April 3, 2009

Whether or not you're interested in offing the heroin dealer who tried to kil your Mafia Don father (as well as the police chief protecting him), it is very important to remember where what's business ends and what's personal begins. Specifically, it is very important for small business owners to keep in mind how their business operations, business finances, and personal finances--what Entrepreneur.com calls the "Triangle of Entrepreneurial Finance"--overlap and affect each other. You can't adjust the the length of one side of a real triangle without affecting the lengths of the other two; ditto, you might say, this triangle.

Business operations are the business's day-to-day expenses: rent, payroll, administration--that sort of thing.

Business finances are the business's broader assets and liabilities: the value of its brand, capital purchases, and cash flow, on the one hand; taxes and other debts on the other.

And, of course, personal finances do not involve the business, at least not directly.

The article does not tell you exactly how to balance the three legs of this triangle--that's up to each particular entrepreneur. But it does provide a useful reminder of the triangle's existence, and of the interdependence of its three legs.


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