How to avoid going broke soon after starting a business

Using accounting software systems like QuickBooks or computer programs like Microsoft Excel to create spreadsheets is a good place to start, Mohidin said. If unfamiliar with how to use either, free consulting is available through initiatives like Elevate Hennepin.

If it's affordable, try hiring an accountant.

In addition to being disciplined with money, business owners also must practice self-control. That means avoiding extravagant vacations and cracking down on unnecessary splurges like shopping or enjoying the nightlife.

"Entrepreneurship is risk management," said Shelisa Demuth, founder of Laurel, a communication services company, and the former executive director of Beta, a nonprofit that helps Twin Cities startups.

"I've seen countless founders who got creative when cash was light, and it can happen for unforeseen reasons when starting out. The ones who weathered it understood their own capacity, immediate needs, long-term impact and how far outside of industry or focus they were willing to go to get their company to the next month," she said. "Betting on big wins is irresponsible. Business survival requires an exceptional amount of focus, dedication, communication and sometimes sacrifice."

Find other sources of income

Investing free work and late nights is one aspect of being self-employed, said Maliza Kalema, executive director at Sown Emancipation. Another is being willing to participate in the workforce while building a company.

In the early days of running her plant-based toilet paper company Bim Bam Boo, Zoë Levin sought income by working for another business.

"I got a side job when things were rough," she said. "There's only one way to fix cash flow: Get more cash. I know a few founders that have got their business off the ground with similar tactics."

Many times, people starting businesses feel outside pressure to fully commit to that venture, even if it means they can't pay themselves.

...continued

swipe to next page