Too often you see a friend on social media bragging about their business taking off. You know, showing off their new cars, a bigger house, and those great vacations. What they don’t show you is that, even though they are making more money, they are still living paycheck to paycheck.
How to avoid the pitfall of “more money, more problems”. It boils down to “Delayed Gratification”. What most new entrepreneurs don’t do is have a 3-5 year financial plan. I’ll give you a little insight into our 5-year plan. We knew that our business probably wasn’t going to take off immediately. We knew that we had a lot to learn, but if we stuck with it that success would come. And boy were we right!
My wife and I both come from very humble beginnings. When we began realizing our profits, we simply acted as if it weren’t there and we reinvested the profit back into the business. This is done for two main reasons. 1) Tax benefits. You don’t pay taxes on money that you don’t keep. 2) Most importantly, we wanted to GROW our business. Had we began keeping profit in the early years, we probably would have failed. Believe me, there is more to growing a business besides acquiring new clients, assets, etc. The business must also have a strong financial profile.
Our system was to simply act like there was no money for us. It really is that simple. We looked at it like this, the business is making that money, not us. Therefore the business deserves to be nourished so that it can continue to grow. DON’T SPEND PROFITS FOR THE FIRST 3-5 YEARS.
The biggest tip that I would give myself six years ago would be to also read the book, “Profit First” by Mike Michalowicz. I read about 25 business books ranging from financing deals, customer service, finding motivated sellers, etc. None of them taught me how and why I should have different pots of money within my business for different purposes. I am very proud to say that our business has a strong foundation and a strong financial profile.
I hope this helps you in the early phases of your entrepreneurial journey. Go out there and grow your business!
Ps. Check out our YouTube link below for lots of great content on getting started in real estate.