Is your business an investment? Maybe, but it’s more likely that it isn’t.
From a technical standpoint, look at the EQUITY of your business – your assets minus liabilities. Positive equity is the business owner’s share of the VALUE of the business. Equity decreases when the owner takes money out or if the business makes a loss. Equity increases if the owner makes a capital contribution or when the business makes a profit.
Your business could be classified as an investment if you are being paid dividends for your per cent share of the profit and/or if you have loaned the business money and you are consistently being repaid interest and principal. The interest component is then classified as income.
To me, an investment is making me money in ways which require little to no daily effort to maintain. It is money I earn while I sleep…
This is called a passive income.
For example, properties I own and rent to others. From a business perspective, it may be an evergreen online program I’ve developed which consistently generates revenue. While it may have required some effort to create and set up, once it’s done, I can effectively pay it very little attention and it still brings in revenue.
Based on this definition, I would say more SMEs than not are not an investment. The owner is still working in the business, earning active income. In most cases, the business is totally reliant upon the owner working in the business, and the owner isn’t even earning an active income for what they do in the business.
At Kaibizzen, our clients recognise they are currently earning active income. We share with them our perspective that their business is merely the cashflow to enable them to live their current lifestyle and simultaneously build their investment portfolio. The goal being that longer term they are generating passive income.
Many business owners – and employees – live pay cheque to pay cheque. They are forced to work (whether they are doing what they love or not) because the moment they stop working, their income stops too.
As business coaches, Rob and I are both passionate about ensuring SME owners are working towards living their true position of choice lifestyle. Why? Collectively, SMEs are Australia’s biggest employer. As the owner of an SME, you are the one who’s taken the risk. Therefore, Rob and I believe every business owner in this country deserves every bit of recognition and reward for the time, energy and in a lot of cases blood sweat and tears they have INVESTED to get their business to what it is today.
The time is now for you to claim your reward.
At Kaibizzen,we have a clearly defined process:
Your business therefore is providing you the capacity to make investments.
It could be.
When you can grow your business and employ others to do everything in the business that needs to be done, so that you can earn the dividends you need it to provide you the lifestyle you want, then it could be an investment.
If business is your highest life priority this may happen. In fact, you may have several businesses that do the same thing.
If business is not your highest life priority, then it is unlikely you’ll have the passion and desire to make it happen – which is why working with a business coach like Rob or myself is so important.
Are you finally ready for your business to give you the freedom and lifestyle you’ve always wanted – for yourself and your family? If so, reach out to Kaibizzen – leading Brisbane business coaches. We’re here to work alongside you to create the business and lifestyle you truly want.
What does it take to actually remove yourself from the day-to-day grind of business? Learn from our panel of Business Owners who've Been There, Done That.