Work and Wealth
The Own and Invest method- The final step: Save and Invest
Over the last two articles we’ve looked at how the Own and Invest method to becoming a millionaire works. First it was identifying a skill that is financially valuable, one that is directly able to improve revenue and profits. The second step involved starting a business to own the profits, ideally getting into an up trending market to increase the chances of success.
The final step of the Own and Invest method is to spend less than was made from the business and then save or invest the difference, which will be the biggest factor in producing the wealth building results.
This is a very simple philosophy, in fact it’s the same concept that was key to our first millionaire method, focus on keeping your costs under control, not spending more than what you earn and then save or invest the rest.
The intention of this method is to use the business as a way to generate additional cash flows which can then be reinvested into the business so it can continue to grow or grow faster, or alternatively used as investments in other businesses, stock market, property or put into a savings account.
The magic to this philosophy is to utilise skills or knowledge to create additional cash flow which then is used to make even more cash flow, creating a cycle of wealth creation.
Often in small businesses, the owner(s) are deeply involved in the business that they don’t separate the operations from being an owner, a bit like not seeing the trees from the forest.
An example is Bob the Butcher, he works 6 days a week in his shop preparing meat and serving his customers. At the end of the year Bob works out his sales, the cost of meat, renting the shop and pays some staff to arrive at a profit or loss, which he then takes as his salary.
Now Bob may invest some of this profit/salary into a property or the stock market, he may even keep some in a savings account, but Bob will struggle to truly implement this philosophy as he isn’t treating the business as an investment. Bob ideally would pay himself as if he were an employee just like his staff using a set rate per hour. This will reduce his profit but it ensures the true costs of operating the business are captured. Bob then as an owner can look at the return on investment and decide the best use of that profit, either to reinvest in the business or invest externally.
By separating the business operations from its performance, the Own and Invest philosophy becomes a simple process of applying each step, you understand what skills are needed to operate and grow the business. The separation of operations from performance means that control on costs and growing revenue become a key focus which will help cash flow and profits which can be invested to get the wealth cycle going.
By developing a mindset around driving profits and cash flows from a business and looking to save or invest these is what makes the own and invest method so powerful, its been proven throughout time to generate substantial wealth and the ideal path to be on to become a millionaire.
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