this article originally appeared on Changemakers Unite as You Are Not Your Biz: How to Create Personal Freedom Independent of Your Business
Every Business Owner looks forward to a future of prosperity and freedom. When you first created your business, you probably looked forward to more free time, a dream career and fewer worries.
Unfortunately, your expectations probably didn’t align with your experience. Late nights, stress, burnout and financial worries cause many businesses to collapse after just a few years.
Why does this happen?
Most Business Owners fall into the dangerous trap of combining their identity with their business. When you put your company ahead of your emotional, physical and financial needs, you put yourself in a dangerous situation.
Because no matter how passionate your mission, you aren’t your business. Your business world and your personal world need to occupy different hemispheres of your life.
The effects of Chronic Money Stress
Whether you’re founding a startup or hold an established corporation, stress is likely present in your life. And stress can be a good motivator, for a short period of time. During a launch or in a big project, stress is a reality.
But that’s not Money Stress. Money Stress in your personal life will eventually eat away at your genius. You won’t be able to make the decisions you need to in the business, because you’ll be aware of how that decision might affect you personally. Client work slowly starts to dry up, star employees leave and pretty soon, you’re thinking about shutting down for good.
Left unchecked, Money Stress will destroy both your personal life and your business.
The reality of entrepreneurship
As a Business Owner, you probably have 50 percent less net worth than if you were an employee.
If that’s not bad enough, you likely rarely pay yourself. And even when you can pay yourself, it’s usually not enough to make ends meet. If you think skipping yourself on the payroll is okay because you’re sacrificing for your future, think again! There’s actually an 80 percent chance you’ll close your doors when you retire rather than sell your business for a profit.
This starving artist mentality just isn’t a healthy reality for entrepreneurs. Depriving yourself of pay to save a business ruins both your business and personal finances. Instead of sacrificing for the future, there’s a good chance you’ll close your doors in a few years.
So what can Business Owners do to grow their business without risking it all? You can support your future, earn more and protect yourself by following these key rules.
1. Draw a line between personal and business
There’s a good reason flight attendants tell you to put on your oxygen mask before helping others. You can’t take a huge risk if you’re not already in a safe place.
A new business is a financial liability. During this time, you’re more financially vulnerable as you try to scale.
You can’t expect to succeed as a Business Owner until you’re Financially Fit. You need to develop a budget, eliminate debt, Live Within Your Means and increase personal Cash Flow. A business simply can’t return substantial gains if you aren’t Financially Fit.
Don’t compromise your Financial Fitness by combining business and personal finances. Create a system to treat your business and personal finances as completely separate entities. Whether you create an LLC, open separate bank accounts or hire an accountant, this is a must.
The separation of your business and personal money ensures both you and your business are protected in the future.
2. Pay yourself a consistent income
You wouldn’t refuse to pay an employee, would you? So why are you not paying yourself a consistent income from your business? To be in a position to support your business, you need to make your own financial safety a priority.
And without a strong personal financial base, you can’t maintain a lifestyle that lets you put in the hours and effort needed for successful entrepreneurship. When you aren’t worried about your own finances, you have the Freedom to fully pursue your business goals without fear. And you’re well-positioned to take risks and make choices to impact the growth of your business.
So always Pay Yourself First from your business. Decide on a consistent income to pay yourself at least once a month from business proceeds. This can be a flat dollar rate or a percentage of your earnings. And increase this number as the business reliably increases revenue.
You’ll find that when your personal finances are in order, the business benefits from your increased focus and energy.
3. Establish an exit plan
Remember your business plan? Great. Now you need an exit plan to protect your financial future.
Financial Freedom is about creating the best business for the life you want. But you shouldn’t spend your entire life running a business. You must create an exit plan.
An exit plan helps you stay on the path to your dream life. Whether you choose to sell your business and fund your Financial Freedom all at one time or work toward Financial Freedom over a period of time, you have to know what the end will be. Experience the life you want to live without viewing the business as an extension of your personality.
Financial Freedom on your terms
For every entrepreneur who succeeds, dozens fail. Don’t let your dreams go to waste. Draw a firm line between your personal needs and your business. Set firm, healthy boundaries to help you reach Financial Freedom while enjoying the business you built.
image credit: Bigstock/leolintang
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.