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3 May 2016

How YNAB Helped Me Launch A Profitable Business

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by Guest Author

It was August 2014. I had a money problem unlike any I’d ever had before. I hadn’t worked in 15 months and was living off savings. I’d just moved from Portland, Oregon, to Spain to live with my Catalan fiancé. We were going to marry in two months. And I was starting my own business. Parts of this story sound glamorous, but it was stressful and scary, and I had no idea if—or how long—the money would last…

The Backstory: How I Got Here

At age 34, I’d quit my job to take a yearlong sabbatical to travel—a lifelong dream come true. During my travels, I fell in love with a Catalan farmer, who lived just north of Barcelona. At the end of my sabbatical, we decided we wanted to be together. Since Manel was a farmer, it meant that for now at least, we’d live in Spain. And that meant I would need a different kind of job.

“Wouldn’t this be the perfect opportunity to start your own business?” Manel asked me. It had always been a goal of mine and starting my own business was a hugely inspiring vision. Yet, was it possible with the money I had left?

I decided to take the plunge, and embarked on an even bigger adventure (move to Spain, get married and start my own business) with only $13,000 left in my savings account. It was nerve-wracking and stressful and I had no idea how it would end.

A Fortuitous Find: YNAB

Around this time, I stumbled across a personal finance blog that recommended YNAB. Intrigued, I signed up.

I’d used Mint.com as my primary budgeting software for many years up until this point. Mint had helped me keep track of my monthly spending and net worth. This was especially useful when I planned my sabbatical budget. Yet, in my present situation, I saw its limitations. Mint didn’t give me anyway to take a fixed amount of money and plan how I could stretch it in the future.

YNAB’s principle of giving every dollar a job really resonated with me. As I got ready for my new life in Spain and my business, every dollar I had left had a very important job.

YNAB in Real Life

When I arrived to live with Manel in Spain in August 2014, I was excited to get to work. I took over a bedroom to use as my office for the rest of the summer. Here, I started making my plans. I was eager, optimistic, and scared. Manel had generously offered to continue to pay for the majority of the household expenses so that I could use the bulk of my savings toward my business. This was one of the best gifts anyone has ever given me.

We decided that if I ran out of savings before my business was profitable, I’d need to find a job. I was not willing to go into debt. These were my parameters, and it was within these boundaries that YNAB was especially helpful.

I brought in the balances from my bank accounts and credit cards. I filled in the most basic of monthly expenses: mobile phone, internet, gas, personal items. Once I had an idea of my monthly expenses, I was able to make necessary decisions about bigger expenses for my business: a coach training program, mentor coach, certification, office equipment, and tax, accounting and legal services.

Seeing my money laid out in YNAB gave me focus and peace of mind. I could make immediate decisions and also see that I had enough funds to at least cover my first six months of startup.

What I Learned: My Advice To Would-Be YNABers

Now, nearly two years later, I’ve settled in my new home, and made many new friends. Manel and I got married. And I finally have my Spanish driver’s license. I can get by with basic Catalan, and can even make a tasty Spanish tortilla. And I’m still in business! ¡Olé olé!

Looking back on those crucial first six months, I realize how heavily I leaned on YNAB to help me weigh and track every expense. I’m relieved to be out of that tight spot. Every dollar (and euro) still has a job for me, but I no longer have to be quite so vigilant. If you’re considering taking the leap and starting your own business, here are a few things I have learned that might help:

1) Get a realistic picture of where you are right now.

Create your YNAB business budget. Fill in how much money you have to spend, and all of your expected expenses. The more exact you can be about expenses, the better. Take stock of what the numbers are telling you. What are your biggest expenses? Can any be postponed, lowered or eliminated? How long can you go without making any income? What’s your plan if you run out of start-up funds?

2) Prepare for over-optimism.

If you’re an entrepreneur, you’re likely a very optimistic person. That’s great. Me too. Just be aware of it. When I first started my business, I really didn’t like it when people told me: “Most businesses fail in their first couple of years.” Or: “It takes twice as long to get a business up and running as you think.” Jeez, so negative, I thought. Except, they were right. So, if you can bear it, plan for it to take double the amount of time to reach your sales and income goals as you think it will. For example, if you think you can make $30,000 in Year 1, plan that it will actually take two years before you can make $30,000/year. You’re still going to work like crazy to try to make $30,000 that first year, but if it actually takes two years, you’ll be able to survive.

3) Let the numbers push you and check you.

I’ve noticed there are two principal pitfalls for new entrepreneurs:

Pitfall #1: You’re too slow out of the gate. You think you can’t start to sell until you have the right website, logo, photography, equipment, or office. You’re hesitant about promoting yourself and your products and so you are slow to take the action you need to start generating income. The danger? You’re adding a ton of upfront expenses that are more about ego than necessity. Plus, moving so slow, you going to take even longer to reach your income goals.

Pitfall #2: You frantically pursue a dozen different strategies to try and grow your business—and as you do so, load up on expenses. You’re subscribing to all kinds of software solutions and hiring designers and consultants. You’re buying trainings, courses, events, and ads of all kinds. The danger? Some of the things you try might make you some money, but all your profit is being sucked away by your expenses.

This is why you want to live by your numbers. Keep your budget up-to-date. If you can see you’re going to run out of money in three months, I guarantee you’re going to prioritize your most profitable business strategies. Conversely, if you see expenses eating up all your money, you’re going to start making different decisions. The lower you keep your expenses, the faster you’ll make a profit. They say, “You gotta spend money to make money,” and that is true in some situations, but not all. Keeping my expenses down truly saved me as I started a business on a limited budget.

Peace Of Mind Changes Everything

YNAB helped me keep everything in balance those first six months of business. As I invested in developing high value, professional services to deliver my clients, I also ensured I had a sustainable business structure. YNAB helped me understand my constraints, which allowed me to be resourceful and creative within them.

This clarity gave me peace of mind—and that was a big deal. When I was faced with so many huge changes in my life, that extra peace of mind made all the difference.

***

Lisa Hoashi is a life coach whose global headquarters is now a farm north of Barcelona. The first real-life result she got from coaching was when it helped her find the perfect (and affordable) apartment in her hometown of Portland, Oregon.

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