Wednesday, January 28, 2009

The One Thing Entrepreneurs Forget

When we dream of what we are going to do with our new business, we sometimes forget the first requirement that the business or some other resource must fulfill. We have to cover our monthly bills to truly make progress on our venture.

I know this may seem very simple and logical, but you might be surprised to realize how many times this is forgotten in the business formation process. If the objective is to make this new business our full-time priority, the first phase of any business is to get it to a point where it can sustain itself and the founding team.

Regardless of how much investment capital or loan money you may have raised to start your business (BTW, those who raise external funds to start their businesses are an overwhelming minority), your business has got to have a solid plan to get to break even for both the business and the founder(s). The longer it takes to get there, the bigger the whole is from which you must climb before you can ever progress into a sustainable and successful business. In fact, it is always the most difficult and most expensive to raise money for your business before you have shown you can at least cover your monthly expenses.

An inability to meet the monthly bills of the business and the founder(s), or "cover the nut" as it is called, puts the entrepreneur into a tough spot. The focus changes from doing the things that will build a long-term business to putting food on the table for the family tomorrow. If an entrepreneur knows the business and his/her personal expenses are covered, they are free to focus on developing and growing their business. This one point will make all the difference in the success of the company.