About 6 months ago, my wife and I decided to start a cafe and especially during the last 3 or 4 months, we’ve had our heads buried in starting up said venture. If you’ve followed this blog for a while, you may have noticed my sudden and mysterious absence. This was due entirely to starting up the business. Now that life has more or less returned to normal, or as normal as life will ever be while running a business, I shall return to blogging.
Starting a business has changed how I handle my personal finances, and since entrepreneurship is a dream many people share, I’ll tear into some of the specific effects entrepreneurship has on personal finance. Of course, these effects won’t be universal. Different businesses, different environments, and different owners will all mean different circumstances. But perhaps my experience will at least give some food for thought for aspiring entrepreneurs or fellow new business owners.
Starting a Business Cost us Money
Let’s get the obvious out of the way. Our business came with significant startup costs. These were largely from re-modelling an office space into a food service space. We were fortunate to be able to start the business without touching our retirement savings. However we also put on hold any further contributions to our retirement accounts. This will probably mean that we will have to play a little bit of catch-up. And had we tapped our retirement accounts we would have had to play a lot of catch-up.
During part of the startup process, my wife and I continued to work at our previous jobs. For the month prior to opening our cafe, however, we had both gone down to just a handful of hours. This meant that most of our income had dried up. Between this and the startup costs, we learned to pinch every penny. We thought we were thrifty before this. This pushed us further.
Starting a Business Changed my Perception of Money
Starting a business is risky. We knew that there was a very real chance of not ever seeing a return on the money we were spending. This was thousands of dollars that we had spent years saving up. There were times where I thought I was insane. But the experience really forced us to re-evaluate money and put money in perspective. In the end, it’s just money. It doesn’t define us (or shouldn’t anyway). If the business does flop, and we don’t ever see a return, it won’t ruin our life. In fact, because of the experience I’ve gained from the venture, I would walk away without regret if the business failed, despite having sunk significant money in (although of course, I’d still rather see it succeed).
Starting a Business Introduces a Lot of Uncertainty
When you work a regular job, you get used to counting on a paycheck, week in, week out (or month in, month out). There is a sense of security to this regularity. Perhaps a false sense of security, but a sense none the less. This goes out the window when you start a business. Sure, you can make all sorts of goals and predictions for how your business is going to do, but in the end, you just don’t know. You don’t even know if your business will be profitable, much less whether you’ll be able to take an owner’s draw. And if you do, how much can your business sustain? In time, trends will appear, but until then we continue to pinch every penny, and hope that the business will produce enough income to cover our needs.
Starting a Business Clarifies our Financial Goals
One thing that put us at ease amidst the expense and uncertainty of starting the business is how few financial obligations we have. We don’t have any car payments or credit card debt. We aren’t locked into a cable or dish subscription. Our insurance premiums are relatively low, in part because we have high deductibles.
This helped clarify our goal of making our budget as lean as possible- where we are locked into as few expenses as possible. Having a lean budget is beneficial more than just when starting a business. A lean budget makes it easier to weather any period when money is tight. On a lean budget your emergency fund will stretch further and you’ll be able to make ends meet on a smaller income. And of course, the flip side of having a lean budget is developing a strong emergency fund and investment income.
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It’s great to see you back and I’m excited to hear more about the business. Thanks for sharing this post. We’ve seen similar issues with starting our business, and it’s nice to know that others have faced similar decisions. Maybe we’ll have some more collaborations in the future… I, too will be returning to regular posts in January.
Best,
-Mike
Thanks for commenting, Mike! I’ll be looking forward to your return in Jan!
Hi Dan!
This was a great post. Thanks for sharing your experience about starting a business. It really does take a lot of courage to open a business — something that I still fear and need to work on! That’s why your blog title caught my attention 😉
Are you still working your day jobs while running this business at the same time? I can imagine that being really tough!! But kudos to you for starting. Despite the outcome, it’s always a learning opportunity which never goes to waste — worth every penny. But of course, I am hoping the best for you!!
Thanks! We have mostly quit our old jobs. I still work a few hours at my old job, but we figured to try and juggle or cafe and full time jobs would be setting ourselves up for failure.
That’s impressive! I’m wishing you all the best on your business journey! 🙂
I haven’t read your blog for 3-4 months, and it seems like you’ve taken a huge step forward! Congrats! But I have to ask. You said that with a day job, at least you get a regular pay check. Isn’t the income pretty stable with cafe? I.e. you get a pretty stable flow of customers each day, and there’s not a huge seasonality factor to it?
Troy, thanks for checking out the blog again. Regarding stable income- maybe eventually we will get a stable income from the cafe. For now, however, that’s definitely not the case. We have some days where we are just packed, and others where we are simply dead- often with no evident pattern. I expect that that may be the case on a month to month basis too. Because of the overhead of running a cafe, a slight swing in volume can mean the difference between barely paying the rent/utilities and bringing home a healthy profit.