These entrepreneurs make millions of dollars, but they wouldn’t be worth what they are now without clear financial strategies. We asked them for the best piece of financial advice they had to offer to another entrepreneur.
Here’s what they said.
Get super rich
You don’t need to just get rich. You need to get super rich. Entrepreneurs need to stop thinking about R800 000 or R5 million. Think tens of millions — north of R300 million. The definition of entrepreneur is someone who puts their money at risk to make more money. Entrepreneurs need to redefine what ‘more money’ means.
— Grant Cardone, top sales expert who has built a $500 million real estate empire, New York Times bestselling author of Be Obsessed or Be Average, and host of The Cardone Zone.
Look for a 5x return on everything
Some investors have so much money to invest that they push their entrepreneurs to spend the money to ‘scale’.
My advice: Raise their money, but don’t use it unless you know that every rand spent brings in five. If you aren’t spending for at least a 5x return, you should be saving for a rainy day. — Tim Draper, founding partner of DFJ.
Spend money to make money
Money is made to be spent. Don’t desperately try to hold onto it like it’s scarce, otherwise you’ll miss opportunities that can change your R1 into R10. Pick your best shots, plunk down your money and take a chance on it. Don’t hang onto too much money. It has very limited utility just sitting in a bank account. Spend it and see how far it can take you. — Barbara Corcoran, founder of The Corcoran Group and one of the Sharks on Shark Tank US.
Buy and hold
Mentally divide your financial strategy into two parts: Positive cash flow and owning long-term wealth-creating assets. Don’t mix them together.
To create positive cash flow, you must have a skill that’s relatively rare and in demand. Positive monthly cash flow doesn’t have to be that much; it just needs to be enough to survive and not stress you out. Then you can be patient with your long-term wealth-creating assets because you have the cash flow.
For example, a lot of people buy real estate just to ‘flip’ the properties, which is fine if your full-time business is the real estate flipping game. But if you ask Warren Buffett, the real way to create long-term wealth in real estate and the stock market is via a ‘buy and hold’ strategy. You buy solid businesses and real estate with solid rentals, hold them for a long time and let compound interest (which Albert Einstein said is the eighth wonder of the world) work on your behalf. — Tai Lopez, investor and advisor to many multimillion-dollar businesses who has built an eight-figure (US dollar) online empire.
Related: Build A Financial Model
Learn to invest early. Budget a portion of your income to automatically be deposited into an investment account with the lowest monthly fees. Once the account pools up, make your first few investments right away. Most entrepreneurs make good money but never put it to work for them. I only work for money to acquire assets and have the money work tirelessly for me. Passive income is the only way to become wealthy. High earnings won’t change the future, only passive income with consistent growth eventually offsets all your living costs and gives you a high quality of life. — Com Mirza, CEO of Fitness Expo Dubai and ‘The $500 Million Man’; failed in eight companies back-to-back and today runs a nine-figure (US dollar) empire with more than 600 employees.
If you don’t change, you won’t survive the ever-changing business world. That doesn’t just include new technology or a new advertising model, but also the business model, which has always been the core of failures in businesses. Kodak and Betamax both failed because they didn’t evolve. — Jay Georgi, founder of Nadvia and operations/management/profits-retention coach.
Build from the ground up
Success has a formula: You must focus on what is in front of you. Human nature is immutable and we are programmed to avoid a loss. It’s common to fear the unknown future of entrepreneurship. My strategy is to build from the ground up. As the son of a contractor, you learn that the building is only as strong as the foundation. In my practice, delivering solutions that save individual employees thousands of dollars creates indirect savings of millions of dollars for the organisation. We benefit everyone in the organisation by focusing on how to improve the financial well-being of individual employees and their families. — Craig Lack, CEO of ENERGI and creator of Performance Based Health Plans.
Invest in people
Hire the best talent you can find for your company, who will become extensions of you. It’s okay to invest in good salaries if that gets you the right team players. Invest in people and don’t think small. You’ll only grow with the right people. To be the best, you must hire and nurture the best. — Manny Khoshbin, president of The Khoshbin Company and author of Contrarian PlayBook; arrived in America at 14 nearly homeless and now has a nine-figure (US dollar) net worth.
Know your numbers
Entrepreneurs are naturally enthusiastic and see the very best possible outcome. They don’t need encouragement. However, they don’t often know the numbers. They’re so focused on their outcome that they don’t see the lag time and the cash flows required to maintain the process. They also don’t bank the money, but spend it before they have earned it. Have a really good accounts team that gives accurate, timely, effective information so you can make great decisions, create the leadership required as an entrepreneur and, ultimately, true and consistent success. — Roy McDonald, founder and CEO of OneLife.
Cash flow is king
Turnover is vanity. Profit is sanity. Cash flow is reality. Focus on profitability and remember that cash flow is the lifeblood of business. Have strong cash management strategies in place at all times, including: Minimising cash tied up in the operating cycle (receivables outstanding and inventory held), increasing gross margins where possible, negotiating extended payment terms, holding cash reserves, and having bank or other credit facilities available for times of cash flow crisis. — Adèle McLay, business growth consultant, author, and speaker.
Be positive about your finances
Spend as much time as you can feeling like you have all the money you need or desire to take your business to the next level. Be positive about your finances. As Roy said, find a good accountant and bookkeeper — someone who can speak your language. Finance has a different vocabulary, but a good accountant will be able to communicate with you so that you understand. — Katrina Palandri, co-founder and CFO of AEG Investments.
Outsource with confidence
Obtain definitive timelines and firm costs when you are outsourcing work. Determine who is responsible for overages and what the remedies are for missing the target you establish. I have found that it is so much better to have an understanding now, than a misunderstanding later. — Jon Braddock, founder and CEO of My Life & Wishes.
This article was originally posted here on Entrepreneur.com.
Financial Literacy Key To Business Success – Especially In A Tough Economy
What can South African SMMEs do to position themselves for success in tough economic times? Arming their people with basic financial literacy is a good place to start argues UCT Graduate School of Business Associate Professor Mark Graham.
In times of economic hardship, good financial and management skills in a business can make all the difference. According to a recent article in Business Day, international investors are sniffing about South African SMMEs that have proven themselves to be well-run during this time of subdued economic growth – and are also attractively undervalued.
Strong balance sheets and stable management in an environment of slow growth economy with low liquidity adds up to some bargain long-term investment opportunities for international consortiums it seems. Among those who have been involved in investment or buyout offers in the past few months are Clover and Interwaste.
It seems self-evident to suggest that well-run businesses attract investment and success. But what actually makes a business – of any size – well-run in the first place?
There is obviously no short answer to this; good leadership, a clear strategy and a strong and motivated workforce all play their part, but one factor that is often overlooked is financial acumen – throughout the organisation. While the accountants and members in the finance team are expected to understand the numbers, this is not always a core competency required in other departments. Yet, having a good working knowledge of finance at every decision-making level, from new managers to members of the board, can be key.
Even if people don’t need to know a lot about finance in their day-to-day job, the more conversant they are on the subject, the better off they – and the business – will be, according to Richard Ruback, a professor at Harvard Business School and the co-author of the HBR Guide to Buying a Small Business. “If you can speak the language of money, you will be more successful,” he says simply.
Financial savvy will give the marketing manager the ability to demonstrate not only that something is a good idea/product or service, but that it makes financial sense too, for example. And it will make sure that the people in the HR team understand more clearly why reducing staff churn is a good idea not only for company culture but for the bottom line as well.
A knowledge of some basic financial decision-making tools (the all-important balance-sheet, for example) and an appreciation of the difference between profitability and cash flow will ensure that non-financial managers are more likely to effectively participate in business strategy and decision-making. Someone who understands the financial statements of a business understands the business in a way that is not otherwise possible. It’s like looking beneath the hood of a car and understanding how it all fits together and why the car can move forward – or not.
Such people can more confidently identify potential problems and inefficiencies before they impact the overall financial performance, because those warnings are almost invariably reflected in the financials first – and often at departmental level. Critically, they can also help identify financial irregularities, enabling them to call out and stop fraud and corruption in its tracks.
Equipping its people with financial skills is therefore a good strategy for a business looking to position itself for growth and investment. And it makes sense for individuals too – Joe Knight, a partner and senior consultant at the Business Literacy Institute in the US and the co-author of Financial Intelligence, says that an absence of financial savvy is “career-limiting.”
Let’s not ignore the fact that there are challenges however. Finance matters tend to scare a great many people. Traditionally, these areas of knowledge carry the stigma of being impenetrable, and financial literacy is not ideally developed at early levels. According to a study by the Financial Services Board, South Africa currently has a financial literacy rate of just 51%.
This means that roughly one out of every two people is likely to prefer to abdicate from financial decision-making – leaving it to the “numbers” people. But with some intervention and training it is possible to empower individuals to decode these mysteries and get to grips with the language of finance.
All things being equal, it’s not pure luck that allows some businesses to operate well and thrive while others fail. Well-run businesses are generally run by well-informed people. In short, decision-makers who don’t understand basic financial concepts and the language of finance simply don’t know what is going on.
While the SA government is currently talking up the need for foreign direct investment to rescue the country from the economic doldrums, there is much that ordinary businesses can do to position themselves for success. And ensuring that their people are adequately equipped to understand the nuances of business through the language of finance is perhaps a good place to start.
Trade Agreement Tips That Will Save You Costs
If you are looking to benefit from trade agreements, you need to keep the following advice in mind.
Trade benefits all parties involved. When a country has scarcity of certain resources or lack the capacity to satisfy their own needs, they have the opportunity to trade the resources which they produce in surplus, for the products they need or want.
When goods are transferred from one country to another, it stimulates the economy as products and money is switched between hands. Over the years, the competitive nature of moving goods from one country to the other, negotiating prices and opening new markets has caused certain agreements to immerge to promote trade between the member countries.
A trade agreement is an arrangement between two or more nations in order for goods to move more easily between borders with mutually beneficial tariffs imposed on imports. These agreements ensure that duty tax is removed or reduced on condition that the importer and exporter provide the correct documents. This is all the more reason for traders to familiarise themselves with the current trade agreements in place.
Tip1# Know Whether You Export To Or Import From A Country With A Trade Agreement
There are a few trade agreements that you need to be aware of which will significantly cut duty tax. The Southern Africa Development Community (SADC) Free Trade Agreement (FTA) is one of them. The fifteen SADC member states included in the agreement enjoy an impressive 85% free trade on goods.
Another trade agreement commonly used by South Africans is the South African Customs Union (SACU) which allows duty tax free movements of goods. This means zero duty tax is payable on trade between these countries. Trade agreements with European countries include the SADC-EU Economic Partnership Agreement (EPA) and the SACU European Free Trade Association (EFTA). We have prepared a list of all the trade agreements as well as the countries involved here.
Tip 2# Know Which Certificate Of Origin Is Necessary For The Specific Trade Agreement
Only traders who can prove that goods were produced or processed in a member country may benefit from these agreements. This is why importers and exporters need to submit paperwork attesting that the goods were made in the country listed as the beneficiary of the trade agreement. The proof provided is called a ’Certificate of Origin’.
A certificate of origin often abbreviated to C/O or CoO is a printed form or electronic document completed by the exporter and certified by a recognised issuing body, validating that the goods in a particular export shipment have been produced, manufactured or processed in a particular country.
The exporter has to submit proof that either a) the products were wholly obtained from that country; this means all components and manufacturing originated in that country, or b) that it is sufficiently processed in the country of origin.
In other words, although some components might have been imported, the product was sufficiently transformed, or value was added in such a way that the final item can be deemed as new or original. Furthermore, if a company was registered in one country and the manufacturing plant in another, the certificate of origin would be issued from the manufacturing plant’s country. There are various certificates of origins used for different countries. Read here for more details about the different documents required to ensure you benefit from lower duty tax.
#Tip 3: Ensure The Certificate Of Origin Is Completed In The Right Manner
These documents must be completed correctly. Most of the information provided has to come from the exporter. If the wrong information has been reported, it can influence the relationship between the importer and exporter negatively.
Common mistakes when filling out a Certificate of Origin may include:
- Identifying the wrong country of origin
- Using the wrong H.S. code
- Providing an incorrect or incomplete and rather ambiguous description of the goods
- Not including a description on how the cargo is packed or reporting a total weight that does not include packaging
- Exporting goods made from imported material and not sufficiently processed to be deemed as originating from the exporting country.
A lot of information can be misrepresented on the certificate of origin. For this reason, we recommend making use of companies specialising in trade administration to ease the stress and to ensure that all the t’s are crossed and i’s are dotted.
Backing You With Smarter Tools
Manage income, track expenses and do more with the ultimate toolkit for your small business.
You work too hard to work this hard. The good news is that you don’t have to break your back or the bank to run a successful business. Managing your business is easier when you’re using smarter tools with QuickBooks.
Since its launch over 20 years ago, QuickBooks has aimed to power prosperity for small businesses and the self-employed with services that help you with income management, expense tracking and more, allowing you to focus on growing your passion.
The new “Backing You” campaign extends this commitment to support small business owners through the challenges of business ownership – with a little help from Danny DeVito.
“The importance of small business is personal to me. At a young age, I watched both my parents and my sister build their own business from the ground up and struggle to balance family obligations with growing their businesses,” says DeVito.
“When Intuit QuickBooks approached me for this campaign, I felt this was a way that I could give back to this very important industry, show them how to make their lives easier and make them laugh along the way too.”
QuickBooks gives you a set of business tools that’ll do all the hard work for you, making sure you get the time to do what really matters to you. “Because collecting receipts is so 80s, and who has time to chase payments?” says Danny.