Smart Startup Move: Save for 2 Years Before You Dive In
Starting a business is exciting, but let’s face it, it can also be tough, especially when it comes to making a steady income. It might take some time before your business starts bringing in enough money for you to pay yourself consistently.
That’s why a good strategy is to save up for at least two years’ worth of personal expenses before you launch your startup. Keep this money in an easy-to-access place, like cash or liquid assets. These savings act as a safety net, giving you the freedom to focus on building your business without worrying too much about your own finances.
Paying yourself from these savings ensures you have a consistent income, providing a sense of security and helping you avoid the stressful ups and downs many entrepreneurs face. You know, the “feast or famine” cycle where sometimes it feels like you’re making a lot of money, and other times you worry your business might fail.
To stay focused on your business and avoid this emotional rollercoaster, make it a habit to save money for two years and pay yourself a salary from those savings while running your business. Any money your business makes can then be reinvested back into the business to strengthen its foundation.
Remember, as an entrepreneur, you’re not just working a job – you’re building an asset. So, instead of using all your income for personal expenses, consider consistently reinvesting it in your business. This approach can lead to compounding growth over time.
Growing a business takes time and patience. Don’t expect consistent profits within six months; it might take two years with focused effort, and realistically, giving 3-5 years is a good timeframe to see substantial growth.
Now, some might wonder why you’re saving money in fixed deposits and liquid instruments instead of investing in assets like real estate, gold, stocks, or cryptocurrency. The thing is, these investments may offer higher returns, but they often lack liquidity – meaning the money isn’t easily accessible when you need it. This can lead to confusion and uncertainty.
As an entrepreneur, it’s crucial to approach money differently. Instead of focusing solely on returns, consider investing in yourself and your business. Prioritize covering your basic needs and lifestyle expenses without the stress of month-to-month expenses. Invest your time and money into your business, and as it grows, reinvest the cash flow back into it.
After consistently reinvesting for 3-5 years, you’ll start seeing the effects of compounding growth. This can lead to significant profits, allowing you to withdraw money from the business to support yourself for the next 3-5 years in terms of personal expenses. All the while, you keep reinvesting cash flow back into the business for continued growth.
This approach requires a strong belief in your work and the value your business provides to customers. If you’re all in, with no plan B, this mindset can lead to real success. While traditional financial advice might push for maximizing returns, protecting yourself and investing back into your business has proven to be a successful strategy.
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