I wrote about treating your job as a business. I do think that it is the best piece of advice that I can give you. However, if you have never done your own business, this advice needs a little more explanation. If you search the archives you will find part 1 – just search for “Job or business” and you will find it!

What does a successful business consist of?

Grow Revenue Faster than Inflation and Competition:

Well your revenue should grow faster than say 8% – which is the inflation rate that hits you. You need to grow too – say at 8% – which means your top line has to grow at 16% at least if you have to keep pace with the country’s growth. Well if your own industry is growing at 20%, then your revenues have to grow at 20% at least! In real life if you are LUCKY to be in a growing industry, remember it may not last too long. Look at telecom.

Have a proper written down executable business plan

No successful business ever succeeded without a properly written down business plan. Similarly if you have a plan to retire at 48, it cannot happen without a properly well written financial plan. Either you know how to do it, or you seek the help of a professional who will do it for you.

Keep Margins High

In real life this means keep your savings rate high. When you reach 70% savings rate, magic starts happening in your life. Your speed towards financial freedom increases so much – imagine every year you work you are earning for 2.5 years. If you think you will spend 30 years in retirement, you need to work for only 8 years (even lesser if you consider your passive income too).

Keep employees happy

You cannot run a successful business with unhappy employees! In your quest for keeping high margins your family should not be deprived of the things they need, and they should not be unhappy – remember that they ARE THE STAKEHOLDERS.

Have a succession plan

No business should be run without a succession plan. Similarly all your investments should have a nomination. You should write your will, and your spouse and grown up children should know how to operate your investments in case you are unable to, or you die.

Keep low inventory

Every business slowly develops some weak spots. Inventory, debtors pile up UNLESS you watch it with a hawk’s eye. That could be a disaster. In personal life it means not buying unnecessary things – which reduce your savings rate.

Keep turnover fast

Your savings cash has to convert to equity, real estate, etc. and then start yielding results. Keeping too much cash will impact profitability, and keeping no cash will create panic when you need cash. You need a judicious mix.

part 3 follows….