Money Lessons I learnt testing 3 business ideas at once.
Ideas don’t cost a lot to explore, but the money will soon disappear if you don’t track it.
I spent £5,063 in two months on a handful of business ideas…
And the worst part is that for a long time I didn’t even realise it.
Testing new startup ideas you can quickly find that money starts leaking out of your bank account like water out of a rubbish paper straw.
Don’t get me wrong, I’ve put everything into my current business and I’d do it over again. I always will do too- that’s just part of my ‘go big, go home’ nature… Time will tell if that’s the right call, but that’s not what I’m talking about here. I’m talking about the money that I didn’t consciously put into a business idea. The money that I never made the decision to lose.
Some spending is totally necessary. Seeing if ideas are even viable will require cash flow, and then there are the costs of getting things off the ground once you start to validate. However, I, like many others, ended up spending money on things I didn’t need to spend money on. I didn’t realise that beginning a startup didn’t need to be as costly as I was making it.
As with much of startup life, it’s all about working smarter rather than harder with your money.
It’s easy to get carried away when you’ve got a new idea, or several of them! Exploring all the options is what entrepreneurship is all about. However, this money was lost purely because in the early days I didn’t separate personal and business costs.
Keeping track of your finances- those bits of money you spend here and there- is the difference between sinking and swimming as a startup founder. Here’s a few lessons I’ve learnt to make sure you’ve always got enough money for the rent!
Budget, Budget, Budget
I know that the word “budgeting” will give many of us flashbacks to finance talks with our parents, but it really is a key point when it comes to monitoring your startup costs!
Spending money exploring your business ideas is both fun and necessary. From train tickets for meetings and networking events, to customer surveys and market research, spending this money feels productive and, indeed, helps you establish whether you’re onto a winner.
It’s just important to be intentional with this. This stage of startup research doesn’t have to break the bank.
Consciously split out the money. A good way to think about it is to consider what you would do if you only had £100. Fancy logos (where I’ll admit I spent about 10% of my budget) might make you feel good but aren’t going to test your idea. Market research on the other hand will. How would you split the spend? Which area would you budget the most money for?
Get A Second Bank Account
Opening up a second bank account takes only minutes with most banks.
I used a credit card. There’s the obvious warning — you’ll be paying interest if you don’t pay it back!!! — but the separation concept is one I’d use again.
Except…I’d execute it better.
A check at the end of the first month made me realise I’d actually been splitting between my main account and credit card. In other words, I hadn’t truly been separating. I’d been spending more on idea exploration than I’d planned. In fact, about £2000 more.
Benefit of hindsight, I wish I’d set up a separate bank account and put the budget into it. That would’ve shown me exactly where my money was going and allowed me to make conscious spending decisions.
Record ALL Expenses On A Spreadsheet
I’m by no means saying that you need to be an accounting pro or spend hours figuring out your outgoings! Exploring startup ideas is fun, and until you’re truly validating your idea, should be the best time to get your creative / problem solving head on. Not the fun police accountant.
It is important, though, to record all expenses in one place and to keep receipts for expenditure. This not only ensures that you have a record to check back on where you might have spent excess, but means that if your ideas do take off, you can claim back expenses (and potentially taxes) in future.
This lesson in particular is the one I’ll learn the most from. Because I kept no receipts or record of my spending in the early days, what could’ve cost me a couple of hours ended up costing me a few thousand. Literally — small projects that were eligible for tax rebates were nothing without receipts to confirm the spend.
That’s the real moral of the story here. Not many of us enjoy budgeting and keeping track of our finances, especially when we’ve got a new idea! But it’s worth it in the long run. Maybe even the short term too, it’ no fun stressing at the end of the month to pay the rent! With budgeting, separating your money, and recording it, you’ll be able to see more easily which of your ideas are profitable, you’ll be able to channel money into worthwhile methods of research and, most importantly, you’ll never check the bank to find only £0.01 left!