From Dating to Marital Bliss: the Union of Personal & Business Finances


All Entrepreneurs face the same challenge: can their business entity survive over time? We’ve discussed the  relationship between small business owners personal and company finances. Our summary is actually a drop-down relationship status on Facebook:

It’s complicated.

Cash = the life blood of every company. Let it flow.
Cash = the life blood of every company. Let it flow.

However, if operating a company with a liquid and thriving Corporate BODY is the goal, the union of personal and business finance will have to be successfully consumated.  As I’ve starting financial consulting with clients, a recurring theme is the many ways Owners sabotoge their future dreams of marrying their start-up and/or growth plans with cash / capital:

1. Missing Financial Statements.  When we financially consult, the first thing I will ask you for is three (3) years personal and business tax returns. No, they aren’t always used to received  financing. Our goal is to avoid debt. However, we’ll always use them for planning. Unfortunately, many business owners haven’t even filed their taxes although they may have profitable enterprises. And, if they have filed, they are not keeping up to date accounting records. Typically, the lack of current Profit/Loss Statements, Balance Sheets and un-filed Federal Tax Returns will short circuit your request for money from a lender immediately.

2. Co-Mingled Funds. The $ 10 spent for family pizza does not go under “Meals and Entertainment” for your business. Can we say Non-existent Corporate Shield? How about Tax Evasion? Your business IS a different entity. Even if you are a sole proprietorship. How do you know what you are really making? Does it matter? Only if you want to keep making it. This was the hardest part for me to do myself. I made a small profit in my second year.  I paid myself a 1099-MISC. It hurt. Terribly. Treat yourself like a public company. If you want to make it to become a public company.

3. Bad or No Personal Credit – your business credit will be built upon your personal credit. Period. Yes, there are opportunities to leverage your customers’ good credit (e.g.: factoring) or collateral (asset based lending). However, at some point, bankruptcies and tax liens can’t be overcome. Long term business planning MUST contain a plan to address personal finance. Contact someone in my network: Smart Money Chicks or  Moneylicious. Or,  someone in your network. Like the commercials used to say: if you don’t get help here, get help somewhere.

4. Runaway (Spending) Habits – The biggest culprit here is the failure to invest in a free accounting program like WAVE, online version like QB or stellar bookeeper like Smart Choice Accounting, LLC. You want financing? Quick, what’s your exact profit margin? Bottom line: do you know how much you can afford to payback AND still continue to pay your cost of doing business along with maintaining your lifestyle? The first part of the 1st CFI mission is to help companies implement cost management techniques. Remember, you can make money by saving money!

Business owners must identify the bad characters lurking to destroy the marital bliss. Then, they can readily achieve the union of their personal and business finances that will win them the funding they desire.

Let the relationship healing begin!