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It’s always about the money

Article written by Harry Welby-Cooke (Executive ActionCOACH)

I love it when people say to me: “but Harry, it’s not about the money.”

Really?! Do you actually believe that?

Now I’m the first to support that money isn’t everything. There are a lot of things that are important. I’m also not saying that money should be your sole focus or become an obsession.

The truth is it’s never about the money until there isn’t any!

Too many business owners and entrepreneurs:

  1. don’t pay themselves a regular and market-related salary;
  2. live out the ‘till’ and either have periods of feast or absolute famine;
  3. live on what is leftover at the end of the month instead of chasing both income sources available to them as a business owner:
    • a regular and competitive salary as a working member of the business AND
    • profits as the shareholder;
  4. believe that one day they will sell their business for a fortune as their sole retirement plan;
  5. start way too late in actually purposefully saving, investing and growing their wealth;
  6. underestimate, by a large margin, what is required financially in the future;
  7. think and believe they will get to investing later.

Your business is your chosen route to wealth. It’s simply a vehicle to support you, and your family, in achieving your hopes, dreams, goals, passions and legacy. It needs to be designed to support you, and be ready to take you on the journey you choose.

The purpose of a business as we see it is to:

“Profitably create raving fans that generate surplus income for wealth creation”

Whilst not necessarily always easy – and by the way no-one ever said it should be easy either – it can be relatively simple. Here are five simple areas to start focussing on:

1. Wealth hour

Make sure you have a regular hour set aside every week as your Wealth Hour. Just 60 minutes, preferably on the same day and at the same time every week, where you have a dedicated timeslot to work on your wealth. Use it to spend the time needed for the other four areas below but also for budgeting, researching, planning, actioning, reviewing and whatever else is required to ensure your necessary growth.

2. M.R.S. and R.O.I.

As a business owner and entrepreneur a market-related salary (M.R.S), and a return on investment (R.O.I) need to go hand in hand and they’re not the same thing. You are both management/executive and shareholder and therefore need to be paid separately for each role. A competitive, regular and monthly market-related salary(M.R.S) and a regular ROI through profits and dividends. Budget for it and create a profit break-even point in your business where at the very least we’re paying M.R.S. and R.O.I.

3. Net asset value

Obviously there are different types of wealth but in financial terms the easiest calculation is your net asset value. Add up all your assets and deduct all your Liabilities and you’ll have what’s left i.e. your net asset value. For a really eye-opening calculation, take your personal net asset value and divide it by your required monthly expenses and living costs. That’s how many months you can live on your entire fortune without any new income sources. Scary right? Use you wealth hour (see point 1 above) to calculate your net asset value on a quarterly basis. Once per quarter – I use the end of each financial quarter (i.e. 31 May, 31 August, 30 November and 28 February) – collect and record the balances of all your assets and all your labilities and calculate the difference. I add them into a spreadsheet and every quarter just add a new spreadsheet. That way it becomes a game where you’re trying to ‘beat’ yourself each quarter and gives you something to actively manage and influence.

4. Tax-free saving

Hopefully you’re already doing this but if you’re not start today. The Government generally doesn’t give you anything for free but at least you can save a maximum of R36,000 per annum, up to a life-time total of R500 000, 100% interest free. Whether you do it monthly, as a lump sum, in batches, up to the total of R36,000 or even less doesn’t matter. Ask around and get advice on the best tax-free investment for you and then perhaps even get one for your spouse and your kids. Interest is free, mahala. It needs to be in your portfolio.

5. PhD in loyalty programmes

Are you needing a bigger wallet or purse because you’re carrying around tons of plastic? Loyalty programmes exist for literally everything. Some are really great and some are pretty average. It’s rare though to actually find someone that knows how they work or how they work together. You can save literally tens of thousands per year by making shifts in how you spend, where you spend, on what you spend etc. In this case ignorance is not bliss and is literally costing you money. Again, use your weekly wealth hour above to start researching how they work and start shifting your buying behaviour to save tens of thousands each year. Use those savings to add to your wealth.

Remember that your business is your chosen vehicle for wealth creation (across all levels). If your business is currently not creating an abundance of wealth for you, across all levels, then perhaps it’s time to get into action! Visit us at www.actioncoach.co.za to find your nearest business coach.

ActionCOACH is a proud Partner of the NSBC

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