Don't empty your wallet without assessing your
finances.
Most entrepreneurs foolishly put their own money into their
businesses without taking stock of their personal financial
situation, says Eric Tyson, author of Small Business For Dummies
(IDG Books Worldwide).
"Before you pour all available cash into your business, do
some number-crunching," he advises. "Determine what you
need [to start the business], and then see if your personal
resources, typically savings and equity, can cover it after your
living expenses are met. The idea is to determine how much of your
personal assets you can comfortably put into your business while
still keeping some in reserve."
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Tyson believes selling your life insurance policy or dipping
into pension and retirement accounts to foot your business bills is
a mistake. "Dipping into pension money could come back to
haunt you if things don't work out as planned and you fold your
business," he says.
Finally, if at all possible, don't finance your business
with personal credit cards. Says Tyson. "Not only do you face
high interest rates, but you also face [the danger of] a poor
credit rating and even personal bankruptcy if you can't pay off
the debt."
Tyson advises against believing everything you hear about using
credit cards for your business expenses. "Entrepreneurs who
have successfully launched companies using credit cards have been
romanticized in the business press, but unfortunately, you seldom
hear about the failures and the accompanying repercussions of not
being able to pay off the debt," he says.
This is reason enough to spend within your means during your
first and most critical year in business.
Contact Sources
Bottle Rocket Inc., (212) 352-2040, http://www.bottlerocket.com
Copier Brothers, 1407 E. Thomas Rd., Phoenix, AZ 85014,
fax: (602) 241-0912
Music Recyclery, (847) 855-7844, http://www.useddiscs.com/cdstore
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