Be Realistic about the Capital Required to Build Your Business

Last week, we introduced Rule Three: Don’t Sacrifice Growth for a Good Night’s Sleep and discussed the importance of pushing past any fear of failure and getting very real about what it takes to succeed as a Female Maverick. It’s time to dig into the first step. Before we start, here’s a snapshot of everything we’ll be accomplishing over the next several weeks.

We’ll be honest. We both wrestled a lot with our personal balance sheets when we decided to start our own consulting business. For Beth, the toughest part was feeling like she was taking a serious financial step backward right at the time her career was taking off. Victoria was most worried about draining her savings (including retirement) to make the ultimate bet on a more stable future for her family.

Ultimately, you have to get comfortable with what you’re giving up in the near-term for potential long-term gain.

To make this work, we knew we both would be sacrificing, albeit temporarily, some significant perks that we were really used to having – solid six-figure salaries (one bigger than the other’s), growing stock options, and a perch more than a few rungs up the corporate ladder. It would mean changing the way we were spending on a monthly basis. And, it would mean taking some deep breaths and exercising a great deal of composure while congratulating our former coworkers on their fabulous vacations, starter McMansions and sporty new cars.

Ultimately, the daily reminders of what entrepreneurial success looks like (courtesy of family members already living their dreams) helped us make the leap. Of course, the money they had and the toys they played with were a big part of the attraction. But it was their freedom and independence that we really craved. They worked hard. But only they decided when and for how long. They made the call when and where they traveled. And they rarely complained about a horrible boss, a wage freeze or a shitty coworker.

To get in the right headspace, you might need a Female Maverick mental makeover. It can help to commit to this on paper. Write your biggest fears and what you might be giving up (personal and financial) and juxtapose that with what you might gain or what life might look like for you when business success comes your way. Put this on page one of your goals journal or, better, laminate it and hang it up for a daily reminder.

Once we wrapped our heads around our personal entrepreneurial mindset, it was pretty simple: Short-term pain in exchange for long-term financial and emotional gain. We had a number in mind we thought we could make from our business, and we went for it without looking back.

Second, get real about what you’re shelling out.

Sacrificing future income that’s not yet in your account is one thing to stomach. Parting with a good portion (or all) of your personal savings is entirely another. And it’s absolutely essential to have a really solid idea of what that total amount is going to be.

So, flex the matrix muscles you built up during Rule Two (remember your kitchen cabinet skills matrix?) And get ready to make a similar document for your capital needs, both at launch and to grow the business, to see how those needs stack up against your current and future resources.

Consider every expense category and put it on your matrix.

For us, we knew that we were going to go very heavy on data sources; what we did for a living – financial communications and ESG strategy – needs data and facts to back up counsel. We also knew that marketing and, more specifically, thought leadership, were going to be critical to brand building, and thus significant expenses on our matrix.

The expense buckets you ultimately come up with will be somewhat unique to your business. But there are a handful that every company needs to consider, including:

• Salaries and benefits (for you and future employees). You might need to have a salary at the beginning to keep things at home moving on an acceptable path. Victoria did. So, that went on the expense side of our matrix.

• Startup and ongoing fixed costs. Think computers, printers, office supplies, and, of course, technology and connectivity. These are all just a cost of doing business. Luckily in our situation, one of us is married to a forward-thinking IT professional (thanks Bill!) who gave us a good deal and was very ahead of the curve setting us up in the cloud, enabling a seamless transition to virtual work later on during COVID.

• Sales and marketing. This might include design, sales platforms, email marketing, conferences, you name it. When you are driving to your first bit of revenue, these necessary expenses can feel like a big drain on capital.

• Travel. Inevitably, you are going to need to get on a plane, train, or automobile. Don’t neglect to consider the cash burn on these activities.

And, finally, visualize what it’s going to take.

Once you know your critical investments and how they compare to your resources, you can prioritize, build out a budget, and paint a picture of what your monthly revenue and expenses will need to look like to ensure your business succeeds. We like to build waterfalls to illustrate how cash will flow.

No matter how you do it (matrix, waterfall, hieroglyphics) the goal is always the same: know how much you are going to need to launch your business and to keep it going in both good and challenging times.

What’s Next?

Now that you know what you need from a financial (and emotional) perspective to make your business work, it’s time to consider what you will (and won’t) do for and with the money.