From now on you can join the Mastermind
One note first:
The more you get involved in the forum, the higher your commission will be. And we discussed what that means in the last coaching unit.
This coaching unit is about your finances. Money is a social agreement that allows you to call on the services of others now or later. Money is a form of energy. No more and no less. Other means achieve the same thing: a strong family bond, good friends, a great reputation, providing great service for others, etc.
If possible, we should increase all of those. Why that? The motives are different for everyone - we'll get to that. Sometimes it is the desire for security, sometimes for freedom, and at other times the desire to be able to bring about change. But whatever it is, with more of these energies, we can do more. How much we want to achieve depends on our long-term goals. More on that in one of the later coaching units.
An entrepreneur differs from almost all professionals and is self-employed from a long-term perspective. It is about long-term and fundamental changes. It is therefore important, that we take all our money decisions from the long-term perspective. There is only one central point:
Income must exceed expenses.
Only then do assets increase.
That sounds easy, almost too easy. But there is a little secret behind it. There are 3 different areas in our lives: The area of control, the area of influence, and the global world (see coaching unit 2). The following is now important for understanding: Expenditures are largely subject to the direct sphere of control. Except, for example, legally stipulated alimony payments. While income, on the other hand, is subject to outer influences. In other words, we can now decide immediately whether to spend money or not. We can influence whether we increase our income through better positioning, sales partners, etc., but we cannot control it directly. In almost every case it will take at least longer. Income and expenditure move in different worlds of action.
The decisive point in building up assets does not begin with increasing income, but with reducing expenses below income and establishing a system with which the difference is automatically saved and invested.
Here's a common objection that goes like this:
I can't save with my current income. To put it bluntly, even if some readers won't like it: whoever claims that is lying to their pocket! On average, the Chinese are doing much worse than us and on average they put a third of their income aside - the Germans only around 11 percent. I started saving at a very bad time. 5 months after my bankruptcy: I still had around 120,000 euros in debt and a regular income from my new company of 900 euros. From this, I saved 100 euros per month. I split the rest between rent, food, electricity, telephone, clothing, etc. Logically, that wasn't always the best food and clothing. And of course, there was no car.
Again, anyone who claims that they cannot save with their current income is lying! He may not want to forgo the short-term comforts that his spending affords him! Forgoing something short-term to make a long-term change is a key characteristic of an entrepreneur. It doesn't work without that.
In his book "The Way to Financial Freedom", Bodo Schäfer describes in detail how this works in private. I don't have to add anything - apart from my thanks. But what this book describes applies also to the company.
There are several rules here:
- The company account and private account are separate. Also and especially for self-employed persons! The company pays the entrepreneur a fixed salary based on the profit of the worst month or quarter of the past year.
- There is an overnight account within the company to which future expected tax payments are transferred. This money must never be used for investment purposes. This is not yours. You can console yourself with the fact, that at least about a third of this money is used sensibly: streets, kindergartens, courts.
- There is one key figure: the financial reach. How long can the fixed costs be met if sales drop to 0 tomorrow? In most small and medium-sized companies, this is a maximum of two months, usually less.
However, two months is never enough in a crisis. This is a dark red alert. Three months is a red alert, and up to 6 months is a yellow alert. And 6 to 10 months is ideal.
- Business economists claim otherwise. But business administration is the science of large corporations and in case of doubt, they are saved by the state. In the case of medium-sized companies, the banks may still be willing to talk - at least if depreciation would otherwise be even higher. In small companies, the light switch is simply turned off.
In other words: In a crisis, small companies can only rely on themselves. I know that, firstly because I have already led my own company into insolvency. And secondly, I have coached one or two entrepreneurs in this situation.
In most business evaluations there is a number similar to 0 in the last line. You cannot build up reserves and create a secure financial reach with this. Instruct your accounting department to insert a line with reserves in the second line of the business evaluation, i.e. directly under the sales revenue. There, a certain percentage of the turnover is transferred to another account every month. Think of this account as an employee payroll account. It's best to install a person who will complain if they don't get their "salary".
It doesn't matter if you start with 10% or 0.1% or just one euro per month. The only thing that matters is, that you start with it. You will then make an interesting observation: At the bottom of the last line of the BwA, there is still a number similar to 0. Only now you have already created reserves. Then you can increase the percentage over time.
- Of course, the operating reserves are not intended for speculation: So, they can be invested in overnight money, money market funds, first-class bonds, or gold, but no stocks!
By the way:
I had several cases, where the private and corporate financial situation was often an issue. Not once have I experienced that someone who has no private assets was able to build them up in the company. Financial competence applies equally to both areas. And even if the goal of the company is not to make a profit, it is a key factor on the way to a successful company.
- Re-read the 35 achievements (5 per day) you've noted since last week. Check whether they are real successes. Read again the definition of dynamic self-confidence in coaching unit 4). Mark the real successes with a red pen. And then find the biggest success and mark it separately.
- Join the mastermind and introduce yourself to the other members. And make a public commitment to your goals there (see coaching unit 3). If you have any questions, please post them in the forum. It is best practice, to share a link to the related coaching unit. Then the others can understand its context more easily.
- Read "The Way to Financial Freedom" by Bodo Schäfer and set up an automatic account and savings system in the private sector.
- Calculate your financial reach in the company. Calculate how large your reserve would have to be to have a range of 6 months. And then create a reserve account. Commit never to touch this reserve account! It is best if you do not have access to this account at all.
- If you don't set up this account, reserve, or savings model, or if you stop doing it after a while, then at least write down the thoughts that are going through your head: These will lead us to the topic of beliefs. We will take care of your beliefs in a later coaching unit.
PS: The next coaching unit for entrepreneurs is about your basic motive.