Personal Finance Tips for the Millennial Seeking to Get into Entrepreneurship
Entrepreneur's New Year’s Guide
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Entrepreneurship comes with its own set of wins and challenges. What transforms these challenges into wins is how we tackle them. Exercising prudent financial habits while setting up your venture is a crucial aspect of entrepreneurship that often gets overlooked. While the majority perceive the world of finance as a black box - filled with complex terms and jargons - it need not be the case for everyone. Instead of letting that clout influence your judgement or even worse - make you run away from it, let's try to dig deep and simplify your take on personal finance to make life easy and turn your financial understanding into strength for the business that you intend to build.
This point is not directly related to finance, it, however, is worth considering since it teaches you the basic rule of what to value and what not. One can find a lot of information regarding how to start, how to work on the business idea or model but there's little mentioned about how the experience at a workplace can provide you with the much-needed perspective on a). The value you as an individual can create for an organization. b). Earning or generating income for yourself. These two points are directly related because the higher value you create, the better you will be remunerated. Your job is a reflection of how you will run your life as an entrepreneur.
Start thinking and planning for your startup at least 2 years prior. It gives you enough time to dwell on your idea and save money to float around at the time of launching your startup. To some of us, frugality doesn't come easy. If you fall into this category, then, spend some time on understanding the importance of prioritising your expenses, budgeting and planning since it will go a long way in helping you build your business.
Raise Money from Family and Friends
Raising money from investors and VC funds might be the norm today, however, many of the well-known industrialists today including Mr. Narayan Murthy have stories about raising money from their family and friends. It requires a lot more gumption and preparedness to pitch your product to people who have known you for long and understand your motivation to build a business. This exercise not only prepares you to pitch to investors but also gives you a runway for couple of months before you raise money from external sources. It validates your idea, boosts your confidence and brings your idea to fruition before bringing investors onward.
Evaluate Fallback Options
When the going gets tough, the tough get going. One of the foundation stones of entrepreneurship is the ability to plan fallback options. Drawing out only enough to float around will contribute in extending the runway for a couple of months only, however, financial capital is needed for the organization's long-term growth. Apart from directly raising money from VC funds and angel investors, one can explore options of participating in b-plan competitions, startup fundraising competitions, applying for business loans etc.
Minimize Dependency on Credit Card
While credit gives you the power to spend in absence of cash, it can also contribute to creating an illusion of abundance. Use debit to give you the feeling of actual cash outflow which further reinforces the saying - put money where your mouth is.
Make Technology your Friend
Maintain income and outflow, for your personal use, even when you're working and not actively pursuing entrepreneurship. By adopting some of the user-friendly mobile apps, one can easily get a detailed analysis of and insight into the categories of personal expenses. Leverage technology to help you in maintaining history, financial records and in analyzing your spending patterns.
These practical steps will help in shaping your approach to entrepreneurship whenever you feel ready. By proactively developing an understanding of personal finances you can prepare yourself to undertake the exercise of building the financial health of your startup. The last thing you'd want is finance becoming a hiccup in the roller coaster journey of entrepreneurship.