Yasameen Sajadi, CEO of St. Paul-based Mazaza, is learning every day that it takes time to turn a profit.
The company, which makes Afghan-style chutneys, aioli and lentil dips, will be in Target, Whole Foods and Costco stores across the U.S. this year.
While it's a big opportunity for Mazaza, it will need to ramp up production before selling to new retailers and continuing to sell to Kowalski's Market, in addition to the more than 100 Kroger and Central Market stores it already supplies. Funding needs to be provided.
For small businesses, growth opportunities like Maza's can leave owners in a position of reluctance to pay for it themselves.
“When you're dealing with these big retailers, your orders are so expensive that you have to pay a lot of money upfront to buy supplies and bottles and cilantro and ingredients, right? We don't see any real benefits, only after 30 days,” Sajjadi said. “It takes about 60 or 90 days to cross the line.”
Sajadi expects Maza's revenue to reach $2 million this year. That way, she and her co-founder and sister Sheila Sajjadi would be able to pay her full out-of-pocket expenses. Currently, Yasameen Sajadi pays herself enough to cover her day care.
“My dream is to have a full-time job with a full-time salary and take my company to a safe place. [pay yourself]” said Yasameen Sajadi. “But it hasn't happened yet. This is the year it happens, if not next year.”
So how can you pay yourself as an entrepreneur if business comes first? These business owners and advisors have developed a strategy.
Be disciplined with your finances
One of the most important responsibilities of a business owner is budgeting.
Since 2018, Ahmed Mohidin, founder and principal advisor of Sigma Consulting & Training in St. Cloud, has been helping Minnesota business owners through the formation stage. Not understanding profitability, expenses, operating costs and record-keeping when starting a business can lead to problems down the road, he said.
“I think the biggest problem is unspent money and mismanagement,” said Mohidin, who provides free consulting to small business owners in Hennepin County through Elevate Hennepin, a program that helps small business owners. ” he said. “The more organized they are, the more successful they will be.”
Mohiddin said it is very likely that the new business will not be profitable for at least several months. He and other entrepreneurs said it's ideal to have at least six months worth of savings to cover expenses, including living expenses.
“Keep some money on hand in case you don’t get paid,” he said.
Mohiddin said the first thing founders should do is open a bank account separate from their personal accounts. If not set up properly, it will be difficult to determine during the audit process which transactions are intended solely for that business.
Overdraft fees and bank fees can also impact a company's cash flow, he said.
Mohiddin said business owners should aim to allocate 30% to 50% of profits to personal compensation.
“However, this allocation can be influenced by a variety of factors, including the size of the company, the industry in which it operates, and the financial needs of the individual owner,” he said.
You don't have to look at compensation as a percentage, says Alex West Steinman, co-founder and CEO of The Coven, a company that operates multiple coworking offices in the Twin Cities.
“I would look at the market rate for the role you are playing as a founder and determine how sustainable the business, and you, are,” she says, adding that you should consider how much capital you put into the business up front. He added that it is necessary to judge whether it can be used. We pay for it ourselves.
Creating a spreadsheet using an accounting software system like QuickBooks or a computer program like Microsoft Excel is a good place to start, Mohidin says. If you're not sure how to use either, free consultations are available through initiatives like Elevate Hennepin.
If you can afford it, try hiring an accountant.
In addition to being disciplined with money, business owners also need to exercise self-control. That means avoiding extravagant vacations and cracking down on unnecessary splurges like shopping and nightlife.
“Entrepreneurship is about risk management,” said Sherisa Demuth, founder of communications services company Laurel and former executive director of Beta, a nonprofit that supports startups in the Twin Cities.
“I've seen countless founders who were creative when money was low, but that can happen for unforeseen reasons when starting a business. Those who have survived that situation have found that their ability to , they understood the immediate needs, the long-term implications, and how far removed they were from the industry and society. They were focused on what they were willing to work towards starting the company in the next month,” she said. Told. “Betting on big wins is irresponsible. It takes extraordinary focus, dedication, communication, and sometimes sacrifice to keep your business afloat.”
Look for other sources of income
Mariza Karema, executive director of Soun Emancipation, said investing in free work and late-night work is an aspect of self-employment. Another is to actively participate in the workforce when establishing a company.
In the early days of running her plant-based toilet paper company, Bim Bam Boo, Zoe Levin sought income by working in other businesses.
“When times were tough, I took on side jobs,” she says. “The only way to improve cash flow is to have more cash. I know several founders who have used similar tactics to get their businesses off the ground.”
People starting a business often feel pressured from outside to commit to the business, even if they can't pay for it themselves.
“That's not always the best choice,” West-Steinman says.
Other entrepreneurs will ask West Steinman how they can grow their brand or company. Her answer: “Don't quit your day job until you're ready.”
Self-employed people should always consider their family and personal needs to see if they need to take on freelance or outside work to supplement their income. “When did you go full-time? How do you need to run your business to become full-time?” she said.
West-Steinman said that depending on your family situation, you may need the income of two people, so it's acceptable to have a steady source of income until you're ready to transition to full-time work.
But experts say juggling multiple jobs can lead to burnout, so it's also wise to look for other sources of funding. To avoid adding to the debt, owners can look for government subsidies or use crowdfunding campaigns.
Maazah recently launched a campaign on Wefunder, an online crowdsourcing platform that allows ordinary people to buy small stakes in startups and small businesses. The funding will help Target and Whole Foods launch, Sajjadi said.
Focus on family and spouse
When Terrace Johnson wanted to start her employment agency, Spotlight Staffing, in 2021, she asked her fiancé if she could leave the workforce and focus on her business. There was nothing wrong with him being the only provider.
“He believed in everything I stood for and still do,” Johnson said.
The company made its first $100,000, and Mr. Johnson's partners were able to continue working and grow their savings accounts. When the company suffered a financial downturn in mid-2023, Johnson decided not to pay herself a salary. Fortunately, the couple was able to live on their own savings. As the situation improved, Johnson shored up the company's budget in case something like that happened again.
Johnson said it's a good idea to establish boundaries with your partner so you know when and where your money will come from.
“Having a supportive partner really helps you survive,” Johnson said.
