Using Personal Savings as Startup Capital
A common way to fund a startup is to use your personal savings. Driven by passion and blinded by ambition, a common mistake made by many entrepreneurs is to go all in or use all of their personal savings to start a business.
It is alright to always make some conservative assumptions and take into consideration the possibility of business failure. Every business is a gamble – few winners and more losers. This perspective helps you control your personal savings and consider other options.
A good way to finance your startup is to use only 50% of your personal savings to support you in case the business folds up. For the balance, you can do the following:
- Work part time. During the startup stage, you can still find work during your free time to generate extra cash and network with other people. Once the business starts picking up then it is time to quit.
- Know your other options like 401k loans, using credit cards to defer payments, or low-interest loans from family and friends.
- Garage sale. It is time to clean out your closet, look for old personal belongings, and hold a garage sale. This may not amount to big money but it will certainly help add some cash in your pocket.
The important thing here is not to rely solely on your personal savings to jumpstart your business and to be more resourceful in finding alternatives.
