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Are You Starving Your New Business?

If you’re thinking about starting a business, you will need to ensure your basic living expenses are paid while the fledgling business takes root and grows to where it can support you.

In a perfect world, your business would support you while you work to make it successful. Unfortunately, most start-up businesses do not earn enough for the owners to pay themselves. For most, this means planning to pay your personal expenses some other way until your business can afford you.

The first step toward solving this dilemma is to determine your basic personal financial needs. Make a list of all personal and household expenses that need to be paid each month for the first year the business will operate.

Next, scan your financial horizon to determine how the personal expenses will be paid for at least the first year in the life of your business. Here are some possible sources of funding for your personal expenses:

1. A part or full-time job. Many businesses are started while the owner works for someone else.

2. Support by a spouse or parent. The perfect time to start a business might be while someone is paying all or part of your household expenses.

3. Buy-out or severance package. People are continually displaced from the workforce as a result of business closures, changes in corporate policies, downsizing, rightsizing or early retirement. Regardless of the reason for the layoff, a buyout package can provide the cash you need to jumpstart that little enterprise you’ve been thinking about.

4. Self Employment Benefits (SEB) Program. Bless the Feds and the distant planet they inhabit. The SEB is a wonderful federally funded program that grants EI eligible entrepreneurs enough money to pay personal expenses for up to the first year of a new business.

5. Secure a long-term major client or two. New businesses are often brought into the world when someone falls into an opportunity in the form of a lucrative contract.

6. Sell assets. For those with the good fortune to have assets to sell, doing so can inject the funds needed to nurse a new business through the start-up phase.

7. Pension. More and more it seems, aging baby boomers use their pension as a base from which to launch a new venture. This can be driven by necessity or by a desire to create a certain lifestyle.

Those unfamiliar with business often have an unrealistic expectation that a new business should instantly be able to pay its owner a handsome salary. The reality is that most new enterprises are allowed to take root because the owner is able to leave cash in the business until it grows.

Any other ideas to offer?

How did or how will you avoid starving your business?