Millionaire Mommy Next Door ran a survey recently in which her readers wanted more topics on entrepreneurship so I thought I would piggy-back on her findings (thanks Millionaire Mommy Next Door) and blog on some aspects of being an entrepreneur from a personal and finance perspective. For 4 years, I ran a business advising businesses on how to grow using my legal background as a spring-board. Thus, I ran my own business and learned a lot from my clients running businesses.

Not to get all “Zen and the Art of Motorcycle Maintenance” on you but being an entrepreneur is both a spiritual and financial commitment and, although I did not know it in the beginning, it is a way of life rather than what you do. It is definitely not like being an employee where you can leave your troubles at the door at closing time.

If you are thinking of starting a business, whether full-time or part-time in 2008, here are a few random factors to consider:

1. Start with the end in mind. It will give you a focus.

Entrepreneurship is the same as personal finance- where do you want to be 2, 5 or 10 years from now? If you have a end goal in mind, it really influences how you should build a business. Those built to sell make different decisions (i.e. don’t run up expenses to create a tax loss since businesses are valued on earnings and not revenue) than those who consider it a life-style pursuit.  Consider what you want out of your business (money? freedom? make the world a better place?) and it will make your business decisions easier since every major decision will be influenced by your proposed ending.

2. It is very lonely. Make sure you get some love.

CEO’s of big companies have subordinates, board of directors, advisory boards and other high-powered friends to talk to. In a small business context, it gets very lonely. Your employees’ primary motivation is to get paid, your clients primary motivation is for you to slash your prices and no one seems to understand you. I use to say that as a sole proprietorship, I was more sole than proprietor.  When you sit at the office on Saturday afternoon doing book-keeping, it sure feels lonely.

The most successful clients I had had great home situations. The clients in trouble had bad home situations. I don’t think it is a coincidence. Successful clients found life balance and a ready made support system. Which bring me on a related point- make sure your family supports your decision- personally and financially because…

3. Entreprenership is French for poverty

I didn’t contribute to my RSP for 18 months after I started my business. I sold various investments to keep pay my bills. I did the undergrad thing for Saturday night- drink at home before you go out to save money. I packed lunch a lot- even when I got tired of P&J sandwiches. There’s two truths to business no matter how big or small the business is- there’s never enough money and there’s never enough time. You have to get use to that fact. You have to sink a lot of time and money before the business takes off- a youtube type of success is 1 in a 100 million occurrence. Most entrepreneurs work the trenches for years before they are successful (hence, having a good support system personally and financially).

But the point was always I was investing in myself; you cannot put a price on experience and personal growth and entrepreneurship gives you a lot of both (some bad but mostly good). I probably learned more about the real world of business- often from my own mistakes- than any MBA would give me.

If you are starting a business- budget your start-up costs and then add at least 15% of that amount.

4. Always pay two people no matter what: you and the taxman

I really made the mistake of not taking a fixed draw in the beginning. You want to keep pumping money into the business so you don’t pay yourself. The problem is that you become cash poor and you begin to resent your business for putting you in that shape. Even if it is a very modest amount, pay yourself sometime.

The other tip was once given to me by a small business banker- most small businesses that run into tax trouble (i.e. they didn’t pay taxes or racked up totally unjustified expenses) don’t survive that long- a tax audit is very distributive and the penalties and interest on unpaid taxes totally cripples a business from a cash flow perspective. Keep in practice of paying your taxes on time from the get go.

5. A few money tips…

• focus on cash in and not sales; sales keeps you happy but cash in keeps you afloat; focus on one number no matter what- the balance in the bank.  If it keeps going up, all things being equal, you’ll be ok
• there’s only two sides to a business: revenue and expense. You only control one side- expenses. Be frugal and only spend money if you know it will make you money
• barter is your friend- I bartered a lot in the beginning; I got a website and a lot of free meals out of it
• every business needs credit; fix your credit score before you begin business if you have a bad one or keep your score high
• arrange your personal affairs so you don’t expose your family to your personal liability: transfer cash and title on the home to your spouse before you begin, purchase credit-proof investments and never let the bank have your partner guarantee any business loans

Let me know if you want to read more about the world of entrepreneurship and I’ll be more than happy to share my highs and lows with you. Thanks.