I have decades of experience working with business executives and coaching entrepreneurs. There’s one mistake I see entrepreneurs make more than any other.
Here’s what I love about entrepreneurs: They’re go-getters. They’re positive people who believe life has great things in store for them. This positivity and optimism is one of their greatest strengths.
But it’s also their greatest weakness.
All too often, I see entrepreneurs being overly optimistic when they’re modeling their business.
They predict low expenses and high revenues.
Down the road, they discover their business needs more money than they expected. So they dip into their personal funds to keep things going.
They get so caught up in their business they forget their financial responsibilities. That is, until they get a nasty shock in the mail: a bank statement showing all their money is gone.
They’ve got nothing left to feed their family or pay next month’s mortgage.
Of course you don’t want this to happen to you. Here’s how to keep your finances in check:
- Make honest projections about what’s possible for your business. This will give you a realistic estimate for how long you’ll need to support your business with your own capital. I explain the details of how to make realistic projections in my book, Launch.
- Keep your personal finances separate from your business. It’s important that you’re open and honest with your significant other about how much you plan to invest in your business. Once you’ve decided what you’ll invest, put it into a separate checking account. Work with a professional bookkeeper from day one. That way you’ll always be on top of your finances.
Don’t make the mistake of burning through money you don’t have. Being realitic about what’s possible means you’re more likely to succeed in the long run.