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This article by Stefanie O’Connell first appeared on in November 2015. Confession – I’ve made a major mistake in growing my business. Though my earnings have climbed exponentially over the past two years, I found...

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This article by Stefanie O’Connell first appeared on in November 2015.

Confession – I’ve made a major mistake in growing my business.

Though my earnings have climbed exponentially over the past two years, I found myself this Friday transferring the last of my emergency fund savings into my checking account – just enough to cover my near-term expenses.

Speaking to you as a personal finance pro, this is a major fail, and a huge source of stress.

Despite successfully maintaining my savings through the financial crisis, unemployment and years as a part-time actress, part-time babysitter, my back-up balances have now dwindled down to nothing.

The culprit is not some frivolous pricey purchase or major lifestyle upgrade, but rather, a simple failure to draw the distinction between revenue and income. A difference I’ve learned to be critical in business ownership.

Delineating income from revenue may sound obvious when you think about it in the context of big business, but in my small soloproneur state of mind, it was a division I didn’t think to make. After all, I don’t manufacture a product, I don’t maintain retail space, I don’t manage a team of full-time employees – I just have myself, and so, I’ve always regarded my business revenue as my income.

That was fine for a while, as the low start up and operating costs of online entrepreneurship didn’t take much of a toll on my earnings. But as my earnings grew, I found my costs also rising. I needed team members to help manage my growing task list, I needed professionals to whom I could outsource projects that fell beyond the scope of my skill set, I needed new paid platforms to manage the broader scope of my work.

While both my earnings and costs have grown, they haven’t necessarily grown in tandem or in direct proportion, bringing me to the precarious position in which I find myself today.

Invoices are out, but payments have yet to come in. Meanwhile, bills are still due at their usual times and my expenses are up in order to maintain my new business growth.

business ownership pitfalls

The Slow Creep of Business Ownership Expenses

I started noticing this cash flow imbalance back in September, minimally at first. I’d find myself in a place of cash flow anxiety for a few days before payments would clear and erase the stress.

It happened again in October, but knowing I still had my savings in place, I wasn’t too worried. Last week though, it all came to a head. The impending squeeze of upcoming monthly expenses (rent!) coupled with a continued wait on payment for issued invoices, compelled me to transfer the entirety of my 5k personal emergency fund into my checking account – just in case.

As of now, the amount I’ve invoiced is nearly $12,000, including some work dating as far back as the summer. The total amount I’ve received however is just $412.85 since the start of November.

The lessons learned?

I need a waaaaay bigger emergency fund. Now that I’m running a business, my monthly expenses are far greater than they used to be. The 5k I had in savings was enough to cover my costs for three months back when I was living the broke and beautiful life, but now that I’m officially breaking broke, it’s time to step up the savings game with a more sufficient buffer. I may no longer be broke, but I’m seriously cash poor.

I need to keep more cash in checking (as much as I hate to do it). With higher operating costs and precarious payment timelines, I need more liquidity. If a single day of checks clearing can make a difference of thousands into or out of my account, I need to actually keep thousands in my account, even if my balance is earning no more than 0.01% interest, (I guess that’s the cost of business ownership).

I need to separate my income from my revenue. While my earnings may be increasing, my profit margins are decreasing. I used to be able to run my business with a nearly 100 percent profit margin – it’s probably closer to 60 or 70 percent now. I don’t particularly mind the closing margin as my higher costs are what allow me to scale my business in a meaningful way, but during this period of transition, I’m finding that I need to scale back my personal spending in spite of higher earnings. (Probably should’ve waited to pull the trigger on the vacation I’m taking next week.)

Looking ahead to 2016, I had initially set myself the ambitious goal of earning six-figures. In my mind that meant bringing in around $8300 worth of work each month. What I’m realizing now however is that in order to have six figures in income I need to have revenue around $200,000 – or $16,600/ month.

So yeah, that’s a pretty major difference – and it illustrates how powerful the shift from regarding earnings as income to understanding earnings as business revenue can be.

I’m now recalibrating my revenue targets to meet my personal income goals.

The Shift from Self-Employment to Business Ownership

I’m also realizing that my current cash flow dilemma may be indicative of a greater issue. I’ve been thinking of myself as a self-employed freelancer for so long that I haven’t taken ownership of the fact that I am a business owner. Getting trapped in the mindset of the former is limiting.

When you’re self-employed, your growth is inherently limited by what you yourself have the time, ability and energy to accomplish. When you transition to a mindset of business ownership, you can leverage your time by outsourcing and delegating – exponentially expanding how much you can offer – and how much you can make.

While I seem to have adapted some business ownership behaviors to my benefit, I’ve failed to take full ownership of my business owner status. I haven’t even set up a separate business bank account! We’re talking bare bones basics here, all of which undoubtedly contribute to the precarious financial position in which I currently find myself.

Growing Into Business Ownership

Showing up and doing the work isn’t enough anymore – not for me or anyone else who’s serious about building something big. It’s time to make these mindset shifts and put effective systems in place, working on the form and function of business as much as business itself.

If any of this resonates with you – congratulations! You’re not just looking for the next job or the next gig or the next paycheck anymore, you’re ready to start thinking like a business – planning for what’s one, three and five years down the line.

Successfully growing into full fled-fledged business ownership is as much about seemingly simple things like separating your income from your revenue each month as it is about zooming out and looking at how you align the processes within your business with your big picture goals to achieve them more effectively and efficiently.

Stefanie O'Connell


Stefanie O’Connell is a former broke actress turned personal finance expert. Stefanie channeled her energy into a zest for personal finance and soon found herself empowered by her finances and starting her own blog,, and a book, The Broke and Beautiful Life. You can contact her through her blog.


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