Imagine, for a moment, that you were going to do something that’s not sexy and start a small business. A shop on the corner, a lawn mowing service. Or my favourite example, a sandwich shop / cafe.
The first step wouldn’t be seeking investment. If there was money required, the first step would be an old school, interest accruing, unforgiving bank loan or money from your closest family members. In the first case, you would sign a contract, and commit yourself to paying back a loan of several thousand dollars, whether your business sinks or swims.
In the second, you’d take money from people who worked hard their whole lives and earned and saved. And you’d take it hoping that you’d be able to pay it back, someday.
Those are tough propositions, but they’re normal. This is what people who run small businesses generally have to do. And for a lot of people, it succeeds. They work their ass off, manage their funds responsibly and pay down their debt. It’s a matter of spending cash where it’s most necessary, managing cash-flow and maintaining a certain level of frugality.
Because the small business entrepreneur, with a loan from Big Bad Bank or her Mum’s retirement fund understands that sooner or later, she’s going to need to pay every cent back, with interest.
If you’re a start-up founder, and you do have funding for your business, you should treat that cash the same way. Treat it like a loan that you have to pay back. Spend it like every cent is going to cost you twice. You’ll be better able to prioritise your expenses. You might even cut down on your burn-rate and extend the life of your start-up.