Why Success in Your Business Beats Winning the Lottery

Business Success

How to build your nest-egg in business

Business Success

Small business success is the fastest way to build wealth for normal people like you and me

About 10 years ago a fellow business coach said to me: “The reason I work with small business owners is that being successful in small business offers the best opportunity for normal people to build wealth to retire on. No investment strategy, whether it be shares, property, or the lottery hold the same potential for the average person, as business success.”

A bold statement, and I’ve remembered it ever since. I know, there’s plenty of people who’ll disagree: My financial planner will happily tell you that the most effective way to build wealth is to start early and ensure you put a small amount in your superannuation fund every month and to focus the portfolio on long term returns… The Warren Buffet approach in other words. And I have a client who is property buyer’s agent, who will happily tell you that the best way to build wealth is to buy property and leverage it into buying the next one, and the next one etc. I even knew a bookmaker once who happily tried to convince me that investing my hard earned on the horses was a foolproof method to getting rich.

Business success And these are all good strategies (although I was never entirely convinced by the bookmaker for some strange reason) and consistently executed, with the right advice and guidance, I’ve seen it work many times. I follow the first strategy with my financial planner and have done so for a while and it’s been working wonderfully well. All I can say is: if only I’d started a little earlier …

The advisers are building their own business

But one thing those advisers won’t tell you is that they themselves are actually their own small business success to build their wealth. They have started a small business in their chosen fields of financial planning, property advice and horse whispering, in the expectation that they’ll generate solid ongoing returns and possibly sell those businesses for a significant amount down the track.

They know that one of the most effective strategies for building wealth is to build a successful business that generates a good cashflow, so as to direct a good proportion of that cash into their own superannuation strategy, consistently and for a long time.

Take the example of my client Jane. Jane has been building a specialist business selling flowers in small bunches online. It’s taken Jane a couple of years for business success. Profitability was not easy to achieve, but now she’s there, consistently and after paying herself a good wage every month, she’s making about $10K net profit on average annual revenues of about a million dollars. She’s accumulating 75% of the profit every month in the business to fund growth and expansion and build the balance sheet and a quarter or $2,500.00 goes straight into her super.

Jane is 35 at the moment and if she were to continue to do this until she is 60, she’d have a $2million dollar superannuation nest egg, assuming a 7% annual interest rate. (A simplified scenario of course, there’s also her regular 9% super guarantee levy, further business growth, growing contributions and of course inflation to consider, but the point is clear I think.)

Mary Poppins and Tuppence

Business success Remember the famous “tuppence in the bank” song in Mary Poppins? The Miracle of Compound Returns will ensure Jane will be a millionaire several times over by the time she’s 60. (Hence my lament: If only I’d started a little earlier).

If Jane was working a normal job with a normal salary it would be hard for her to find an additional $30K a year to add into her superfund Impossible really, but this monthly contribution is easy to make for her business. A business needs money to grow and it’s important to ensure that we build the liquidity and balance sheet of our business (see also my article about the principles of sound financial management of your business here), but it is more than reasonable in the circumstances for Jane to pull out $2,500.00 per month. Over the course of this year Jane has budgeted to invest some $40K into new equipment and updates to her website but if she does that she is still going to have the balance sheet grow by $50K this year, and if she does the same again next year she will have built up $100K to fund her expansion plans.

And all the while Jane is earning a good wage from the business and she’s able to do everything she wants to do in life.

Nest-eggs are not for wage slaves

Three years ago, Jane was working in the corporate world, in a middle management role. She was working hard and earning a good salary, but retiring with several million in a superfund? That was never going to be on the cards.

Let me assure you… building a small business is generally a hard slog and very few people ever become truly rich from starting a business, but building a nest egg such as the one Jane is building is very possible… I promise you.

#BusinessSuccess #FunInBusiness #Retirement #SmallBusinessProfit

 

By the way, I’ve written several books about building small businesses. The first one: The Ten Truths for Raising a Healthy Bouncy Business is available to download free as Ebook or Audiobook.

FREE Download: The 10 Truths for Raising a Healthy, Bouncy Business

How to Raise a Healthy Bouncy Business

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