Yikes. It is too easy to underestimate the funds needed to start a business! Startup capital refers to the funds covering business expenses and your minimum survival mode salary until your business pays you an adequate salary.
Naturally, most new coaches have a very limited period during which they better get their coaching practice up and earning fast, or they will run out of money to fund themselves and their project. This is commonly referred to as bootstrapping.
Sadly, most new coaches underestimate how long it will take to get adequate funds pouring into their business. Many have to abandon their coaching dreams because they didn’t have adequate startup capital to give themselves a fighting chance.
I want to share my own story here, just so you know you aren’t alone.
MY PERSONAL STARTUP FUNDS STORY
One chilly Thanksgiving evening in Killington, Vermont, an unnecessarily pesky phone call from an IBM team member proved to be the last straw. The one that broke the camel’s back. It was from a colleague on a big project I was working on. I decided as I hung up that call, that I would resign from my cushy, comfortable corporate job with a fat corporate salary.
I announced to my husband the next morning that it was not negotiable. I was leaving! I was to become a coach. And I would borrow $50,000 from my own retirement to start my business. I promised I would pay it back within two years, and announced he wasn’t to say anything. He sweetly didn’t resist too much (he’d lived with me while I endured the increasingly toxic corporate job. Pretty sure I wasn’t fun to live with).
Well, I must confess as I look back now with the benefit of hindsight, I wasted most of that $50,000. I had never run a coaching business before. I did all the wrong things. I started out as a life coach. (Guilty secret: I have to confess I never could figure out how to make that work!) I bought too many self-study classes that were never going to help me. With wonder and excitement, I listened to free webinars on 30 hot topics that guaranteed my success and bought lots of things that didn’t help me. I got some expensive certifications I probably never needed. I designed a whole website, and paid $3,000 for it, that was totally wrong (I hadn’t settled on my niche yet, so it was aimed at the wrong target market).
In particular, I had no idea how to find clients, and I tried so many sales techniques and marketing methods. Most cost a fortune and didn’t work for me at all. Don’t even ask me how much money I wasted on a Google AdWords experiment in the days when I had no clue how to use them! Newspaper ads, too! Jeez.
I finally figured it all out. I was one of the lucky ones. I was making over $10,000 per month by the end of Month 8. Making mistakes and failing frequently are excellent teachers!
Here is my confession: it was the end of Year 3 before I could declare a personal income (not revenue, actual taxable income to me the hard-working owner) of $150,000. That was equal to the corporate salary that I left. At the time, my revenue was around $360,000. I had no idea of the gap between revenue and income!
Here’s the lesson: I was one of the lucky ones. My husband could support our living expenses while I got my business going. It took me many months to start making real money and years to take out significant owner’s drawings that I could easily live off.
Yet time and time again, I see fearful business coaches, with no support, that HAVE to get clients by the end of the month. What a highly stressful and highly unlikely way to build a business.
There is SOOOOO much hype on making six figures in a month or a year or whatever. I know you have seen it. I am sure a few people have achieved this income, but it is highly atypical. The Ewing Marion Kauffman Foundation, which studies entrepreneurship, found that 90 percent of USA entrepreneurs do NOT make $100,000 per year of revenue. That is a fact.
So, some practical advice for getting startup capital:
Fear, starvation and desperation will not attract clients and do not build the sort of business you desire.
Get funding support, whether it’s a small business loan or from a personal savings or checking account.
Get enough funding to give yourself a sporting chance. Remember, it can take years to grow your revenue to the point you can support yourself.
We believe a financial cushion of at least six months, and preferably 12 months, is
If you really can’t get yourself this financial cushion to get your coaching practice going, don’t quit your day job just yet. Start your coaching practice after hours or part time, and quit once you have figured out how to get clients regularly.
PS: In all my years as a coach, I have yet to meet the coach who earned six figures coaching on the side, before she quit her day job. If you have done this, please reach out to me, I want to meet you! However, I have met many wannabe coaches that tell me this is their plan.
برچسبها: BUSINESS BUILDING MYTH , 7: I WON’T NEED MUCH STARTUP CAPITAL ,
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