The 4 E’s in Entrepreneuring Pre-Launch Preparation: Expenses

You’ve been immersed in your passionate idea. You’re ready to launch!

As you were preparing for the leap, have you taken care of the 4 “E”’s in Entrepreneuring? These are:

• Expenses
• Expectations
• Execution
• Excellence

This article will cover the first “E” in an entrepreneur’s pre-launch preparation:

EXPENSES

Do you have at least 3 months of total living expenses saved?

It’s wise to have at least 3 months of emergency cash saved up before you launch. Not credit. Not invested assets. Cash, or a liquid asset that you can cash in when emergency arises. Ideally you’d have at least 6 months saved up.

You can’t afford to spend your first launch months worrying about your family’s crippling finances when you should be focusing on building your business momentum. Spend some time and know how much your household spend is. Round your numbers up, not down.

Before you launch, you need to know the answers to these two questions:

1. What is my monthly household expenses?
2. For how long can I survive on zero new income?

Do you need to adjust your launch time frame?

You calculated your income and found that you have either a very low - or zero - financial cushion. You may take a few approaches:

• You hold off on launching as you keep your job to save up for your financial buffer.
• You do a “soft launch” and juggle working full time while building your business part time.
• You launch anyway!

Ayush Pant, an internet marketer and consultant based in Washington, D.C. emphasized the importance of knowing how much it costs to launch - and maintain - a new business. Ayush found himself in a better financial position 6 months later, and admitted that being single was an advantage. However, he felt it was a mistake for him to quit his job “prematurely”.

Are you prepared for the potential (initial) drastic reduction in income and other benefits from employment?

Scientific copy editor Anita Snyder had low business expenses, but she misses the money she used to bring home. Not having a steady paycheck is a major adjustment, both financially and emotionally. Two benefits of employment that I sorely missed were paid vacation days and sick days. For some of us, when we’re sick, business activities stop!

Many prospective entrepreneurs are also concerned about other benefits from employment, especially healthcare. Given the rising cost of healthcare, this is not an insignificant factor to consider when launching a business. An entrepreneur I know incorporated her business to get better insurance rates. Sometimes if you are a member of an association, you may get group rates and discounts for insurance (healthcare or liability).

Too often, we are focused on the income potential when launching a new business, and not pay equal attention to launch expenses and operational expenses. Our passion helps us persevere, but ultimately, our expenses will determine how long we can persevere responsibly.

Photo credit: Blue Piggy Bank by Rawku5.