Paying yourself first

Discussion in 'Investor Psychology' started by Xenia IM, 14th Mar, 2015.

  1. Rixter

    Rixter $uper Investor (Retired)

    Joined:
    15th Mar, 2001
    Messages:
    9,335
    Media:
    12
    Location:
    Highton Vic.
    I agree... You can choose to either be The General of your Army or A Soldier in the trenches..

    To me, a successful business is when you are The General of your Army...PAYG and some one Self employed are the Soldiers in the Trenches, because they are selling their time as opposed to outsourcing and leveraging some one else's time.

    If you dont work to replace yourself you keep on working...nothing wrong with that if that's what's you enjoy doing and prefer to do.

    But as Mr Fab states "Achieving the goals you've set for the business, whatever they may be", The General of the Army is the business goal.

    Everyone has their own Success definition.. The General is mine.
     
  2. Rixter

    Rixter $uper Investor (Retired)

    Joined:
    15th Mar, 2001
    Messages:
    9,335
    Media:
    12
    Location:
    Highton Vic.
    Because their thinking or perception inhibits it being done. The only limits, are the one's we impose upon our selves.

    Systems, are the tools that allow you to replace yourself.

    Food for thought.
     
  3. cimbom

    cimbom Member

    Joined:
    29th Nov, 2011
    Messages:
    1,832
    Location:
    Canberra
    Why would you bother to train as a doctor if you were going to do this?
     
  4. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

    Joined:
    30th Sep, 2002
    Messages:
    2,180
    Media:
    18
    Location:
    Sydney
    I owe a lot to the RK mindset, completely turned me around and now at the investor level where I can just sit back and collect cash many multiples of my previous full time working income.

    However, I believe his ideals on business are BS.
    It just won't work unless it's either completely automated, systemised, long established with large resources set, etc.
    There's too much that can go wrong in the business world which requires the skills only a business owner can have.

    I'm not sure if we are talking about the same types of "Business" here.
    But how many business owners could switch off their phone, email and all other forms of contact, go travel the world for 12 months and them come back expecting their business to have carried on with no loss in profits during that time?

    Not very many at all.
    Lets not confuse business ownership and investing here.
    Investing generally requires much higher levels of capital to operate.
     
    Xenia IM likes this.
  5. cimbom

    cimbom Member

    Joined:
    29th Nov, 2011
    Messages:
    1,832
    Location:
    Canberra
    I wouldn't mind having a business that I could run from anywhere in the world though. Would be an excellent compromise :p
     
  6. Mr. Fabulous

    Mr. Fabulous Thought Criminal

    Joined:
    28th Sep, 2002
    Messages:
    6,127
    Location:
    Melburn
    Hi MIW, firstly it's not 'spot on'. As far as I know, Rixter has never run his own business, so he has no experience to relate this to, therefore his point of view is worthless.

    As Ace In The Hole stated, the reality is that most business owners can't simply 'not turn up'. There is no way that a business is 'set and forget'. Anyone that has run businesses will be able to tell you that. Even if you have systems and processes and management in place to run things on your behalf, you still need to manage the managers.

    Business and the world in general is constantly evolving, you can't simply just throw the keys at your no. 1 guy and say 'I'm off to travel the world. See ya in 12 months!' and come back expecting things to be just how you left them.

    All RK does is fill books full of useless crap that sounds great and sells well, but most of it isn't relatable to the real world. Rich Dad, Poor Dad was good as a way to plant the seed. The rest of his stuff is garbage. Why would you take advice from a salesman whose success came from selling books and seminars?

    For those that are interested, I strongly recommend reading the book 'Good To Great', which is frankly much more relatable to the real world in business terms than RK could ever possibly hope to be.
     
    oc1 likes this.
  7. Xenia IM

    Xenia IM Property Manager

    Joined:
    19th Dec, 2014
    Messages:
    754
    Location:
    Adelaide, South Australia
    I agree Ace. I have tried both ways - I did completely automate my business and step out of it for 5 years. It existed to pay salaries and create jobs for people, it did not work for me and my family.

    profits are much higher when I'm in there.

    12 months ago I sacked the senior property manager and assistant property manager all in one go. Between the 2 salaries and cars and laptops and superannuation and all the BS that business owners need to pay, it freed up $110,000 in the business. I took, the car and the 2 salaries, took over both positions myself and not only is cash flow not a problem anymore but we are now growing by about 10% per month.

    I have also gotten rid of all the explosive, reactive landlords, the ones who are never happy with anything and very ungrateful and have an uncontrollable urge to micromanage everything - this created space for new happy people to come in.

    I guarantee our service and will immediately fix up anything that has gone wrong but will not work with people who are rude or with anyone who has a victim mentality - totally not interested.

    The business is now growing, I'm using the money to invest rather than to pay salaries to people who are not growing the business, the 4 staff members that are left are much happier because the nasty landlords are gone and the only challenge now is to work out better systems to handle the growth more effectively.

    When you look at the profit and loss statements of real estate companies, the ones where the owner works in the business are much more profitable than the ones where the business owners have multiple staff and are not actively selling or managing properties.
     
  8. Xenia IM

    Xenia IM Property Manager

    Joined:
    19th Dec, 2014
    Messages:
    754
    Location:
    Adelaide, South Australia
    BTW - I don't think RKs view point is BS.
    It's just one way to look at things - probably works for big business which is different to small business.

    I am running a small business and all I am saying is that the method of completely stepping out did not work the way that I wanted it to work.

    I like cash flow and profit continual growth and the only way to get that is to be in there creating it, but that's just me.
     
  9. Biz

    Biz $17 DOLLAS YO!

    Joined:
    14th Jul, 2014
    Messages:
    402
    Location:
    Sydney
    :rolleyes:

    You can't just boil everything down to mindset guff. When you run a business you are dealing with people and people have a mindset and perogative all of their own. This idea that you can just handball a business to someone and it will run itself is fine if the market and people never change but the market and people do change. If the people you are handing your business over to are good enough to run it profitably how long do you think it will be before they say "why are we working for him, making him rich? Lets do it ourselves!" Business isn't statue quo it is constantly either expanding or contracting and ultimately the "General" as you put it is the one who has to keep the boat on coarse and take responsibility for what is happening.

    Sure you can put systems and people in place to let go a little but there is a limit. The utopian situation people like RK promote doesn't exist.
     
  10. Xenia IM

    Xenia IM Property Manager

    Joined:
    19th Dec, 2014
    Messages:
    754
    Location:
    Adelaide, South Australia
    Biz
    Rick is correct in saying that businesses work on systems - they do.

    without systems it's chaotic and you cannot grow past a certain point.

    systems however need to be overseen and continuously rewritten, they are certainly not static.

    New systems are also written all the time as the business grows.

    There are also some things that cannot be outsourced successfully.

    That's why I also believe the owner needs to be in there at the same time.
    It's much more complicated than what we are discussing here but I agree that mindset and systems certainly have a lot to do with it.
     
  11. Biz

    Biz $17 DOLLAS YO!

    Joined:
    14th Jul, 2014
    Messages:
    402
    Location:
    Sydney
    They have a part of it of course. Every business needs systems even if it just just how to make a coffee for a customer. You can't just say though a business owner can't step away from a business because their mindset is wrong. The business needs attention and direction that is how the systems are built.
     
    Xenia IM likes this.
  12. Xenia IM

    Xenia IM Property Manager

    Joined:
    19th Dec, 2014
    Messages:
    754
    Location:
    Adelaide, South Australia
    yes I agree
     
  13. serendip

    serendip Member

    Joined:
    17th Jun, 2014
    Messages:
    286
    Location:
    Newcastle, NSW
    There are definitely business which can be more hands off than others though. I think it depends on what generates the income. If you're a psychologist or GP or some other kind of expert who people pay for each episode of service it's much harder to have your business continue without you than if you sell a product such as shoes. Stepping away for a year may be difficult but stepping away for a day or a week or a month should be easier if you have appropriate systems in place. Then of course there's the type of service you provide which offers ongoing income with minimal input eg trail commissions. I do agree that the ideal of 'set & forget' is pretty unrealistic.
     
  14. S.T

    S.T Member

    Joined:
    27th Jun, 2011
    Messages:
    1,183
    Media:
    4
    Location:
    Melbourne
    Most of us landlords only have to take such measures when our property managers are duds, food for thought.
     
  15. Mr. Fabulous

    Mr. Fabulous Thought Criminal

    Joined:
    28th Sep, 2002
    Messages:
    6,127
    Location:
    Melburn
    Great post! Here's a great picture that succinctly shows how RK's snake oil crap is, well.... crap.

    [​IMG]
     
  16. Biz

    Biz $17 DOLLAS YO!

    Joined:
    14th Jul, 2014
    Messages:
    402
    Location:
    Sydney
    That's why business isn't like property and I don't class property as a business. I have had periods of six - twelve months where I haven't even had to speak to the property manager and the rent just rolled in. You'll never get that situation in a business.
     
  17. Mr. Fabulous

    Mr. Fabulous Thought Criminal

    Joined:
    28th Sep, 2002
    Messages:
    6,127
    Location:
    Melburn
    Hi Xenia, you might enjoy my blog post on this subject, if you read it, let me know what you think.

    http://www.rooseveltfc.com.au/blog/...lanner-part-16-dealing-with-difficult-clients
     
  18. sanj

    sanj Member

    Joined:
    16th Jul, 2010
    Messages:
    3,441
    Location:
    perth
    SOme good posts here
     
  19. MTR

    MTR Bling Bling

    Joined:
    24th Feb, 2007
    Messages:
    7,683
    Media:
    32
    Location:
    My World
    Agree with this.
    Buy and hold regardless of asset class are investments.

    In terms of property developing it is most definitely a business, you can not operate unless you show profits/income and successful track record to fund ongoing projects, albeit on a small scale, depending on number of projects but you still have to manage cash flow etc.

    Perhaps developing as a business is less risk if on a smaller scale as you don't have the overheads of small business, staff overheads etc. ???
     
  20. Mr. Fabulous

    Mr. Fabulous Thought Criminal

    Joined:
    28th Sep, 2002
    Messages:
    6,127
    Location:
    Melburn
    The thing about considering property investment a business is that, if it was an actual business, 95% of people would be out of business!

    Negative gearing = poor business strategy.