts on “Stop Spending Money Your Company Doesn’t Have

  • August 24, 2016 at 1:54 pm
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    How I wish I read this article before I started my first company years ago. Having gotten an investment from an equity investor my eyes lit up like a kid in Christmas thinking of all the things to spend it on. 8 months later the company’s cash flow was dead. Thanks for the great article, I hope that it will help many new entrepreneurs not to repeat my mistakes.

    Reply
    • August 24, 2016 at 5:20 pm
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      Your story is exactly why we wrote this piece, Soni. I am sorry that you had to learn the hard way but I hope that the lesson helped you in your future businesses. Thank you for sharing your comment.

      Reply
  • October 6, 2016 at 12:04 am
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    What a great article about proper budgeting. I think sometimes it is better to start a business on a shoestring, than have all the money in the world. Thanks for the article.

    Reply
    • October 6, 2016 at 1:43 pm
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      True words Jerry. So much money is sometimes wasted when money is not tight. Some of the greatest businesses; Apple, Virgin, Ford, all started on a shoestring.

      Reply

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