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Make money from your own business

Every year a leading business magazine looks at the nation’s most wealthy. It’s a bit gross to pry into people’s money making success without their permission but the punters, including me, find it a great read. That said, many of us read this magazine for different reasons and this year I did some analysis to see where their wealth came from.

Two reasons

The two regular reasons for them being wealthy was property and starting a business. Now, does this raise doubts over the financial planning community’s war cry that shares are the way to go to build wealth? The answer is ‘yes’ and ‘no’.

Property rules

Most of us aim to own a property, build up our super and buy some more shares or an investment property. Obviously through super we’re indirectly buying shares, so they make up an important part of our plan to build wealth.

Well bought property when prices are lower like now is a great foundation stone for wealth. It gives you a place to stay instead of paying rent. It’s free of capital gains tax. If it’s a property in a favourable area, it can rise in value by seven to 12 per cent a year, though not every year.

Banks prefer…

And if you select well and buy with great timing, there’s another big pay off — you can borrow more for a property than you can for shares. Why? Banks lend more on property. Why? Like us, they trust property more than shares!

Your own business

I love super because it’s treated so kindly by the tax office with basically a 15 per cent tax if you stay in it until retirement. But owning and growing a business can give you a very wealthy future. However, it’s hard work. At the core of starting a business you have to believe at least one of two things can happen but hopefully both. First, as you will generally work harder in your own business, you should earn more each year than working for someone else. This doesn’t have to be the case, it’s just nice if it happens.

Up goes the price

However, if the first doesn’t come about, the second has to happen — your business has to increase in value. It means it can be sold for a lot of money or you can list it on the stock market. It could be something that can be franchised to give you a long-run return or it can be systemised so you don’t have to work hard in the business in the future, giving you a great stream of income.

The people who succeed in business have a number of characteristics. If you don’t have these characteristics, get them or don’t go into business.

Full of passion

The best advice is go into a business that you’re passionate about. This means you can set goals and you’ll do everything to make it happen — and you will enjoy doing it.

Business winners start with a vision. They remind themselves of it everyday to ensure they don’t waste time. And next they get great people around them — staff, contractors and experts — who help, not hinder their cause.

Research is important

Out of the vision comes a pretty simple plan to build a great business that satisfies a market need. The smart ones do, or pay for, market research to make sure they have something great to sell. For example, if you were planning to open a café, you would want it to be so good that every customer would become an advocate because the food and service is the best.

Jack Welch, the former CEO of GE once advised: “If you don’t have a competitive advantage, then don’t compete.” That’s great advice.

See the vision

Once you can see the vision, you have the product or service and the right people, you have to grow as a leader. You will grow the business, so you need to develop the leadership skills.

Some people immerse themselves in books and courses, but these people are often executives or bookish types. My history working with great entrepreneurs has shown me that many great business builders look for mentors or business  coaches to help them change as people to become great leaders.

Learn from the best

Many say they have learnt from others who have done it before them. I recall a guy who I once taught who came to me and said he wanted to either start or buy a business to franchise.

He was conducting an extensive piece of research before he made the dive into a business and he picked my brain for my views on franchising and various businesses.

The guy bought into a little but popular chicken burger business, which ultimately became Oporto.

The success of that wealth play through building a business was planned, just how you should plan to build your wealth.

 

Published on: Wednesday, July 15, 2009

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