Never Use Personal Savings To Fund Your upside down Business Operations
Why are you using your personal savings to fund your daily business operations? I will never understand this strategy, that in actuality is really not a strategy but more of an emotional impulse to “do the right thing” or perhaps simply an avoidance of reality or maybe wishful thinking. In any case, it is a serious mistake that must be addressed.
If your loss is controllable, short in duration, temporary, identifiable and solvable with a capital injection that returns the business to a positive cash flow, then sure, use some savings. That’s a reasonable idea as long as you make certain you return the money as soon as you can. However, this is never, ever the case. What typically happens is the business tips below break-even and you slowly drain your reserves and savings to support shortfall without a plan to return to profitability, simply propping up the business waiting for something to happen.
This is a mistake and serves only to prolong the agony, prolong the life of a sick business and prolong losses artificially until your savings are all gone. The business is still sick and nothing has been done to change your reality. What’s the point in that? You will now go into default without any cash to utilize for a workout, and the business is in the same upside down condition, so all that has happened is that you have bought some time with some very valuable capital–your savings–which was never intended to be injected into your business. Now it’s been utilized completely inefficiently and nothing has been gained but delay.
Simply stated, if your business is upside down, you need a plan to get it right side up again so it earns a profit. Without a plan that includes specific actions and adequate cash to support it, it should not be funded. To waste personal savings with no possible upside, with only a desire to postpone disaster is a mistake and a waste of precious capital. It’s ignoring reality and serving no viable purpose as the business is still not profitable when the cash is all gone.
If it is not a business worthy of saving, with a plan and adequate cash to save it, kill it and stop wasting capital. Most importantly, don’t waste your retirement or savings account. It is not the right move.
