It is rightly said that: wealth is created not by how much you “earn”, but by how much you “save”. As a business owner, do you regularly save money? Do you make monthly savings? Do you withdraw a fixed salary from your business every month?
I have seen several entrepreneurs who don’t withdraw fixed salaries every month from their business. Instead, they keep investing their personal funds into the business every now & then. Few even fall into the debt trap by regularly taking loans to fill in the cashflow deficits in their business. It’s heartening to see so many promoters mortgaging their homes, personal properties, and wife’s jewelry only to sustain their business.
While working with businesses, we start by identifying the existing networth of the promoters, their personal savings, and their investments (in business as well as personally). Recipe for long-term wealth creation is a balanced investment allocation (across multiple asset classes) tossed with the right portfolio diversification sprinkled regularly with incremental savings and garnished with periodic review of the portfolio.
We elucidate the significance of creating passive incomes for business owners. Wouldn’t it be nice if all your financial obligations are automatically taken care of by your passive incomes? Then you may choose to work on only those projects & with only those clients with whom you “want to”, and not because you “have to”. This would not only heighten your energy levels but also lead to super high productivity (both personally as well as in business).
Lastly, we implement a monthly review system to measure networth of the promoters and their portfolio performances so as to track & eliminate erosion of wealth over a long time period.
Thank you so much for investing your time in reading this article. I sincerely hope you found it useful. Please feel free to share it with other entrepreneurs in your network.
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The above article is penned by one of our finance mentors CA Vikram Menda to disseminate the best practices followed by some of the best businesses across the globe.
CA Vikram Menda handholds businesses in implementing new-age tools & techniques of financial management, thereby ensuring cash-rich businesses and timely compliances.