Step 3 - Use Your Cash Flow Engine
Module 3: Small/Business Owner & Investor
Acquiring Income Producing Assets – Small Business, Self Employed, Business Owner, Investor
The second and third categories are small business/self-employed and business owner/investor. For these categories it takes a special type of person because in these categories you actually have to leave the security and safety of employee status and venture out on their into a situation where you will have the stress of making it go. Only a very small percentage of people are cut out to do this and although it looks glamorous and wonderful there is a pretty high failure rate because a lot of people just cash out of their 401(k)s and cash their assets and launch out into a business or franchise. Most of these are doomed to fall flat on their face.
The first thing we have to evaluate before we decide to acquire this as an income producing asset is your level of passion. If you don’t have passion to do this it is not going to happen. The way that you can evaluate passion is to look to two categories. One is to have this burning desire to do it where it is all you think about when you sleep, eat, and drink. The other category is to have a passionate desire to correct an injustice. Perhaps you have seen some kind of injustice that happened in society and you want to fix that injustice and you’re going to get into small business and the purpose of the business is to correct that injustice. These are the two types of passion you need in order to succeed in this environment because this is a very stressful area to move into and a lot of times if you don’t have a passion you will just falter and give up.
The second thing that you need to evaluate is your risk tolerance. There is a certain amount of risk in leaving a secure job and going into self-employment and you have to decide whether you and your family are up for it and whether you really are are willing to take that kind of a risk to move out into this category.
The third area is something a lot of people with a lot of passion have overlooked. It is education and experience. A lot of people have a lot of passion to start a small business but they really don’t have a proper education to do it and they really don’t have the experience required. A really good book in this line is e-Myth by an author named Gerber. In that book he talks about the a person who has this wonderful ability to bake pies and is just an excellent pie baker but she has no skills or ability to operate a pie store. She especially lacks the ability to manage multiple stores. Store management and multiple stores takes a completely separate skill set. You need to evaluate whether or not you have the business management skills to manage a small business or whether you just have the passion to actually do the work of a small business.
The third would also involve experience. A lot of things look really good but when you get into it you’ll find out they’re not always with you expect they are. For example you can look at detective shows on TV like CSI and always find that it is glamorous and everybody’s beautiful. There’s all kinds of danger but you never get hurt. And there appears to be no real grunt work at all. But if you were to actually move into this type of career without the appropriate experience you would find out the drudgery of all the hours and hours and weeks and weeks and months and months of a very frustrating activity that often leads to nowhere. Don’t just look at the glamour side of things. Actually get some experience by apprenticing out there; actually go there and then do some research and talk to people there that are doing it to get the real story of exactly what it is.
Small business and business ownership is not particularly a very easy thing to move into. That’s why you have to have that passion to get you through the rough spots.
The last factor for this type of income producing assets is the world economy impact on the business. What we are talking about when we discuss the world economy impact is that you need to make sure your small business is not one that is subject to outsourcing. There is a good book called the World is flat by Friedman that discusses we are really part of a global society and that many of tasks are very susceptible via the Internet to be outsourced to a lower labor cost situation. I know the people in unions are not too happy about that but because of the Internet it is very easy for services to move to the lowest cost provider as long as you can hold the quality. You have got to evaluate your small business or other business ownership to make sure that your particular niche in your particular business is not subject to being outsourced.
NewSuccesspath has designed a number of modules for small business and business ownership in a completely separate subscription service that is available on this site. This is available for those that want to consider movement in the direction and to do the research in that direction that is needed.
When you get to the place where you have enough income producing assets to equal your current salary then by definition are financially independent and can quit your job. The ultimate goal is to be able to just do your job because you want to do your job and not because you need to do the job to get a paycheck.