Starting a business might be scary, but for those already invested in a venture that’s underperforming, knowing when to pull the plug is by far the more terrifying prospect.
To be an entrepreneur, you require a certain amount of blind faith, drive and ambition. At some point in your business venture, and long before you have too much invested though, it is absolutely necessary to do an analysis to know how much “financial runway” you have to make your business take off.
Avoiding this analysis can lead to absolute ruin. Here’s why:
Your “financial runway” is the amount of money you are able to invest or risk in business, without putting yourself, and your future in real financial jeopardy.
It’s virtually impossible to start a business without incurring some debt. The business itself will also provide plenty of opportunity to overspend, particularly if you’re already inclined to do so in your day to day life.
Even if your spending is necessary “for the business,” it’s your name on the debt being issued or incurred. If your business succeeds, your early spending will weigh on this success until you pay it off. Here’s the scary part: If your business fails, you will still be on the hook to pay that debt, all by yourself.
If your business takes off before you reach the end of your financial runway, you are “in business.” (Congratulations!)
The end of your runway, though, is the point at which a business crash will impair, or destroy your financial future, irreparably. Once you reach this point, you need to stop.
How can a Personal Financial Trainer help?
If you’re considering a new business prospect, or if you’re already in the thick of it, it is especially important to get a crystal clear view of your finances, your expenditures, and the point at which you MUST pull the plug. The personal and emotional investment in a business can be huge, making it impossible for most people to see this line without help.
Having the strength to find this point, the very end of your “runway,” so to speak, and then respect this line is also very difficult to do without support. The line is indelible, not something that can be erased and redrawn. Passing it means you need to cut the business loose, and make good on those debts by other means, before they lead to ruin.
A personal financial trainer will respect just how difficult this exercise is. They understand how much their support is needed. They will help you make these difficult decisions, and provide much-needed validation, and support to help you through it.