You need money to build your business and you’ve probably heard of entrepreneurs going to great lengths to bootstrap their businesses. For instance, some people sell their valuables and collectibles while others go into debt. Those are decent ways to bootstrap a business, but there’s a better way that will support you long-term.
Slash your living expenses to free up serious cash long-term
Before searching for sources of capital, experts recommend eliminating unnecessary expenses first. You may not realize it, but a significant portion of living expenses are often unnecessary.
For instance, say you live in a house all by yourself. In addition to paying rent or a mortgage, you’re paying for garbage, electricity, water, sewer, and possibly yard maintenance. If you’re like most people, you pay for cable, internet, and a phone. Then you’ve got property taxes that seem to rise each year, appliance repairs, building maintenance, and more. All of these expenses make sense when you’re just trying to live and enjoy your life. These expenses don’t make sense when you’re building a business.
When you’re a homeowner, living expenses come with a drain on your time. How much time do you spend managing your house? How often do you wish you had more time to spend building your business?
Imagine not having to be responsible for repairs, maintenance, or property taxes and not having so many bills to pay. Imagine having hundreds or even thousands of dollars freed up each month that you can invest in building your business. This would be your reality if you downsized your living space.
What’s your priority – your future or a fancy living space?
Your business is your future. If you plan on supporting a family with your future business income, you can’t afford to waste time or money. You’ll build your business faster by moving into a studio apartment or renting a room, at least until you’re turning a profit.
Instead of selling your house, rent it out to generate future long-term profits. The rent should cover your mortgage plus a little extra, and you can hire a property management company to handle the hard work. By the time your business becomes profitable, you’ll have an asset that generates pure profit.
Don’t fake it ‘til you make it
There’s a belief floating around that surrounding yourself with luxury is the fastest way to create a genuine luxurious lifestyle. Maybe you’ve built yourself a home office that resembles an old-fashioned library and makes you feel like you’re living large – at least until you have to pay the mortgage. Or, perhaps you’ve rented a fancy office so you can feel like you’ve already become a success. The “fake it ‘til you make it” approach will make you feel good, but it will also drain your wallet.
Don’t try to surround yourself with luxury too soon. Some of the world’s top startups don’t even rent office space until they’re turning a profit. When the Crazy Egg creators worked for KISSmetrics, they didn’t pay themselves a salary until they received $10 million in venture funding. Unnecessary expenses that make you feel good are still unnecessary.
Don’t worry about projecting a successful image to the world
It’s not necessary to maintain a luxurious lifestyle while building your business. It just doesn’t make financial sense. Although many entrepreneurs project an image of luxury on social media, avoid falling into that trap. Some of those entrepreneurs have been in business for many years and others are just pretending.
Don’t put the cart before the horse. If you’re not yet financially fluid, don’t pretend because it will sink your business before you get off the ground.
Put your living expenses on the chopping block
If you’re committed to building your business as quickly as possible, revisit your living expenses and put them on the chopping block.
Calculate the amount of money you’d save every month by downsizing your living space. For instance, say you’re renting a house for $3,000 per month. If you find a room to rent with utilities included for $1,000, you’ll pocket more than $2,000 each month. Even renting a studio apartment for $1,500 will save you more than $1,000 each month.
Calculate the amount of money you’d save by canceling cable TV, random subscriptions, and utilities for a large house. Then get rid of every expense that doesn’t support building your business.
Slashing your living expenses holds the most promise for recovering the largest amount of cash. Your business will become profitable much faster when you make this necessary sacrifice.