Secret 2: The Money
This is the second post of a six part series about some truths behind the first 6 years of my cake journey. We hope you enjoyed reading it, be sure to comment and let us know. If you want to start at the beginning please head to the introduction, Let Me Tell You a Secret.
The money did not start coming in when I threw open the doors of my business. At the best times in the first year I would say it was more like a trickle. Prior to quitting my job I made sure I had enough savings in the bank to last me at least 6 months. That was my rainy day money. But the plan was not to touch it unless I absolutely had to. I was very worried that I might actually have to dip into my savings but after the first few months I realised I wasn’t and I wondered why… it turns out, when I was working a full time job, I was unhappy an unfulfilled. So I spent money on things like daily coffees and lunches, occasional clothes and stuff to just treat myself. But once I was actually happy… I didn’t need to spend money on things to make me happy… I drastically reduced my daily coffees and lunches because I was eating at home. It turns out… I was earning a lot less, but I was also spending a lot less.
Real money did not start coming in until my 3rd year of business. Typically this is the case with small businesses. The first year is the hardest. You are still trying to find your bearings, systems and processes and it feels like money is leaking out of you at every turn. I can tell you that in my first year of business the amount of profit I made was classified by the tax office as a ‘hobby’ and not a business. I know this will be hard for a lot of people to hear. They expect to just throw open their doors and have orders pour in. While that may be true, you tend to also have a lot more expenses in your first year (especially if you are moving into a retail location) so be really honest with yourself and your family about that. This might mean you may have to take up a part-time job until things become more financially stable. There are ways around it, but most importantly, you need to start somewhere and be prepared not give up.
The second year, things are a little more stable. You have found your groove and rhythm and things are generally looking better. The 3rd year is usually make or break time… this is when you either soar or when cracks start to form if you have not set your business up correctly.
Sometimes people ask me, if I had stayed in a corporate job and climbed the corporate ladder, would I be earning more than I am now? The real honest answer? Probably. If I had it in me to climb to be in a leadership role in a multinational company I have no doubt I would be earning more… but at what cost?
In my first 2 years of business did I earn less than a teenager working at McDonalds – definitely. You have to understand, when you start a small business, there is no way you will be getting a real salary or getting paid for every hour you work. I’m not saying this to depress you, I’m saying this so you can be prepared.
Anytime I feel inadequate when I look at people in their fancy suits and handbags, stretching out in business class or having important conference calls. I remember that I have what I am most happy about – freedom. If I wanted to take an afternoon nap because I was tired – I could. How many people can say that? I go to the gym in the middle of the morning because it’s not as busy – because I can choose to. Multiple times a day I can train and work with my dog – because I can work everything else around that. Above all, I look forward to working and am passionate about what I do. How many people can really say they have that?
The money is important. It always is – not going to lie to you here. A lot of my decisions to pioritise or axe an idea has always been about which one would be the most profitable. I got into this for the love and while I still love it now, I am in it to make a living… and making a living means being honest about wanting the money and valuing yourself and finding the balance between that and the love. Making a living means not letting others take advantage of you for their personal gain. Because it can’t ever just be about the love when it comes to business… if it is only about the love – you’ve got a hobby.
Continue reading the next part in the series, Secret 3: The Creative Process