Personal finance

When starting a business, the first thing you must do is to understand the financial situation in which you find yourself. It is necessary to be in a good starting point to be able to enjoy the process and that it does not become a lost battle.

You have to make a personal balance sheet and update your net worth, know what assets you have and the liabilities you have before you start. Your assets can be the backing of your business. Otherwise the business would have to start generating profits from the beginning and this is not frequent.

Not many people like to keep track of their finances in detail, let alone comfortably discuss the matter with strangers. Whether it is to help your clients or for yourself when starting your coaching business, it is critical to be honest, realistic and as accurate as possible.

Update your net worth

The first thing is to update your net worth. As a coach you don't have to know everything or be an expert in the area of finance but you do have to guide and advise your clients, and this first step is important to have done. Although it is not difficult and there are even several online calculator solutions, you can seek advice.

Net worth is equal to the value of your assets (everything you own) minus your liabilities (everything you owe).

Assets: can be money such as cash, savings accounts, investments; or they can be assets that you can liquidate such as personal and commercial real estate, land, furniture, vehicles or any valuable property you own. You should put the figure of the value they have now, not when they were acquired. You can also include accounts receivable that you have.

Liabilities: these are your debts or liabilities, from a mortgage or a loan you have taken out to unpaid taxes or credit purchases for example. When you have the sum of both, subtract them and you will get the net worth value. Larger amounts of liabilities must be matched by larger amounts of assets or else an imbalance may be inferred. It is important to have liquidity to cover debts or any emergency.

Include your salary in the financial projection

Automation makes our life much easier but sometimes we are not aware of all the income and expenses, and the dates when the money should come in and go out. We must cultivate the habit of analyzing our finances because we must continue to meet all obligations, and it is a point to keep in mind if the entrepreneur decides to leave his job with a stable salary to start a business.

It can be a stressful period because not only do you have to start and maintain your business for a while, but you will need to make enough money to cover your personal expenses. If you don't have other support to cover those expenses, you have no choice but to take them into account and include the estimate as your salary. Do not fall into the temptation of charging little or nothing so that the financial projection fits better.

It seems obvious but it is an aspect that new entrepreneurs tend to underestimate, you have to be practical and take into account all possible scenarios.

Record your monthly expenses

What is the minimum monthly amount to maintain your lifestyle? You can't forget about your personal expenses because even if you are starting a business they are no