Copreneurs: Determine Your Risk Tolerance Before Starting a Business

by Pamela on April 7, 2012

For Couples in Business Together, Knowing Your Financial Limits Could Save Your Relationship

In my last post, I advised couples in business together to determine their risk tolerance.

I’m not a financial risk-taker. My risk tolerance is very low. I wouldn’t go to Las Vegas to gamble because losing money keeps me up at night. My husband, on the other hand, has a higher risk tolerance. Although he would never gamble, if we started a business together, he’d be fine with having all our eggs in one basket, whereas I wouldn’t.

So, why is important for couples in business together to determine their risk tolerance?

Because business decisions are often financial decisions and the number one thing that most couples fight about is money and the handling of finances. If one partner is a risk taker and the other is a conservative spender and you then merge your professional lives, you could run into major problems. Your risk tolerance may never be the same, and that’s okay as long as you and your partner find a happy medium. If you can’t, you may want to reassess your plans in order to avoid heartache down the road.

Figure out what dollar amount you’re able and willing to invest in your business and stick to it. Discuss how long you can comfortably pay the bills until you start turning a profit and stick to that. Decide on how much you need to keep in savings (for your own peace of mind) and agree not to spend that money.

Resist the temptation to fund your business with your credit card. If you and your partner start out with a large amount of debt, you’re only adding to your stress right out of the gate. Credit card debt hurts start-up businesses. The statistics are interesting. And, for couples, it’s more than your business on the line- it’s your relationship.

For on-going monthly expenses, you’ll want to get a business credit card or charge card. Decide what your limit on that credit card should be and stick to it (I feel like a broken record). American Express has quite a few cards for small businesses like the Plum Card, and the Simply Cash card.

Have you and your partner discussed your risk tolerance? What did you learn?

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