I used to tell people all the time how hard my life was. “All I do is work and run my business” was my common answer when people at a party would ask “so what’s new?”. It was depressing. And yet, the entire reason I wanted to start a business was so that I could be free. I had daydreams where I’d travel the world, sleep in until noon and then go for brunch during the middle of the week and just read and play guitar. Yet, now that I had a business, I found I still wasn’t able to leave my day job so it was really just like I had two full time jobs now instead of one. My dream didn’t seem real at all.
One of the most powerful lessons I learned from that time of my life was the importance of keeping a low personal burn rate. Burn rate is a silicon valley term that means “how much money you spend in a month”. A personal burn rate is your cost of living.
My cost of living at the time looked something like this:
$3170 was my personal burn rate. The amount of money I needed every month just to survive, without doing a ton of fun things like trips, etc. Then, I had my business costs as well. I had to make a minimum of $3170 a month no matter what. Since I charged $1000 for a wedding, I needed to book over 3 weddings a month just to be full-time. It seemed impossible. Somehow, I was also supposed to come up with money to advertise, buy equipment etc. How does anyone do that?
Your Burn Rate Is A Trap.
That’s right. Its controversial, I know, but it’s true. Your personal cost of living is the thing that is enslaving you and it certainly was the thing that enslaved me. I realized it one day and I took drastic measures to lower it. I wanted to lower it because I knew that if I could get my burn rate lower, I only needed to book 1 or 2 gigs a month to be full time at my business. That’s great because as soon as you are full-time at your business, you have time to grow your business. You don’t need money when you are starting out, you just need time.
Having a job and a business will kill you. I was diagnosed with testicular cancer during this time in my life and I have to say, I believe stress was a major factor in the early onset of that cancer. Stress will also hurt your relationships and make you too busy to enjoy the people around you. You won’t be “present” in the moment, you’ll just be thinking of the next thing on your to-do list while you are supposed to be enjoying time with them. That will start to get to them after a while and could have a dramatically negative impact on your life.
I can personally testify to the fact that I had much less freedom when I had a full time job and a business as to when I just worked full time. I realized something important. I needed to focus on my business all day, every day if I wanted to succeed. To do that, I only had one option. I needed to lower my cost of living.
To get my burn rate to a suitable point, I moved in with a friend. My rent was now $400 a month. It wasn’t a great place, but it bought me time and freedom and for me, it was well worth the price. I sold my car and my payments and insurance for that went to $0. I rode public transit, started riding my bike (which got me in shape), walked everywhere and used car2g0 when I needed a car. I found a lower cell phone plan for $40/mo. You get the picture. I considered the whole thing an experiment. I saw that what I was doing (working full time and running a business) wasn’t working and wasn’t rewarding so I thought I’d do something drastic. If it didn’t work, I could always go back to my old expenses and find a great place to rent again.
My new cost of living looked like this:
The Result of My Experiment:
Was it drastic? Yes and I know that this can’t work for everyone. I had no mortgage, kids or spouse, so I was able to pull the trigger on this very quickly. But if I had a mortgage, I would have sold my house. My freedom is worth more to me than an investment 40 years from now. Plus, I had faith in my own ability that if I could just have the time to make this business work, then I would definitely be able to generate a a better ROI than real estate much faster. I also believe in the power of focus, so I made my business my focus. I didn’t have a diversified investment portfolio. I just had my business and I made up my mind to make it work.
Lowering my cost of living meant I only needed to book 1 gig a month to survive (I raised my price to $1200 per gig to cover it). I was easily hitting my target and with all day, every day, to network, do SEO, learn about advertising etc, I quickly started booking double the number of gigs needed to cover my cost of living. Soon I was making 4 times what I needed to cover my cost of living. I wasn’t just free, I was profitable!
Within 1 year of quitting I had a business deep into the 6 figures. Living so cheap meant I also mastered money management because I had so little to manage, it was easy to keep track of. I also couldn’t afford to make a mistake.
My Advice For You:
How low you can lower your cost of living is going to be different for everyone, depending on your personal situation. I don’t recommend going into debt to start a business and would definitely say lowering your cost of living is a much safer option. However if you have a mortgage, kids or a spouse, I realize you may not be able to lower it this much. Here’s the thing. You can get it lower than it is. Spend the time, think about it and lower it as much as is humanly possible. It is a temporary sacrifice.
Within about one year of lowering my cost of living, I was able to grow the business, move into a $2500 per month loft in the fancy, upscale part of the city and go on trips whenever I wanted while paying staff to do the things I hated and be more effective at it. It all became possible because I made the temporary cut backs I needed to get where I wanted to go.
My number 1 piece of advice to entrepreneurs is lower your cost of living so you can be free faster. As soon as you are free, you will have more time to grow your business.
Focus = success.