Tag Archives | entrepreneurs

A Safety Net for Entrepreneurs

A Safety Net for Entrepreneurs

It goes without saying that one of the reasons entrepreneurs are successful at growing wealth is that they are risk takers. Some entrepreneurs argue that in fact there is little risk in what they do, because they fully analyse the financial implications of their wealth-building strategies before they part with their money. Even so, they are betting on their own ability to predict future outcomes accurately. It’s not hard to think of entrepreneurs who have made and lost several fortunes in their lifetime, or who have a list of failed projects alongside those that were successful.

Being on a high growth path to wealth creation can be addictive. When money comes easily, why not keep making more? Cash flow is the life blood of any business and strong cash flow creates the opportunity for expansion. In the extreme, entrepreneurs who rely on cash flow for growth in effect create their own Ponzi scheme. It works well as long as the cash keeps rolling in, but if for any reason the cash dries up, the business quickly collapses like a house of cards.

There is a simple solution for avoiding complete devastation. Every entrepreneur needs a financial safety net – a store of wealth that is ideally unencumbered, and kept separate from the business. Instead of using all the business cash flow to fund expansion, some is diverted into other investments that have a lower risk profile, such as property. This store of wealth can provide a minimum standard of living or a foundation on which to rebuild a business in the event of a failure. For this strategy to be successful, the safe assets need to be protected via legal structures from business creditors and any temptation or pressure to use them to rescue a failing business must be resisted.

Comments { 0 }

The Ironies of Money

MoneyThe Ironies of Money

Some people have an obsession with wealth – how to get more of it and what to buy with it – and they dream of the feelings of security and freedom that come with it. Yet the irony is that such people are not the most likely to become super wealthy. Successful wealth creators are driven not by the motivation to create vast wealth or by what they will do with the money. Instead, it’s all about the journey, the thrill of taking risks and of competing, the sense of adventure, that satisfaction that comes from achievement and building something from nothing. The true rewards for entrepreneurs are psychological rather than financial. In fact, the greatest rewards for super wealthy people often come from giving their money away to help make a better society.

While money can make you happy, it does so only to a point. Beyond a certain level of income, negative issues can arise, such as an imbalance between life and work, stress and health problems. Striving to make more money so as to provide for the needs of a family ironically can produce the opposite of the intended result. That’s because children need time with their parents more than they need expensive toys or a private school education.

Will money help you find a better life partner or more friends? It is a cruel irony that some of the wealthiest people in the world are the loneliest. You might think that people with significant wealth have financial freedom, but in fact, significant wealth needs to be looked after. Along with wealth comes status, and expectations from society that might limit how you live your life. It’s not how much wealth you have that matters, but why you’ve got it and what you intend to do with it.

Comments { 0 }