BBB #5: Stop Doing Business For Money, Do This Instead

A big thank you to our readers who keep this newsletter going. In case you missed some of my previous letters:

• Ever said "I'm so focused on growing my business that I neglect my personal finances."? This may help…

• Looking to start a business? Maybe you have an expertise that you can convert into consulting.

• Avoid FOMO when setting your own financial goals by following these steps…

One of the many books that changed my life is Robert Kiyosaki’s Rich Dad, Poor Dad. 

Being a finance person myself, I can’t help but compare and contrast his ideas to my technical experience as an accountant.

One of the key messages I got from his book is about the differences between rich and poor people when it comes to working and doing business.

This concept has made tremendous changes in how I approach my finances, starting when I was still in corporate working as an 8-to-5 employee until today when I am now managing businesses.

In my attempt to share this idea to my clients and others, I posted this on my social media last week. And many people (business owners) resonated with it. Some, however, sent me questions asking to deep dive about this.

Money is short-term; assets are perpetual

In entrepreneurship, acquiring assets means that we build long-term wealth. Assets can appreciate in value over time and generate passive income.

Examples of assets: business, real estate, intellectual property, patents, trademarks, stocks, etc.

What it means then in a finance perspective is that prioritizing the balance sheet alongside the income statement ensures that we focus on building a strong financial foundation that includes valuable assets with sustainable earnings potential.

The more assets we have, the more earning potential.

Don’t put all your eggs in one basket

What I love about doing business is that owning various assets diversifies my income streams. It reduces my dependence on a single source of revenue and providing more stability for my financial goals.

This is where balancing assets and income in our financial planning helps diversify the risk and can shield us from unexpected downturns in any particular revenue stream.

Assets create more money… and assets

Assets can be leveraged to create more significant opportunities. One good example is using real estate properties as collateral for financing new ventures.

Assets can be used as collateral, money cannot be.

As such, in finance, having an optimized balance sheet can demonstrate to lenders that we have valuable assets that can be used as collateral. This increases our chances of obtaining access to more capital for business growth.

Let money work for you

Investing in income-generating assets can lead to passive income, providing financial freedom and flexibility.

• Stocks give us dividends.

• Bonds give us interest.

• Real estate properties give us rent income and asset appreciation thru capital gains.

• Businesses give us massive returns on investment.

The balance sheet reveals the value of our income-generating assets, which contributes to the net worth of our business or personal finances.

Sales is not everything; net worth or net assets show us the true picture of wealth.

Playing the long game

Focusing solely on making money leads to short-term thinking. It naturally creates deeper questions like:

• “Now that I have the money, what do I do with it?”

• “Now that I have the money, how do I protect it?”

• “Now that I have the money, how do I grow it?”

Acquiring assets helps build a more sustainable and enduring business.

By considering both the income statement (short-term performance) and the balance sheet (long-term health), we can ensure our business is well-positioned for continued growth and success.

So, the next time you purchase that new espresso machine for your cafe, or that new computer set for your new employee, don’t think you’re spending money. You are building your asset base.

Stay wealthy!

Got questions or comments? Would love to read them!