You’ve been working very hard over the year on your business. The first quarter is already up. It’s only the first of April today, and your spouse wants to talk about the household budget. All of the business's money is being spent on growth, and you are unable to contribute as much to the household as your peers. When you're running a fast-growing tech services business, you may end up in a cash-poor situation in your personal life. You are a founder of a tech services company, but you are also a whole person who has obligations in their personal life. You can't ignore the pressures in your personal life.
So as you step into Q2, we think it’s appropriate to take a break and put some attention into your personal life. And today, on April 1st, 2024, we take a break from talking about business to give you personal finance advice. Wait, we're not financial advisors and don't have a fiduciary relationship with you. Scratch that we take a break from talking about business to give you personal finance NOT advice based on the principles of how to run a business.
This article is under the assumption that you are a capable entrepreneur. Your business is your source of income. And your business is performing at the rule of 40 (that is, the sum of CAGR and EBITDA is 40%). This criteria means you are doing very well. So here are some money management tips especially for entrepreneurs, that sane people just can't believe.
Look, I know that any sound financial planning is based on the assumption that you need to diversify your portfolio. But as a business owner, diversification is also called spreading yourself too thin. You want to focus on what you're good at. Focusing on increasing leverage is called strategy, and it is how you grow your business. In your personal life take a hard look at your portfolio. What is that one thing that is going to make you a billionaire? Go hard on it all the way. Will Nvidia hit 10 trillion? Will Bitcoin cross a million? Who is to say? Use your common sense.
Hey, we understand that you need to save money. But your business is an engine that you input capital and it gives out more money. No matter what you do, you won't make any investment that provides better than 40% returns. So if you can spend money to increase growth, do it. Cash in the bank doesn't help you one bit. Take on debt if you need to, to increase growth. In your personal life, this means you need to live it up. Can you make sound decisions without the daily spa visit? Will clients respect you if you don’t enter on a Rolls?
As a business owner, you live a more uncertain life. You may need liquidity more than people who are not in entrepreneurship, and unlike the sound financial advice of paying yourself first and putting money in retirement accounts, you should think about reducing your long-term commitments. You will find many opportunities to reduce your commitments at the grocery store. Buy only the smallest size item that they have.
We’ve already talked about the importance of keeping track of finances in your business in articles like. And it is important to note that it is a lot of hard work. It doesn’t just happen in your business, you have to put in the work. We want you to continue to do that because it is essential to your success. It is the same amount of work in handling your personal finances. Unfortunately, we did not leave you with any time to look at your personal finances. Oh well, it's not as if you would have seen anything you would have liked and we don't want that kind of negativity in our lives.
This isn’t just regarding making financial decisions. It is important to remember that the right decision is correct in a particular context. If you’re married, if you have kids, business vs personal, your ambitions, and so on, all these play into what is the right decision for you to take. Just take this article for example. On any other day, this article would be considered out of place. But today, on the first day of Q2, 2024 it is completely appropriate advice. Sorry, we can’t legally say that, completely appropriate NOT advice.
We hope this article provided you with some food for thought. I can say from our journey in Flux7, that we always made sure to spend a week in Vegas blowing money on drinks, limos, and helicopter rides. We highly recommend you read the advice in this article and think about what is important to you.
This article really doesn’t constitute financial advice, and we really don’t have a fiduciary relationship with you.