Surviving until my business is off the ground

When starting a business, your personal and business finances will be closely linked as it can take a long time before your business generates enough surplus for you to pay yourself. Even when your business does make a profit, you may want to re-invest it to help your business develop.

You will need to understand your current personal expenditure and realistically forecast future costs. Money Saving Expert has a useful and detailed personal budget planning spreadsheet you can download as well as guidance for how to make savings and adjust your lifestyle to your income.

Once you have your business projections and your personal budget, you can work out the difference between your financial requirements and the amount you will be prepared, or able, to take out of the business.

You may have to accept that personal sacrifice is required to launch your own business, and consider personal cost savings or other sources of funds. However, before taking the plunge and launching your business it may be sensible to build up savings to tide you over. Financial advisers usually say that you should have savings that would cover at least three months’ expenditure, and if you are launching a business, you may need to build up more than that.

There are three main ways to make savings.

• Stop spending on items or areas you might want, but don’t need. These include small items like daily take away coffee, magazines, sweets, etc and larger spend on holidays abroad or upgrading phones and laptops when you don’t need to.

• Look for cheaper options for essential things you do need. This might involve shopping around for better deals on insurance or utilities, buying second-hand where new is not necessary, or switching to cheaper brands.

• Avoid unnecessary waste. This might include leaving lights and heating on when you don’t need them, driving and paying for parking when you can walk or take the bus, or buying too much food that you then bin.

You can apply the same principles in your business too, for example, launching your business from home, rather than acquiring premises.

As well as making savings there may be options to generate more income or borrow money.

Generating personal income

• Start your business part-time so you could retain your existing employment or find a part-time job, although you will need to check if your employer is happy with that and keep an eye on any tax implications.

• Reduce money tied up in assets - for example, trading in your car for a cheaper one.

• Sell items you do not use or want at auctions, online, or private sales.

• Check if you qualify for tax credits or benefits.

Personal borrowing

• Family and friends may be prepared to loan you money where you may not pay much interest. However, ensure any agreement is in writing and be aware of ill feeling if you are unable to repay on time.

• It may be possible to arrange an overdraft or loan from your bank. Remember that they will have to be repaid, and the interest rate may be high.

• Consider leasing a car, rather than buying outright and tying up money.

When borrowing money, you must avoid getting into a debt spiral where you take on so many loans that too much of your income has to cover repayments. If you find you are in a difficult situation, seek confidential advice from National Debtline as soon as possible.

For more information on obtaining finance or investment in your business, go to our finance section. And if you are concerned about your ability to manage your business debts, read our advice on dealing with debt.

Building your networks and knowing where to find advice will help you survive the early stages of your business. Read our guide on the help and support available for your start up.