3 Critical Money Strategies Unique to Entrepreneurs



Few can contest that entrepreneurs are a different breed. They are special. Elite. They voluntarily go into harm’s way taking risks mere mortals would never dream of doing. Entrepreneurs creep silently into the night for long hours; often for little pay and no glory. In the world of business, entrepreneurs are the Navy SEALs of the work force. Like the elite warriors, entrepreneurs also enjoy a few of the benefits of membership; relaxed grooming standards, flexible hours, and even get to dress down at times.

Silly I know, but these two groups share unique traits the majority of the population does not. They are not followers and often rebel against authority. The traits that enable entrepreneurs to achieve great things are also risk magnets. Entrepreneurs cannot follow the same “rules,” and when they try to, the results are devastating. Entrepreneurs are different. They have different needs and one that is often ignored is how they manage money. 

Here are three critical money strategies unique to entrepreneurs:

1. Pay Yourself First

Like the elite Special Forces, most entrepreneurs do not do what they do for the money. The money they receive is often a tool to keep score. To most entrepreneurs, money is great, but it’s the thrill of the chase that creates the rush.

With this unique personality trait comes risks others don’t have. The entrepreneur’s tendency is to put every penny of profit back into the business for the big payday in the end. This is usually a required mindset in the beginning, but it’s high risk behavior that must be reeled in as soon as practical.

In the end, owning a business is about building your personal net-worth so you can live on your own terms. To do that you must extract profit from the business and move it to your personal balance sheet. Being entrepreneurs, that’s emotionally hard to do.

We would rather invest in new equipment, employees, or advertising before taking money home. However, it’s important to create rules that force you to take profits because if you wait until the right time, it may never come. Remember the oldest rule of personal finance—pay yourself first.

2. Cash is King

Any entrepreneur can relate to the cash flow rollercoaster. There are wild rides up and equally frightening trips down. Unlike the predictable cash flow employees experience, business owners have erratic cash flow and thus have to do things differently than everyone else.

Traditional financial planning advice frowns upon hoarding large amounts of cash because of the missed growth opportunity of other investments. However, it’s more important to have the cash than earn interest because the entrepreneur’s cash flow is so unpredictable.

It’s very difficult for the startup owner to save a pot of cash. They are usually bootstrapping and need every dollar just to get the thing started. I’ve been there more than once, but as soon as you can, or preferably before you get started, build up a cash reserves of at least 20-40% of your annual net income.

That may seem like a lot of cash, but this is only the starting point. Depending on the stability of your company, more than 20-40% is often better. Cash is king, especially for the entrepreneur. It allows you to make better business decisions, take advantage of opportunities, and operate from a position of abundance.

3. Higher Return / Diversification

I hear the same thing from each of my new entrepreneur clients. “I can make more money investing in my business. Why would I want to put my money anywhere else?”

This is a good question, but following that strategy increases risk in an already hazardous environment. By nature, entrepreneurs are overly optimistic about their chances of success. Optimism is necessary to take the business risks we do, but it often leads to poor diversification of their money and assets.

Because of the inherent risks of a small business, it’s even more important to invest money outside of your own business to mitigate the probability of losing everything. It often seems there’s no better investment than the one you know inside and out—your own—but that does not mean you should put all your eggs in one basket. Use your business to earn money, and then spread it around several holdings so you’re never exposed to single investment risk.

There are too many investment choices to list, but stocks, bonds, cash, real-estate, and other businesses are what I’m referring to. These outside investments are not where you seek greater return, it’s where you protect your money from your own business risk.


As entrepreneurs we usually can’t see our own mistakes until well afterwards. We get too close to our business and find ways to justify our high risk choices. Have an outside person hold you accountable. Discuss these ideas with a trusted friend, your accountant, or financial advisor, and explain your financial goals. Get that person involved in your budget decisions so you have someone who is not emotionally attached to the business to hold you accountable to your financial goals.


Chuck J. Rylant is a Certified Financial Planner and writes at ChuckRylant.com. He is also the author of the new book: “How to be Rich: The Couple’s Guide to a Rich Life Without Worrying About Money.”