Are you ready to start a business? Use this 4-point checklist to find out


There is a real drop in staff, he told me on the phone. After eight traumatic months of dealing with Wave 2, it sounded so good. Life will become normal, he sighed in relief. And you can go back to work, I say. No, that is not happening, he said.

So many people have had time to review their lives over the many months the covid pandemic has kept us at home. People have learned new skills. Not just online courses and credits, but life skills like fixing plumbing and repairing air conditioner. Many question the time, effort and money they were wasting commuting to work. The savings that many have made have surprised them immensely. Without traveling, dining, and having fun, many have found that they don’t miss much after all. And then many decided not to return to work.

In some countries this has become a topic of political discussion. Allowances have ceased; businesses are opening up; but people are resigning in large numbers to worry. Few people are looking for a new job. Rather, they are looking to become entrepreneurs. In the new team spirit, husband and wife plan business ventures. Online sales are at the heart of their concerns. No store, no employees, no inventory, but sales of people sitting at home and sailing away. It sounds like an interesting proposition. Let’s see how personal finance will match this new romance with entrepreneurship.

People start a business for at least one of the three main reasons I think. First, they think they are so good at it that they have to do it themselves rather than doing it for someone else. Second, they think it’s a good idea to do something, given the demand for the product or service that idea will create. Third, they think there is a lot of money to be made.

How you create, develop and maintain a business will depend on its primary driver. And it will be the same for the personal finances of the household. Someone who is convinced that a business will make a lot of money fast, will not be able to endure slow sales, inventory build-ups, late payments and such routine business events in stride. They will get impatient with the working capital needs of the business and make hasty decisions on pricing and promotion. Household finances will also suffer.

Someone who believes in the power of their skills and expertise needs enough capital to keep the business running. They have the patience, and their household finances should show the same resilience. If they have the ability to limit their spending from home and still have the calm, persistent demeanor required by their business, they may be able to stay invested.

Someone who bets on demand for their product or service, needs agility to hunt markets and effectively promote their product or service to see growth. They must not only be ready to find and win clients, but also modify and rework their ideas according to the demands of the market. Their business and their household need to spend to continue their efforts with the optimism they need.

These are simple generalizations. But the intention is to ask new entrepreneurs to care enough about the impact of their business ideas on their personal finances. Every businessman must believe that he will be successful. This optimism is necessary to take the plunge. It takes a while before a business venture can take off, and there are always unexpected twists and turns on this journey.

Talk to any successful entrepreneur about their journey. They will tell you that after they are successful, the world only looks at the good decisions they made, celebrating their wise choices along the way. But in reality, at every turn, they had to make decisions, and some turned out to be good and some turned out to be bad. It is through the bruises of bad decisions that a business learns and improves by finding success.

Therefore, a business enterprise will have to face costs, losses, expenses and investments before it can establish itself. During this difficult time, household finances will also experience a period of stress. While everyone understands that the comforts of a fixed salary won’t be there, the rewards of a plentiful sack of cash will take a while to arrive. Hence the warnings of an author who will be accused of being conservative and cautious.

First, don’t romanticize the new post-pandemic world. Things will reverse over time, and we are all creatures of habit who will revert to what we used to do. We may be wiser with this experience, but we still don’t know how many will be left over time. Don’t confuse the changes in this shock with some kind of trend reversal. Let your business plan provide for this possibility as well.

Second, don’t be tempted to divert most, or worse, all of your wealth to your business idea. Unless I put it on, I wouldn’t make it, a friend said. You are in charge of your money when you deploy it, but the risk of concentrating your wealth on a single asset, even if it is the most valuable, is high. Keep enough so you can go back if necessary.

Third, plan your household income and expenses over a reasonable period of time. Three years might be a good approximation. Enough to make your business take off and be worth it. If you don’t have the wealth to provide this, let a winning member keep their job. They can quit and come back later when the business begins to cover costs and earn money. The household will be isolated until then with this income.

Fourth, make sure you don’t make isolation your credo even though the pandemic has made it a virtue. In the real world, things happen because a community comes together around you: your friends, colleagues, relatives, peers, supporters. Make sure you keep investing in your relationships and networks. They will not only watch over you, but also offer valuable insight if you get hung up on an idea that doesn’t work. They may be able to come up with alternatives when you need them.

If entrepreneurship is your calling, log on. But don’t get carried away.

(The author is president, Center for Investment Education and Learning)

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