What is your strategy?

[serendip]

I find it really interesting the stance that Step 1 is starting your own business. I really think it depends on the individual. The statistics for failed business are scary & many small businesses generate less income than many jobs. I think people need to take into consideration their individual circumstances / personality / education / work preferences etc. For e.g. why would someone who can earn $250K as an employee start a business earning vastly less than that, particularly if they don't have the aptitude for running a business?

On the other hand if you're great with people and can start a business which doubles / triples or more your income then yes, that would be a good way to go.

 

[LeoT]

Hi Serendip,

that's why I think using your income from a 'job' is the way to go for most people. If your income is not enough, get another job. get 2..3.. whatever it takes. Again, depending on someone's goals. the bigger the goals, the greater the commitment that's required.

 

[BLTN]

I find it really interesting the stance that Step 1 is starting your own business. I really think it depends on the individual. The statistics for failed business are scary & many small businesses generate less income than many jobs.

Pretty much my thoughts exactly. If your business fails, you are pretty much screwed (as you now no longer have equity or income).

Hi Serendip,

that's why I think using your income from a 'job' is the way to go for most people. If your income is not enough, get another job. get 2..3.. whatever it takes. Again, depending on someone's goals. the bigger the goals, the greater the commitment that's required.

Which begs the question - how much income is enough?

 

[Prop_Perspectiv]

Sanj
Do you have to put in lots of long hours and deal with lots of employees? Just curious really, could be very stressful

Build a profitable business for cashflow. Sounds so simple

It has taken us way longer than we ever thought but we are so close now. Yes, I find it very stressful - especially employing people. It can be very rewarding but mostly not. I see it purely as a means to an end and have given myself a very strict timeline to step out of the physicality of the business (which means I will have someone run it for me, not necessarily sell it or walk away from it entirely).

I am also working on developing my real estate interests into a business. So I'm not just a property investor, I actually run a property business that generates it's own (large) cashflow. Without the employees....

 

[Ace in the Hole]

I like this strategy.

But the first step, starting a business, where would you even start??

Surely this is extremely high risk? Business could very easily fail and you are totally screwed.

Not at all.
I've had a couple low value start ups that pretty much failed.
Current biz cost nothing to start and is worth a few mil now, + generated great cashflow over the past 8 years.

Starting a business can be very cheap, almost zero risk for unlimited gain, provided you don't need to purchase or acquire expensive equipment or outlay a large initial amount which could be lost.

Buying an established business is expensive and I believe that is where the risk is.
Unless you are extremely experienced in the industry and know you're getting a real deal, even then, there may be hidden issues you may not have been aware of, so its still a risk if it's a high capital purchase.

 

[LeoT]

" Which begs the question - how much income is enough? "

How long is a piece of string? It depends on if you are working? your partner working? How many dependants you have? and what your goals are which then guides how much finance you will need.

Very roughly speaking, 2 incomes on say 70-80 k, with a child, modest mortgage and decent standard of living (nothing amazing) should be more than enough to start building wealth.

Please keep in mind that's very rough! The variables are endless eg being single, on 55k income, no debt, no kids, low rent. Also a decent position to start.

 

[Prop_Perspectiv]

Current biz cost nothing to start and is worth a few mil now, + generated great cashflow over the past 8 years.

How many hours in? What do you do? (PM me or ignore obv if you don't wanna tell )

 

[Ace in the Hole]

How many hours in? What do you do? (PM me or ignore obv if you don't wanna tell )

Basically full time job, Mon-Fri 9-5.
Import "sporting goods" from China, market online direct to end user.
Have a warehouse and do in store sales too, but majority is delivered nationally.

 

[LeoT]

Ace in hole,

I just noticed you have a Jim Rohn quote in your posts.

Don't you just love the guy! He transformed my life.

 

[Ace in the Hole]

Yep, I'm 100% with you on the mindset thing.
I'm highly motivated by Anthony Robbins too.
Not listened to him for a while, but set me right in the past.

Glad you confirmed this in the thread.
Strategy is only a small part of success, mindset attitude and confidence count for most.

 

[LeoT]

" Strategy is only a small part of success, mindset attitude and confidence count for most"

Couldn't agree more mate. Did you listen to les Brown much? I liked him very much as well... this brings back memories.. I used to listen and write down their philosophies..and learn them, then implement.

I tell you what the major thing I learnt is: We need to take 100% responsibility for everything that happens. Not blame the economy, taxes, government, gfc etc etc etc. No room for excuses whatsoever. Its great to know I'm not the only Jim Rohn lover on here!

 

[pinkboy]

Not at all.
I've had a couple low value start ups that pretty much failed.
Current biz cost nothing to start and is worth a few mil now, + generated great cashflow over the past 8 years.

Starting a business can be very cheap, almost zero risk for unlimited gain, provided you don't need to purchase or acquire expensive equipment or outlay a large initial amount which could be lost.

Buying an established business is expensive and I believe that is where the risk is.
Unless you are extremely experienced in the industry and know you're getting a real deal, even then, there may be hidden issues you may not have been aware of, so its still a risk if it's a high capital purchase.

Have to highly agree with everything AITH has said here.

From my own experience, I started up my own business 9yrs ago from scratch. Im reasonably conservative, and just built equipment into job pricing and jagged a few jobs where that equipment was paid for outright. That equipment now makes me 'free money' when its charged out to jobs (along with labour and materials and on costs).

However starting a business takes a little more than a few free spirited seminars that give you positive vibes. I can tell you business can be ruthless, you will need to develop a thick skin, and in some cases a hard nosed approach to situations will get you the best outcomes. You have to be highly adaptable, have a certain aptitude, and definitely pride, leadership and respect. There is no half way, or you will fail.

I also believe if you arent earning more than at least triple what you could by working PAYG, then you will be better off as a wage slave. First third is what you would normally earn, second third pays for all the late nights, long hours and dealing with all the pleasures of business, and the last third is the cream for investing/retiring/playing with.

Business: It never gets any easier, you just get better at it.


pinkboy

 

[devank]

The statistics for failed business are scary

There is a general perception that most businesses fail in the first year. It is wrong.
Last two months I have been dealing with certain databases (eg: ASIC & other few other business records) for a Credit Risk related project. Not many genuine businesses fail in a short term.
Many people register a business for various reasons but not to really do the business. They simply close the business or go 'inactive' once their purpose is served. All that gets records as 'failed' makes a sensational headline

 

[Catalyst]

In the "buying more than we could handle, and selling off some to pay off the rest after a few hard years" group.

We started off by buying as many as the banks would allow us.
Worked multiple jobs to feed the negative cash flow.
Sold half the portfolio.
Paid of the rest with the proceeds.

Newbie here. Been following the forum for a couple of weeks. Plus reading Jan Somer's More Wealth in between.

Would love to be in the same boat, Y-man. Still in the "I don't know what I don't know" mode though.

Interesting thread. Keep it coming, folks

 

[Rixter]

Hi Rixter,

I have never been comfortable with the strategy your talking about. It sounds good in theory, and yes I know people are doing it but increasing your debt over time more and more and more doesn't sit well with me. yes I know as prices rise your lvr really should go down even though your drawing the equity to fund your lifestyle. Just doesn't sit well with me to have all that debt with no plan to reduce at all. Am I the only one not so comfortable with this?

But if it works for you then well done.

Yep, the rich/wealthy have been applying this strategy for decades.

We are all different though, with different goals, time frames and personal risk profiles.

Everyone has a different paradigm that becomes their bench mark from which they make comparisons from.

No right or wrong ways, just different ways. Which way a person decides will always be based around their paradigm.

 

[MTR]

Build a profitable business for cashflow. Sounds so simple

It has taken us way longer than we ever thought but we are so close now. Yes, I find it very stressful - especially employing people. It can be very rewarding but mostly not. I see it purely as a means to an end and have given myself a very strict timeline to step out of the physicality of the business (which means I will have someone run it for me, not necessarily sell it or walk away from it entirely).

I am also working on developing my real estate interests into a business. So I'm not just a property investor, I actually run a property business that generates it's own (large) cashflow. Without the employees....

I totally get it.

My partner also had a business where he was at one point employing 18 people, very stressful, I was not involved in the business. DH got out of it 5 years ago now, one of his clients purchased and continued to operate this. Rewarding for some, not for us, with partner working long hours and riding highs and lows, continue concerns regarding cash flow, client base etc.

Its not for everyone and unless you can make a bucket load of money in a short time frame I would say stick to a day job IMO and find easier ways to create income streams.

In saying this I congratulate anyone who has been successful in business, good for you. Some people are just made of the right stuff to create successful businesses.

We have now managed to create a business from property developing and holding stock/investments which creates significant cash flow to replace incomes. I have found this is easy to do with relatively low or no stress. Advantage of this business model is you can operate anywhere in the world as long as you have a phone and ipad/computer, don't have to deal with people/staff and no massive overheads. Just set up a company, I am the project manager and I pay myself a wage and the hardest part is securing the right property and finance.

Cheers
MTR

 

[Redom]

Have to highly agree with everything AITH has said here.

From my own experience, I started up my own business 9yrs ago from scratch. Im reasonably conservative, and just built equipment into job pricing and jagged a few jobs where that equipment was paid for outright. That equipment now makes me 'free money' when its charged out to jobs (along with labour and materials and on costs).

However starting a business takes a little more than a few free spirited seminars that give you positive vibes. I can tell you business can be ruthless, you will need to develop a thick skin, and in some cases a hard nosed approach to situations will get you the best outcomes. You have to be highly adaptable, have a certain aptitude, and definitely pride, leadership and respect. There is no half way, or you will fail.

I also believe if you arent earning more than at least triple what you could by working PAYG, then you will be better off as a wage slave. First third is what you would normally earn, second third pays for all the late nights, long hours and dealing with all the pleasures of business, and the last third is the cream for investing/retiring/playing with.

Business: It never gets any easier, you just get better at it.


pinkboy

This is brilliant advice pinkboy.

I completely agree with the mindset side of things. I dont think its worthwhile thinking about creating or going into a business with the end aim of salary replacement. I like the 'triple' your salary benchmark.

From my experience, it is remarkeably more stressful, requires a lot of long nights, really tests a broader range of skills (people being the main one) and dedication. I dont know how it goes for more developed businesses, but its hard to separate the business from the other aspects of your life. Previously i could leave work at work and didnt think much about it till the next day.

At the same time, its rewarding from a personal and financial point of view.

Would be curious on others views who manage multiple businesses at the same time.

Alternate approach of doing it by earning more in a PAYG role also has strong merit to growing an investment portfolio. I dont see why it cant be done in an accelerated manner this way too.

 

[D.T.]

We have now managed to create a business from property developing and holding stock/investments which creates significant cash flow to replace incomes. I have found this is easy to do with relatively low or no stress. Advantage of this business model is you can operate anywhere in the world as long as I have a phone and ipad/computer, don't have to deal with people/staff and no massive overheads. Just set up a company, I am the project manager and I pay myself a wage and the hardest part is securing the right property and finance.

Emphasis mine.
Property developing - have to deal with vendors, REA's, councils, planners, draftys, builders, tradies, accountants, buyers / tenants

 

[sanj]

Sanj
Do you have to put in lots of long hours and deal with lots of employees? Just curious really, could be very stressful

Yes and no, it's hard to explain.

Basically I only get involved in particular kinds of businesses and business models. If I'm involved in starting them then low entry point and low staffing model is extremely important. Never say never but I'd almost never get into something that is very easily replicated and relies on the owner being there unless margins were huge (unlikely to be if easily replicated). Examples of this would be retail shops, things like say mechanics shops etc because the market is saturated and there are too many people willing to work in them for a pittance so I'd never be able to compete.

Basically I've got 2 businesses where I'm involved day to day and investments in another few where I've got some input but not daily. Of those only 1 involved buying into an existing business at a highish figure which has Hugh staffing cost but there is significant upside there.

In terms of hours, I love the flexibility. Eg yesterday alone I worked on 3 of them and yes I worked til 830pm but I enjoyed every minute of it.

Today I just woke up, will prob start work around 11. It also allows me to take a fair bit of time off? Eg I've been on I think 5 trips this year and there's no way I could do that if working for someone else.

It comes down to the approach, currently were negotiating to buy into a couple of others too, if the numbers work we will, if they don't we won't. Also, if a business doesn't work then yes I won't be happy but it isn't the end of the world as I don't have a loan against any of them, no big overheads etc.

There are lots of ways to skin a cat, people just need to open their eyes to the possibilities and once you do the options are endless. I dropped out of uni and only have a year 12 education but I get offered stakes in companies or offered jobs all the time. The key is to make yourself more useful to others than they are to you.

I don't say any of the above to bignote myself btw, I normally keep this close to my chest but I thought I'd share this since you asked. I absolutely love property but it isn't the only thing I do so if returns aren't good there I focus on other areas. It's also why I have absolutely no interest in buy and holds, people talk about 5% returns etc, I view them as much higher risk because it's a waste of capital when there are opportunities out there earning say 30 to 50% if the business only trades on multiplier of say 2to 3 times earnings

 

[MTR]

Emphasis mine.
Property developing - have to deal with vendors, REA's, councils, planners, draftys, builders, tradies, accountants, buyers / tenants

Very true, just left a couple of main players


Lets go through the list though -

REA - easy to deal with, flattery will get you everywhere

Councils/Planning Dept - So far so good, but only dealt with Cockburn and Melville. I may change my mind if I had to deal with Stirling, heard they are b...... to deal with.

Draftee - sacked my last draftee, and got my finger on the pulse here

Vendors - I don't deal with these people, I get a gun agent to do this and work it.

Builder - I have a great builder and his project manager deals with any issues that arise.

Accountant - He is anal, but bloody good and in Perth. Sort of guy that wears his trousers around his neck, if that makes sense, oops did I say that.

Tenants - not my issue, PM issue, employ the right person here or suffer the consequence.

Seriously though, by far I will say FINANCE FINANCE FINANCE the most nerve racking of all and sourcing the deal, however I actually enjoy this aspect.

Cheers
MTR