In my last “starting a business” post I discussed the 101 of starting a business, creating the business plan. Today’s post will focus on the inevitable next step, living lean and saving money.
As a future business owner, personal and professional finances are very closely linked. In the beginning your overhead will be costly because it requires a significant investment in your retail stock, advertisement and perhaps even rent to get noticed and be successful. The best way to compensate for this is to reduce your personal living expenses. Living lean is not enjoyable but it’s an essential part of starting a business.
My current “life” situation is unique and has caused me to think creatively as I’m waiting to finish my business plan. This summer I will be moving from Washington, DC to Chicago with my lovely boyfriend so he can begin law school. Our move date is entirely up in the air because I need to find a job first. Our move will because expensive because we’re packing up all of the things we’ve accumulated in 3 years of living in DC and moving it half way across the country. My business plan is stalled because I’m going to have to learn the lay of the land in Chicago and find the right neighborhood to open a store. So in the meantime, I’m trying to keep my Etsy shop alive and well (which is very limiting, because you can only post handmade items and vintage finds on Etsy). Needless to say, in all of these pieces there is a clear need to live lean.
Here’s how I’m doing it.
- Making coffee at home and ditching the local coffee shops. This one really pains me to do it, but it adds up.
- Cutting my restaurant and cocktail budget by 50%.
- Bringing lunch to work everyday.
- Don’t use your credit card. This one is always challenging. Though it’s tempting to whip out your credit card if you’re running on fumes until your next paycheck, resist the urge! So what if you have to eat oatmeal for lunch for a week straight. You’ll be proud of yourself in the end.
- Stick to a budget. Each month, I allot myself a certain amount of money for clothes, makeup, decorating, basic household items, and groceries. Budgeting has allowed me to save than I anticipated I could. The way to effectively calculate what you can save is best explained by the Smart Cookies’s Guide to Making More Dough.
Step 1: Pull your bank and credit card statements for the last three months and categorize where your money went (rent, utilities, groceries, personal items—break this down according to what sorts of things you buy for yourself, and entertainment—concerts, happy hours, date nights, etc.).
Step 2: Determine what your average monthly spending was for each of those categories.
Step 3: Evaluate what you can cut. Usually this is the personal items and the entertainment categories.
Step 4: Based on these numbers, set a budget for yourself and stick to it!
Living lean is a tough commitment to make to your business, but it’ll pay off in the end. If you’re in the position to move in with family and save money on rent, do it. If you’re like me and can’t, then start chipping away at the smaller things and soon it will amount to large savings. Though you have to make sacrifices, be sure to keep your creative juices flowing. My future store, Habitat, will be a home decor store, so for me cutting my decorating budget was somewhat stifling. I don’t think I even went a month sticking to my initial budget for household decorating items. As a result, I allotted myself a bit more money in that category and took it from somewhere else. It’s essential to live lean, but remember to provide funds for what inspired you to live that way in the first place!