If you’re considering moving from a stable job to that of a franchise business owner, then getting your finances in order is essential. The worlds of business ownership and being a paid employee are vastly different, but none more so than when it comes to personal finances.
Not only do you need to set aside money to invest in getting your business off the ground, you also need to consider the working capital that you’ll need to keep the business open long enough so that it can start paying for itself and a salary for you.
In addition to this, you need to consider the personal money that you’ll need to support you and your family during the start-up period. This includes having money for bills, mortgage payments, food and personal living.
You must use the opportunity of being a paid employee to get your personal and business finances in order so that you can set both you and your business up for maximum success.
As a soon-to-be business owner you need to give yourself time to get your business up and running profitably, therefore, it makes sense to give yourself as much runway as possible. This goes far beyond ensuring you have enough capital for your business and for you to live on during the initial start-up period.
You need to think about your bigger financial picture:
- When is your mortgage up for renewal?
- Do you want to change your credit card providers to access favourable balance transfers?
- Do you have any car leases that are due to expire during your start-up period?
- Do you have any major expenses coming up that would impact your business start-up?
- What major events can you see impacting your finances over the next five years? For instance, do you have children starting university?
The above list are critical things to consider and should serve as a starting point to assessing your larger financial picture. Not getting just one of these points in order could have a substantial impact on your journey as a franchise business owner.
For example, mortgage lenders will often look at household income when assessing your ability to service mortgage payments. If you’re just starting out on your business journey, then you will have minimal, if any, income. This can have an enormous impact on your ability to raise credit, including securing a mortgage renewal. We have seen many former high earners, who are at the beginning of their entrepreneurial journey, struggle to renew their mortgage due to them no longer being in a salaried role.
If they had taken care of this mortgage renewal while they were still salaried employees, they could rest in peace knowing that the mortgage was secured for at least five years, giving them ample runway to get their business off the ground. Instead, they now have the urgent and important task of renewing their mortgage , which is taking their time and focus away from getting their business off the ground.
When it comes to your personal finances, it pays to take the time to sit down, reflect, review and evaluate. While it doesn’t have to take weeks of your time, it is well worth investing as many hours as you need until you feel a sense of clarity around your personal finances and what you truly want from them.