As one starts a new e-commerce business, it is easy to use one’s personal money in the establishment of the enterprise. This is a very bad mistake as it leads to some serious financial woes, if not checked in time. The easiest way to get into such a predicament is to use a personal credit card to fund some business activities, such as advertisement. Before too long, a large balance is reflected on the credit card and now comes the time to rob Peter to pay Paul. If one maxes out a credit card, this causes a decrease in disposable personal income. What is really happening in this instance is a thing known to lawyers as co-mingling of funds.
This decrease in personal income will lead to problems within the family, if not solved quickly by a small business loan or some other creative financial activity on the part of the new e-commerce businessman. If co-mingling is excessive then the family has to do without some of the things that have been available, in the past. As can be seen, this will cause friction within the family and threaten the very fabric that is responsible for holding the family together.
In many instances the co-mingling starts as an innocent quick-fix for what appears to be a minor problem. Many co-mingling of funds problems start with using your own money to purchase something for the business. You might rationalize your action and tell yourself that you will write yourself a check to cover the cost, but you have to realize that if the e-commerce company is not making money then what you have done is cheat your family out of some of its purchasing power. Most of the time, this small purchase is made on one’s personal credit card.
A good rule to follow, when considering co-mingling, is if the added increase in credit card activity is 10% above what is normal on one’s credit card bill, and the business activity will not support this increase, do not do the co-mingling. It is better to try to establish a loan that can be supported by the money being made by the e-commerce business. A business must be able to pay for itself or it becomes a monster that cannot be controlled.
The sad yet true fact is that only 10% of thee-commerce businesses started on the internet succeed. That means only 1 out of 10 businesses will be successful. Those are not really good odds. If one does not have a fund to fall back on, then starting a business is out of the question. It is much better to leave one’s money in a secure bank than to engage in a business activity when funds are not available to support the business.