Building a Business Entrepreneurship Finance

How Your Personal Finances Are Slowing Down Your Business’ Growth

I was recently talking with a friend who has a 9-5 job and also freelances on the side. To give you some context, his goal is to make enough money off the freelance work to cover his living expenses and, eventually, turn that into his full-time income –something that those of you with (or looking to start) a side-hustle or in the early stages of running a business might relate to.

We had previously discussed how important it was that he took control of his personal finances. He proudly told me he had been able to reduce his monthly expenses to only $2,500 –a long way from where he started. I congratulated him; he had done a great job and sacrifice. But I also challenged him to take one more step and get it to $2,000/month.

“Why? Isn’t this good enough?” he asked me. And don’t get me wrong, it is… but, that’s another $500 a month you can put in your pocket –that’s a whole extra month of runway after 4 months.

I then told him…

“You should NEVER have variable expenses”

When you are starting up, I’d argue that your focus needs to be on reducing your expenses as much as humanly possible.

You’ll then have an exact number that amounts to everything you need (not the same as want –more on that later), and you have to be sure that there is no imaginable way to go lower than that. That’s your expense baseline.

Your expense baseline has to be predictable –which means you can only have fixed expenses.

You need to personally forecast and budget: $X will go towards rent, $Y will go towards food, $Z will go towards gas, etc. There’s no place for variable expenses. You cannot drunkenly come back from the bar, pass out on the couch, and realize the next morning you spent $150.

[Sidenote: I’m obviously not accounting for out-of-the-norm incidents such as accidents, medical issues, natural causes, etc.]

Why am I so strict about this? Let’s go back to my friend for a second. His goal is to leave his job and work for himself –thus his income needs to cover his expenses. The lower his income, the faster this will happen, and the faster he will achieve his goal. Short term pain, but a much quicker path to his goal.

Having low expenses gives you freedom, and it lets you achieve your goals faster. But it does take self-discipline because, once you have a forecasted budget, it should not change –even if your income rises.

Throughout my first few months as a freelancer and then during Jakt’s very beginning, I knew exactly what was the minimum amount of money I needed to live –and I didn’t increase that for a long, long time. When I started making more of it, I didn’t run and spend it –I stockpiled it! Looking back, I should’ve hired more people earlier, but my living expenses didn’t change: I didn’t buy new clothes for almost three years, I didn’t move to a bigger apartment for a couple years, etc.

I just didn’t need it… which leads me to my next point.

Know the difference between “Wants” and “Needs”

Not all expenses are created equally.

People get very soft and permissive with themselves when it comes to what they need vs. what they want. Especially if you have just started running a business, you can’t be delusional:

You don’t “need” to go to SoulCycle –it’s $35/session. I used to go to a gym in NYC that cost me $20/month –less than one SoulCycle class. You don’t “need” that office, or that table, or that chair, etc. And, of course, there are things that you actually need like eating healthy. But, even then, you can find ways to eat healthy without dropping $40 for a meal.

Honestly, people’s relationship with money is one way I vet people that I could partner with through The Polpo Group. And I’ll tell you why:

Because it shows what’s really important to you –either your business (and the freedom that comes with it) or materialistic shit you don’t need. If you’re not willing to sacrifice yourself, this is probably not going to work out so well for either of us.

And if you don’t want it bad enough, that’s perfectly fine –but you have to be honest with yourself. It doesn’t really matter how many time you post #hustle on Twitter. You “kinda” want it –or you might have glorified the idea of calling yourself an entrepreneur–, but you’d rather go party at night. You still might get where you want to be, but it will definitely take longer.

It all comes down to priorities and knowing what you want. There’s no right or wrong answer –I’m just telling you what I believe is the fastest path to achieve the goal of having a business you can do full-time and get the freedom you desire.

It’s important to be self-aware enough to know your priorities but, once those are established, it’s time to make a plan, stick to it, and be laser-focused on executing it. To do that, however, you’ll have to get used to…

Telling people “no”

You can’t imagine how many times I had to do it:

“Anthony, do you want to go out to eat? Nope, I don’t have money” (even when I started making some money, my answer was still this –stockpiling, remember?).

“Anthony, do you want to go for drinks tonight? Nope, we can hang out, but I can’t buy drinks.

I said no to everything because I was extremely focused on growing and scaling Jakt. That was my one and only priority, and every step I took had to get me a bit closer to that. And, if it didn’t, I didn’t take it. It was that simple. Everyone looked at me like I was crazy, but I really didn’t give a damn. I was living month to month, barely scraping by…

But, honestly, I was so happy doing it. If I let my expenses bloat, I wouldn’t have been able to pay my rent, etc, and I probably would’ve had to end up on a 9-5 job I hated. To me, the freedom of having my business money cover my expenses (and staying away from corporate) was very much worth it.

I chose myself and what made me happy. If I had listened to what my friends or my parents said, I would’ve taken a job at a bank. Instead, I didn’t talk to my family for a couple of years (long story, I’ll cover it another time). I just knew that I had to follow my own path or I’d be terribly miserable —and I accepted the consequences.

Again, this is not for everyone, and you should do what makes you happy, but that’s what it takes to quickly build a business from a personal finance standpoint.

If you want to go full-time on your business as fast as possible

  1. Make your expenses fixable and predictable –and reduce them to the bare minimum. Keep them there for as long as you can. 
  2. There’s a difference between wanting something and needing something. But you already knew that. You just have to be honest with yourself. 
  3. Budgeting means prioritizing and saying no to things. Ask yourself if that’s what you want and, if it is, go all in.