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| Friday, December 12, 2008 |
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Debt is not always your friend
By Eric Koefoot @ 11:21 AM :: 1361 Views ::
0 Comments :: Eric Koefoot Blog, Start Up World
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My father was (is) a child of the great depression. Born in 1923, he was 6 years old when the stock market collapsed and 22 when the nation finally pulled out of the economic slump at the end of World War II. I always thought my Depression Child father was pretty funny, and his oddities were the butt of a lot of jokes between my brother and me on many occasions. Dad only uses one light at a time in the house, and if he leaves the room to get a drink, off goes the light! He drives the cheapest, lamest car in the neighborhood (can you say AMC Hornet? Not a chick magnet). We could see our breath INside the house in the winter (no kidding)! My dad always paid cash for cars, never carried a credit card balance, and used and reused things until they were way beyond their designed life. I can recall seeing the road through the floorboards of the car before he deemed it time for a new car.
I suppose that we all become our parents, and there are few exceptions. While I may not use only one light at a time and I don't buy the cheapest car around, I do believe in paying off credit cards every month and not taking out loans for anything larger than a mortgage. I drive my cars for 10+ years, though no quality car these days has rust in the first 10 years. And I am an entrepreneur.
How do these things relate? I have a very low lifestyle burn rate, which I believe is one of the key elements of entrepreneurship. If you can manage your personal burn rate, you can last longer to get your business going. The old adage is that it takes twice as long and twice as much money than planned to get a business going. And unless you are Google, this is usually true. Giving yourself and your family more time to let the "entrepreneurial dice" roll a few more times is critical. Most businesses need a few adjustments after launch to get the sauce right, and most of the risk of a startup is the planning phase and this early execution adjustment effort. If you are forced by cash drain to bail out before you have time to make these changes, you've eaten all the risk in the business and missed the possible reward phase.
So ask your self a few questions:
- Can you purchase that car instead of leasing it?
- Do you really need the private schools for your kids? (Many public schools are pretty good, especially here in the DC area -- outside of DC itself)
- Do you really need all that home help? (nannies, cleaners, gardeners, etc.)
- Do you need to take the expensive vacation, or can you get a great experience by roughing it?
- Do you need to eat out as often as you do?
- Can you do with fewer bobbles, trinkets, and gadgets? Most are crap and lose their luster in a few weeks.
Everyone's situation is different, and for some people, few of these ideas apply to their lifestyle. But the concept is still valid. Every way you can lower your monthly family burn rate, the longer you'll be able to stick to building your dream business.
And isn't that the reason we're entrepreneurs?
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