Being an entrepreneur can mean a lot of different things to different people. However I believe there are some terms that all entrepreneurs can identify with:
- Problem Solver
- Risk Taker
Did you notice that none of them have anything to do with money? I have had countless conversations with entrepreneurs about their startups, and honestly I can’t recall a single one that talked about money. It was always the “why” and “how.” Entrepreneurs tend not to create things that solve problems for money, money is simply the byproduct of building something of value that benefits human kind.
Although money is not the driving force for most entrepreneurs, it is certainly on their mind. Money is a tool. They use it to build and scale their businesses. They also use it to provide for their families, giving them a lifestyle they never had, allowing them to experience life through a variety of opportunities. (For related reading, see: Entrepreneurs Make Money: Why, How, Where and When.)
Most entrepreneurs understand that money is simply an idea. They don’t want the money for the sake of having money, but for what the money does. They respect this idea and are not afraid to pursue their passions using money to make things happen!
I recently conducted a focus group with company founders. One of the things I learned is they all agree that personal financial planning is important, but when they are pulled in so many directions already, it is tough to add one more thing to the plate. However, they all said they wish they would have started planning sooner.
Based upon my experience working with entrepreneurs, here are three personal financial tips entrepreneurs can start using right away:
Define Your Hopes, Dreams and Goals
What does this have to do with money you may ask? Well, everything! If you are of the belief that money is an idea and tool, then you will agree that we need it to do the things we want to do in life. But if we don’t define those things, how can we plan for them financially?
No two people will ever have exactly the same hopes, dreams and goals for the future, yet we all can benefit from thinking about them. It really is taking a look at who you are and what you want out of life. It is a very personal process. It is a lifelong process, thus what you want today will almost certainly change in the future. (For related reading, see: Setting Financial Goals for Your Future.)
Know Your Personal Cash Flow
Whether you are just starting your company or you are on the brink of a liquidity event, knowing your cash flow is crucial.
For those who are in the early stages of their company, you need to know your personal financial needs to map out how much money you will need to live and how long your current savings will last. If you are bringing on investors they will have no problem using some of their money to pay you a salary, but if you don’t know what you need, then how can you determine the right amount to pay yourself while still investing in your business?
If you are about to sell your company, your cash flow is just as important. You are transitioning from earning a paycheck to receiving a lump sum. You may never earn a regular paycheck again. Having a strong grip on your cash flow will help you determine how to invest your windfall and what lifestyle you can expect to enjoy post exit. (For more from this author, see: Sudden Wealth: How to Handle a Cash Influx.)
Educate Before You Implement
A commonality I have noticed among entrepreneurs, is that they make it a point to educate themselves before implementing a strategy.
So how do you educate yourself about your personal financial situation in a way that gives you insight about your relationship with money and what strategies make the most sense for you given your hopes, dreams and goals for the future?
First, figure out what you want, regardless of money.
This is where doing some initial research online or with some books is a good place to start. Get comfortable with the basic financial concepts and strategies so you can start to formulate your plan. This is where you may want to consider speaking with a financial professional.
Part of your education process is to vet financial professionals before you ever reach out to them. Check out their website. Does it tell you who they are, who they serve and how they do it? Are their fees transparent? Also check them out on independent government websites like FINRA or SEC Investment Advisor Search.
If they pass muster on these fronts, then consider reaching out to them. Set up a meeting to interview them. Remember, if you don’t get along with them it won’t matter how smart or qualified they are, you have to connect with them on a human level to build trust. Without trust, nothing else matters. (For related reading, see: How to Find a Financial Advisor/Planner.)
How Does This Help You?
If you have taken the time to identify your future wants and desires, it actually brings clarity and energy to your life. You will have focus. You won’t feel overwhelmed or distracted by your finances, but empowered because you now have identified what you want, and more importantly, how to get there. This is liberating and also allows you to put more of your time and energy into doing the things you need to do to get what you want.
(For more from this author, see: Combining Business Ownership and Marriage.)