Financial advisers vehemently advocate against this common practice, which can include tapping an owner's home equity to fund a company. Focusing all your financial resources on a business can jeopardize retirements, children's education funds and leave a family struggling in an emergency.
Bob Doyle, president of Doyle Wealth Management in St. Petersburg, Fla., is sympathetic to the fact that a business can be so engrossing that an owner can make personal financial decisions that aren't the most prudent - he noted that he's a small business owner himself.
''Our largest asset is probably the value of our business,'' he said. ''But I have a 401(k), IRAs, investment accounts.''
Doyle likened an owner's pouring all his or her funds into the business to owning only one stock - something that most investors know is just foolhardy. ''Just as I wouldn't put all my money in Exxon Mobil stock, I wouldn't put all my money into Doyle Wealth Management,'' he said.
Many small business owners do realize they need to focus on their personal as well as business finances, although it can be a struggle at first to do both.
Felicia Palmer and her husband, Steven Samuel, started their business, 4Control Media, as a hobby, so they didn't mind putting their spare cash into it. But when it turned into a full-time business, one that they needed for their livelihood, their attitude changed - they wanted the business to support them, not vice-versa.
''Once we realized our spending was starting to be significant, we said, 'This is a real business and if we're not operating it as a business, we're fooling ourselves,' " Palmer said. ''We can't keep spending money and not get anything back.''
Kathy Sacks, who owns Sacks Public Relations in Phoenix, recalled being nervous when she and her husband Brian used their home equity to help fund the magazine they started when they were in their 20s.
''We broke all the rules - you're not supposed to put your personal finances on the line and we did,'' she said.
The strategy did work for the couple, as they were able to sell their magazine at a nice profit.
Despite such success stories, advisers still caution against putting everything into the business - as Doyle put it, ''just like they wouldn't take money from a 401(k) to buy a high-flying Internet startup.'' He noted the high failure rate among new businesses - and, as many small business owners learned after the Sept. 11, 2001, terror attacks, any company can suddenly become vulnerable.
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* JOYCE ROSENBERG writes about small business for The Associated Press.
