Hi and welcome to episode 14 of startup marketing. Today, I want to pull back the curtain and talk about how to save for your own business. I think when I announced my plans to go out on my own and start Authentic, a lot of my family and friends were surprised. I’m not a super spontaneous person and I like stability in my workday, so entrepreneurship seemed counterintuitive, I think to my personality. But, what I probably hadn’t broadcasted a lot was my desire to have more freedom in more on schedule and the ability to step away for longer periods of time than a typical PTO bank allows. And, eventually, I’ll get to that point with Authentic because of the way I’m building my business today.
Something that I think everyone kinda wondered about, but maybe are too polite to ask is how I got to this point financially. As I’ve shared briefly in the past, I was unexpectedly let go from my marketing position of almost nine years at the start of January 2020. (and for those of you who are listening to this episode way in the future, it was long before Covid-19 was even a thing in America). The company I worked for was downsizing for a variety of reasons and if you’ve ever worked in marketing, you know that marketing teams are one of the first places that businesses go to cut expenses. Thankfully, I had been building Authentic for almost a year at that point and I was ready enough to be out on my own taking clients. It was a huge relief to immediately transition into a new job. But, it wouldn’t have been as relieving if my husband and I hadn’t been so prepared financially.
Now, I’d like to take credit and say that I had a lot to do with our financial preparedness, but in all honesty, my husband is the numbers guy in our house. It’s not that I’m incapable of doing it, I ran a gigantic budget when I was in the corporate world, it’s just that he’s way way more into it than I’ll ever be. And that’s one of the reasons that I love him so much. Without his planning and support in my dreams, I wouldn’t have been able to start Authentic.
First and foremost, we laid the foundation for this business long before we ever talked about me starting my own business. We started with an emergency savings account. If you’ve never thought about or looked into an emergency savings account and regardless of whether you’re planning to start a business, you want to have six months of expenses in an emergency savings account. This was something we preached consistently at my previous job in credit union marketing. I know this can sound like a luxury if you’re someone who’s paycheck to paycheck, but it’s not impossible. Even starting with just a few dollars a month or paycheck is a great place to start. There’s no shame in what you’re able to contribute to something like this. On average, 40% of Americans can’t afford a $400 emergency expense. This means an unexpected health bill, dentist visit or new tires can put you in a bind. So, even if you take nothing else away from this episode, I sincerely hope that you start building an emergency savings account.
In order for us to build our emergency savings account, we’ve always been very diligent about keeping our essential costs in a reasonable place. As my husband and I both started to advance in our roles and earn more money, we definitely allowed ourselves to choose more moderately or higher priced items, but we never maxed ourselves out. We took great care to weigh our priorities and make sure that we splurged in the areas we felt were important, but balanced those splurges with savings in areas that we didn’t prioritize. There was plenty of discretionary spending, for sure, but we prioritized putting money into a savings account before the discretionary spending. In other words, we made sure to pay ourselves first and THEN allow ourselves the luxury of spending that discretionary income.
For many years, we plodded along at a comfortable savings rate. Eventually, we accelerated that savings and got really aggressive with what we put away. When that time came, we scaled back on things like eating out and funneled that money into savings. We did this for a variety of reasons, but mainly when the first inklings of a recession were talked about back in 2019. So, if you’re in a position where you can put more away, look for opportunities to do so. If you’re not in a position where you have a lot of discretionary income, save your receipts for a month or two and see where you can save a little bit of money and funnel it into your savings account. One thing to note: make sure this is a separate account from all of your others, this way it isn’t as easy to dip into those funds for non-emergency expenses.
When we had the conversation about me starting my own business, we talked with our financial advisor and looked over our regular, personal expenses. In addition to the six months of emergency savings we had in place, we determined we need an additional six months of business expenses on reserve in order for me to comfortably walk away from my corporate paycheck. Thus, we went into full squirrel mode and really just started putting as much money away as possible. I did the research and took the time to prepare an estimated monthly budget for supporting Authentic and that was the number we used to set a savings goal. Fortunately, by the time I was laid off and suddenly an entrepreneur, we were about 70% to our savings goal.
One thing my husband also wanted me to make sure to mention is that there are a lot of resources from your local small business administration and chambers of commerce, so make sure you check to see if there are any grants or loans available to you.
One way we eased into this transition was by building Authentic while I was still working. This meant that some of the expenses we incurred weren’t felt as deeply as they would have been if I didn’t have a regular salary. It wasn’t easy working full time, being a mom of two and trying to build a business. It took some creative time blocking and scheduling to find enough free time to get the things done that needed to be done, but softening the impact of those expenses was worth it. Just make sure that you keep track of all your expenses so when you’re ready, you’ve got all of that ready for tax purposes.
Another way you can prepare to be out on your own is to put as much extra money as possible away for a set period of time and then step away full time to build your business. There will be a lull in your income, but you’ll have that savings cushion to get you through it.
There’s a lot of small expenses that start to add up as you start your own business. Some of them include:
- Filing expenses for your EIN/Tax ID number (btw, I highly recommend Inc File- it’s really inexpensive and super fast)
- Registering your URL/domain name
- Setting up your website
- A handful of marketing management tools you’ll want (email provider, social media scheduler, etc)
- Any new equipment you might need: a new computer, special programs you’ll need access to, etc)
- An accountant to review your taxes, because as a small business, you get to file quarterly—yay!
To help you plan for these expenses and wrap your mind around what it’s going to take to get started, I’ve created a cheat sheet for you that you can download at getauthenticbranding.com/resources
It outlines how to save and expenses you can plan on upfront to help ease the transition.
If you enjoyed today’s episode, please rate, review and subscribe to help other women and small businesses like you find this podcast.
Until next time!