Over a year ago, I began my quest to find answers to my two most pressing entrepreneurial questions: What does it really take for an entrepreneur to be successful? What does it take for a business owner to be the best of the best?
My conversations have taken me across the country, and I’ve spoken with business owners from different industries in all stages of business growth. I’ve also participated in numerous discussions on Connect, Citi’s network for professional women on LinkedIn, where many of our members are running their own businesses or are aspiring entrepreneurs. They’ve been exchanging ideas and supporting one another with advice on how to succeed as a small business owner, so I’ve distilled what I’ve learnt from these conversations into three cardinal financial rules for entrepreneurs:
1. Work on your business, not just in your business.
When you are surrounded by your own business day in and day out, it’s important to take a step back and make sure you are handling all aspects of the business. Sometimes entrepreneurs are so focused on their product or service, they may overlook their business finances. But it’s important to handle your business finances with intent and in an organised way.
2. Keep your personal and business wallets separate.
The old adage that business and pleasure don’t mix also holds true when it comes to your business finances. Set up separate accounts for your business. Don’t stop talking to your financial professional or advisor throughout the process of starting your company, since it can help you feel more confident that you are managing your personal finances wisely while you begin to build your business.
3. Have a “drop-dead” number.
Set a threshold for the minimum amount of money in the bank that you are not willing to go below. This number will be different for each person, but the important thing to take away is that you think about what this number means to you and save it in advance. It’s important to build up and maintain this healthy reserve or cushion to allow you to manage the lean months or the periods of uncertain cash flow. If you find that you are approaching your “drop dead” number, this is where discipline must override passion. Step back, take a hard look at your situation, and see what’s working and what’s not.
Linda Descano is a charted financial analyst and president and CEO of Women & Co, a division of Citi that provides women with financial resources and a community for building their financial knowledge.