Treat Your Spouse As An Investor
Here are ten rules of thumb that I have seen successful founders follow to navigate the first two to three years of a startup and keep their spouse on board and supportive.
1. Treat your spouse as an investor and board member from the beginning. You will need their advice and support. They don’t have to join you full-time in your startup–they are unlikely to be as entrepreneurial as you are. But a decision to start a business or even to invest significant effort in exploring possible companies, even if you are working full-time, will have significant near-term implications for your life together.
2. Lay out a plan and hold yourself accountable on a periodic schedule. While your spouse may have limited insight into the challenges of getting a business off the ground–although, in many cases, they may know more than either of you may first assess–they do know you quite well. In particular, your strengths and weaknesses. And you will rely on them for emotional and financial support because you are joint stakeholders in your success as a couple. In this regard, a crucial part of accountability is adjusting your plan in response to your spouse’s feedback and events as they unfold.
3. Come to an agreement on an overall plan that includes timeframes and limits on financial obligations you will incur. In particular, be explicit about the opportunity costs of starting a business. Working on a startup plays out in two different ways depending on whether you are unemployed or currently employed. In the first case, you need a backup plan for finding work that you may need to spend time on in parallel with trying to get a new business off the ground. In the second case, it will normally be most effective for you to continue working at a job you may find less satisfying but maintain enough cash flow to fund your household and save for when you separate and go full-time on the business. You don’t have to put in extra time to get ahead at work, but you do have to work hard enough to stay in control of when you leave the job.
4. Distinguish between asking for money, asking for emotional support, and asking for advice. Don’t ask for an open-ended financial commitment: don’t make bankruptcy your “stopping rule.” Don’t conflate emotional support with financial support for your startup: this also applies to friends and relatives. Few are equipped to make a high-risk investment. You should only ask for advice on tactics or implementation details where your spouse has relevant experience and expertise. This same advice applies to conversations with friends and relatives. Distinguish between asking for reassurance or emotional support and specific guidance.
6. Plan for iteration and refinement. Base your plans on “nothing new ever works,” not just the first time but also the second. Set your spouse’s expectations that you see an opportunity that you find energizing, but you still have things to learn. Engineers tend to be good at planning how to spend money effectively to create new products but often need to learn how to sell. People who have been effective in sales and marketing may be surprised to learn how difficult it is to manage the creation of something new and useful on time and on budget.
7. Commitments to customers and cofounders are important, but family commitments are more important. Your spouse must respect the time you need and not view your startup as a vacation or an interesting new hobby. But you must reinforce that perspective by treating it as seriously as other obligations. You have to define working hours, and working hours must end. And you need to continue to meet commitments to family and friends.
8. Establish some simple practices to maintain financial transparency from the start. A monthly review of expenses with balance sheets and income statements is a good start. Quickbooks can do this for you easily in the beginning. Be very clear on any funds that will be transferred into the business or that the business will be able to provide for your family. Bootstrapping a startup involves spending less time and money in other areas, typically lifestyle and travel-related purchases.
9. Maintain a list of critical risks and review monthly. One of the most challenging risks to represent in a spreadsheet is the impact of delays. Many things take longer than you first anticipate: new features, closing deals, and getting paid are three critical factors you need to manage. Closing deals with people who already know and trust you can give you a false sense of what the actual sales cycle will be when you are selling to strangers. Don’t be too confident about your sales process until you have gone through several complete cycles with strangers. All this means you need a prudent reserve for unanticipated expenses and delays.
10. Financial outcomes are essential, but new learning enables you to define and meet goals. Your spouse may reasonably adopt a “show me the money” attitude, so you must plan and report financials. But you must also define how you track key development, sales, and support outcomes. You need to demonstrate that you are learning from your experiments and experience by improving your ability to define and satisfy goals. You have to take a severe approach to modeling and managing your business, updating your plans and assumptions based on results achieved.
Summary: Conversations With Your Spouse About Your Startup
Before you make a major commitment: here are some key items to cover in a conversation with your spouse before you quit your job and start a startup.
- What’s the cash fingerprint: how much money will you need for how long to sustain the effort
- How long will it take you to find a job if this doesn’t work out
- How will you tell that it’s not working and you need to look for a job
- How much time a week will you need to spend on the startup: what are the “protected times” that you will continue to devote to your spouse and your family.
- Estimate your timeline to
- break-even – no longer need to invest in startup
- ramen profitability – minimum wage for hours work
- salary = 80% of your job
These timeline estimates can be difficult but you have to understand the risk level. More importantly, if you are having trouble determining these answers, it’s ten times more challenging for your spouse. They also embed “stopping rules” in the sense that if we cannot reach “break-even” by this date, where we no longer need to put money into the startup, then we should make a significant change or get a job.
Monthly conversations you should have with your spouse.
- What was accomplished last month
- What’s the plan for next month
- What are objective measures of progress that represent risk reducing accomplishments
- Updatate your timelines for break-even, ramen profitability, and 80% old salary
What not to say if things don’t work out.
- Don’t Say You Won’t Do It Again, assume that you will
- Don’t Say Anything that Damages Your Relationship Out of Frustration With Your Startup’s Failure
Here are some blog posts on bouncing back from a failed startup (and recognizing that your startup has failed):
- Maintaining Perspective on the Entrepreneurial Roller Coaster
- Entrepreneurs Blend Passion and Prudent Risk Taking
- The Heart That Holds On
- Francis Adanza on the Entrepreneurial Roller Coaster
- Discovery, Invention, Growth, and Renewal
- Am I Making A Fool Of Myself?
Related Blog Posts
- Ten Mistakes Early Stage Bootstrappers Often Make
- Five Serious Financial Mistakes Bootstrappers Can Avoid
- Time to Market Season Recap and Lessons Learned
- How Founders Should Should Manage Startup Runway
- A Cofounder Commitment is Long Term: an Informed Decision Takes Time
- Entrepreneurs Cannot Rely on a Cookbook or a Manual
- A Holistic Approach to Launching a Bootstrapped Startup
- M. C. A. Hogarth on Business for the Right-Brained
- Managing Recurring Problems In Your Startup
- Chalk Talk 1-2-4-1
Image Credit: 97955404 – 123rf.com/profile_gstockstudio
I want to express my thanks to Angie McCormick of AngCo Virtual Assistants and Theresa Shafer of SKMurphy for their insights and efforts in helping me craft and refine the checklist and summary of the three types of conversations to have.