Page 47 - The UnCaptive Agent

20 THE UNCAPTIVE AGENT

Staying Alive Long Enough to Thrive

The last gut-check question that I think every founder
must ask themselves is what their plan is to stay alive
long enough to succeed. While it’s possible to make
enough income as a new insurance agency owner in the
first year, it’s not possible to do it in the first month.
It takes a while to get the cash flow to move. From my
experience, it generally takes about three years to get
the flywheel of any business moving well enough to
guarantee that you have the income you need to pay
the business’s bill as well as your own.
How will you fund the expenses of the business
until it pays for itself? There’s a concept called working
capital, which is simply how much money you need to
pay bills for the business if there is an interruption in
cash flow. When the cash isn’t there, how many months
can you survive on your working capital before you go
under? This is a question you need to think through
very carefully. My advice would be that you need three
to six months of working capital. How much working
capital you need really depends on how many expenses
you have and, of course, every founder conserves cash
by minimizing expenses. As you build your business
plan, this is a critical issue to think about.
The other money plan you need to have is how you
will pay your personal bills for the first two or three years
until you can take enough money out of the business
to live on. In the beginning, you may be fortunate to
generate income to pay the business bills fairly quickly.
But how do you pay the rent or mortgage? The health
insurance? How do you fund food, car payments, and
all the other expenses of modern life? Are you married,
and does your spouse have a job whose income can cover
your expenses while you’re getting started? This is the