Here's a secret: You don't need a completed business plan to launch a business. Heck, you don't even need to be the smartest person in the room to form or lead an IT services-focused company. So what do you need?
Most importantly, I think you need to have your own house -- your home life and personal finances -- in order. After Business Insider identified 8 signs you're living beyond your means, I saw an instant correlation for IT entrepreneurs. Here's a look at each one, and the potential implications as your challenges at home potentially undermine your startup business.
1. Fear of Missing Out: Do you constantly need to buy the Next Big Thing -- an Apple Watch, a luxury car, smart home devices, etc. -- before you have the cash on hand to do so? When it comes to starting a business, chasing the Next Big Thing gets even more expensive if you run up luxury business expenses that have little or nothing to do with actually building your business.
2. You Carry A Balance On Your Credit Cards: So let's get this straight. You don't currently pay your monthly bills in full. Now, you're somehow going to quit your job, abandon your salary, give up your benefits and start a business? That sounds like a reckless idea to me.
3. You're Not Saving At Least 5 Percent: Think of it this way. If you can't turn a profit in your home life -- saving at least 5 percent of your gross income per year -- how are you going to build a business that generates at least a nominal profit?
4. You Have No Emergency Fund: Starting a business can be fun. But are you really ready with some of the early pain points? In our two stints as entrepreneurs, Amy Katz and I typically did not take a salary or any income for at least six months. Each month, we each drained our respective savings a bit to pay our bills at home -- while also funding the business build-out. Without a proper emergency fund in place, draining your family savings and then potentially going into deeper debt can be a high-stress journey.
5. You're Leasing A Car You Can't Afford: Investors often talk about burn rates -- how quickly startup companies burn through venture capital, angel dollars and seed money. But here's a related thought: What's your burn rate at home? In other words, how quickly do you burn through savings while striving to pay everyday bills, including luxury items that you may not necessarily need?
6. You Don't Have Any Money Left At the End of Each Month: Some aspiring entrepreneurs start businesses to pursue money -- which will finally allow them to bank some dollars at the end of each month. But here's the thing. I think the best entrepreneurs pursue other rewards -- creative freedom, the chance to control your own fate, etc. A bigger income often is the byproduct of those pursuits. But if your business stumbles, those who have never saved money ahead of the startup will be left without any financial safety net.
7. You've Paid An Overdraft Fee: In business, negative cash flow makes borrowing money really difficult. Push your business checking account into the red, and your chances of raising money become even more remote.
8. You've Never Set a Budget: At home, my wife and I have always maintained a somewhat loose but generally responsible budget -- never spending more than what we take in, unless it involves a great investment (example: buying our home at a market discount). In business, I've been fortunate to work with Amy. She's always two or three steps ahead of me when it comes to budgeting for the company, tracking our corporate finances, and forecasting where we'll be later this quarter, later this year, and beyond.
If you've never gone through those exercises at home, you likely aren't prepared for the initial cash flow challenges you'll face as a startup business.
