The Entrepreneur's Wife

Friday, May 12, 2006

The List of Non-Negotiables

OK, so you're over the shock of hearing the news, and your entrepreneur is set on creating their business.

The next few posts will talk about what you (the Startup Spouse) need to consider, starting with the big one: Where the money will come from (and where it won't!).

The best way to do this, is to list the assets you and your spouse have, and then from that, create a list of what you are NOT WILLING TO RISK FOR THE COMPANY.

This list of non-negotiables might include:

-Your house
-Your children's college money
-6 months' living expenses
-Your retirement savings
-'Basic' comforts of life
-Your standard of living

Once you've created your list, then with your entrepreneur, look at what's not on the list. Ideally, there will be enough cash for them to fund the start of the business. If there isn't, then talk about where the extra money needed might come from. Borrowing from family and friends, or having them own a piece of the company? Finding angel investors? Getting a bank or small business loan? Finding a venture capitalist? There are lots of options for finding money (which we'll look at in more detail later).

Discuss how you will keep your personal assets separate from the business. The easiest way is to ensure that from the beginning your entrepreneur keeps proper accounts for the business, and a separate bank account.

Now, here's the big thing that no one talks about: Whatever your entrepreneur thought would be enough funding, probably isn't, so where's the extra money going to come from? You might want to take a second look at your list and ask yourself whether there's anything on it that you can risk losing if crunch time hits. Put the items into categories:

1) Unwilling to risk no matter what.
2) Willing to risk, or risk a portion of (specify the amount), if the risk seems low.
3) Willing to lose if necessary to try to keep the business going (this might be a portion of your retirement savings, or your children's college tuition if there are still many years until they go).

Doing this exercise can save you from what many, many entrepreneurial family slip into, where the business seems like a black hole, absorbing all of their assets, with no sign of whether it will pay off in years to come or not. If it does, then everyone's got stories to tell of their great bravery for years to come. But if it doesn't, then the results could be total disaster: loss of everything, personal bankruptcy, and a bleak old age.

In my own case, I like to say that 'the business ate my wedding', because at the time that we got married, the business was still eating all of our available cash, so we scheduled two wedding activities: A small ceremony and reception (which we had), followed by a big reception in a second location (which never did happen). This is fine by me, but I've also witnessed scarier stories where people have risked too much on a start-up and lost everything, including their homes. By planning ahead, and drawing firm lines now while your entrepreneur still has a clear head and before emotions get involved, or a gambler's mentality, this doesn't have to be you!


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