Side hustle, secondary stream of income, lucrative hobby…whatever we choose to call it, entrepreneurship has come it stay. This inevitable age of entrepreneurship came alongside the advent of mainstream capitalism. Everyone could now own and operate a business and it seemed like almost everyone at some point did. That entrepreneurial spark birthed about 213.65 million businesses in the last 18 plus years alone and in 2021, The Cable News reported that Nigeria had about 41.5 million businesses. Entrepreneurs are undoubtedly the creative core of multifaceted industries that see increased demand for innovative solutions.
But being a business owner is more than creating a product or service for consumption. As a business owner, one of your major goals is to attain a level of financial freedom where you can take control of your life and have enough financial resources to pay for your living expenses, thereby, allowing you to afford many of your life goals.
The goal of financial freedom isn’t just to have money, but to create the freedom that gives the opportunity for a lifetime of choices; even up to retirement.
The key to attaining every goal is to plan. Creating or running a successful business takes creativity, planning, and above all, hard work.
So how can you manage your business effectively enough to attain financial freedom?
Step 1: Evaluate your current financial health: Calculate your debt-to-income ratio by taking stock of the value of your assets and subtracting your liabilities, to get your net worth. This will determine the changes you will need to make in your business —from saving to spending to earning.
Step 2: Set Goals for Financial Independence: Define what you want to achieve with your finances by thinking ahead, creating a blueprint, and preparing the process of change you hope to achieve. Without set goals, you are very likely to spend way more than you should and constantly be short on funds.
Step3: Pay yourself: Use the pay yourself first tactics to help kick-start your journey towards freedom. This strategy helps you ensure that you prioritize your long-term financial well-being. Thereby, maximizing your savings and regulating your spending habit towards building lasting commitments. Also, make sure to separate personal finances from business finances, so you can properly evaluate your profits and losses.
Step 4: Choose an investment option: Before choosing an investment option, first, you must ascertain your risk appetite and the best investment plan that suits your appetite. You can find out your risk appetite level here. Choosing an investment option, allows you to invest in different assets and or fixed deposits, from real estate, Income notes, tax deeds/liens, precious metals, private equity, personal lending, and even stock/bond investments.
Step 5: Save more; spend less: The key to increasing your net worth is to spend less than you make. Your business won’t make any tangible profit if you’re constantly spending your proceeds. Rather, reinvest your income into the business, to fast-track growth and increase your potential future income streams. You can also set up an account that automatically deducts a particular amount of money from your business account. This allows you to have sufficient money for an emergency or rainy day, even into retirement age.
Step 6: Diversify: The keys to growth are diversification and market expansion. Always be on the lookout for new business opportunities that would expand, grow, or diversify your business. This will generate more revenue and create new value offerings for both existing and potential customers. Broaden your research on competitors, other successful entrepreneurs, and your niche market to stay on top of your business.
Step 7: Have the right attitude: Business is a game of carefully calculated risk-taking and well-articulated decision-making. You cannot make the right decision for your business if you do not have the right attitude. A positive attitude that is ready to improve and passionate with a consistent effort towards achieving your set goals, will propel you to your world of financial independence.
Step 8: Get a Financial Advisor: When you have amassed a decent amount of wealth to a particular level—either in liquid or tangible assets—get a financial advisor or manager for regular monitoring of your investment portfolio. This is necessary to ensure the alignment of your investments with your ﬁnancial goal in strategic and concise ways.
If you need help with any or every aspect of this planning, we are here. Let’s talk.