January 8, 2008

Home Business Owners Should Plan On Shinola

No matter how good your business plan and projections are, there’s always something that makes that first dollar take longer to appear in your deposit slips: that DSL line they installed turns out to be flaky and you have to call the cable company for broadband instead, the guy who said he’d take anything you produce says it’ll be at least 90 days before he can buy, the training took longer than you expected . . . the list is endless. You’ll feel like you’re walking a tightrope.


As a rule of thumb, when your starting a new business, plan for 6 to 12 months of expenses including your own living expenses. If you haven’t already done so, be sure to find other home based business owners or telecommuters and ask them about their start-up experience. If you’re starting up a home-based business, as long as you’re not a potential competitor, fellow entrepreneurs are often very willing to help. You can even go so far as to ask another owner to look at your projections and see what they think. They often will reciprocate and offer to show you theirs. Also track down one or more business associations that you might join. Whether or not you join, the bigger associations are often a goldmine of useful information on topics like: typical financial ratios, vendors, specialized attorneys and accountants, tips and tidbits about how to succeed, etc.

If you have an existing job you can save every penny to build up a war chest for that first year of expenses. If you need to raise money, keep it simple. You don’t want a bunch of angry investors driving you crazy with well-intentioned suggestions (a.k.a. their half-baked, wanna-be ideas) while you’re struggling to make things work. Money from friends, family, and people who know you, like you, or love you, is probably your best bet. After that, assuming you qualify, a loan is your next likely source.

Above all, make sure your credit card debt is under control. And if it is, get a bunch of them and use them all just a little and pay on time every time. Build up the limit on those cards so that if you suddenly find yourself in crunch you have an alternative. But think of it this way, if you’re going to walk out on a tree limb, it’s nice to have another one to hang on to. If you break the limb off to use for balance like a tightrope walker, you can’t lean on it anymore . . . and there’s no net.

For more help on small business loans, angels and other private investors, venture capital, government loans and grants, preparing a business plan or financing application, and other money management advice, check out our all new, fully revised eBook, Finding Money—Secrets of a Former Banker.

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