The COVID-19 Pandemic is coming to an end one way or another. What is left are economies experiencing various degrees of destruction and future outlooks that range from bad to worse. There will be a big bounce immediately, due to the very low levels to which we have sunk, and the pent-up demand of not being able to spend while (in wealthier countries) receiving all manners of stimulus.
This recovery will be short lived as economic reality takes hold. Many small businesses will have exhausted their reserves of money and owners’ energy and will be gone for good. Some quite large businesses (e.g. some airlines) will have suffered a mortal wound and will bleed out over the next few years. Governments, anxious to recoup their outlays or desperate for revenue interrupted by lockdown, will be on the hunt, seeking the money where it may appear to be; with the wealthy, international corporations, or hidden away in Caribbean Islands.
This hunt will ultimately bear little fruit. In the end the poor will pay. History, despite its unpredictability, tells us that. I am guessing that this includes most of you reading this. Having struck such a strong note of despair, I will spend the rest of this blog suggesting some techniques you may try to shelter yourself and your loved ones, while putting yourself in a position to take advantage of the opportunities that invariably arise out of uncertainty.
To begin with, you have to think like the wealthy. Wealth is a mindset, not a number. Over 600 billionaires were minted in the past year; the most on record within a single year. The story this does not tell is the number of millionaires, multi-millionaires, and people with hundreds of millions of dollars who are not yet billionaires. There are plenty. The lesson is, the wealthy have a mindset that allows them to avoid panic in moments of disaster, secure their rear, and pounce on the opportunities that they know are coming.
Wealth is not a number. With the wealth mindset, you can become very wealthy on what may appear to be a quite modest income. In his book The Millionaire Next Door, Thomas J. Stanley defines wealth as the number of days you can maintain your current standard of living if you never again lifted a finger. I like this definition, as it focuses on stability and sustainability; the basic plan. Spend less than you earn, protect the excess earnings from risk (taxation, theft, profligacy), and look to invest in your asset base.
Become an entrepreneur. You don’t have to go out suit-and-tie to raise A, B, and C rounds of financing. This can be done from your home (or other place you may live) while you have a regular job, no job or work part time. Many ventures, some of them famous and quite big businesses, were started by students in their dorm room or bedroom. Dell Computers, Facebook, and many (relatively) smaller ones have too (Car Throttle). Start with something small, something your talents predispose you to. We all have talents, so if yours are not immediately apparent to you, spend some time looking inward. Solve an easy to find problem. They’re harder to solve, but that is the core of business. No business has existed (for long) that did not solve a problem. Every problem you have is a business opportunity. Find a fit and pursue it.
The wealthy risk what is necessary, and protect the rest of their assets. So your business cannot expose all you have to the full force of commercial combat. A wise man (wealthy) once said to me, (among many other things I did not heed) always own your house; do not wager it on your talents. In hindsight, it was good advice. Sum up what you can afford to lose, gather it together and risk only that on your venture. Trickier is the point where you pull the plug. The myth of the entrepreneur talks about the person who risks it all, is relentless in the face of defeat, saves themselves just before the implosion, then prospers massively. Hardly anyone talks about the bank taking your house, your car, your land, empty college funds, savings et cetera. But it happens. Your first control of that is to understand the point of no return, and do not cross it. Pressure will come from family and friends just to turn the corner. There is always a bridge too far. Identify and name it before you start, so when you see it on the horizon, you know that it’s time to pull up the stumps and run.
It’s time to talk about one of the greatest inventions of humankind: the Limited Liability Company. In a nutshell, the Company itself is a person in the eyes of the law, and has its own capital, which is the full extent of the Company’s obligation to stakeholders. Another person (you) who may own the company solely or with others, is liable only for the amount that you have invested, and not everything you own under the sun. By limiting risk, this vehicle has led to an explosion of entrepreneurialism, which is essentially risk taking, as the risk takers would not be entirely consumed by a failure, but would live to fight another day. This is important, because entrepreneurship, risk taking, business building, and wealth creation, have proved stubbornly difficult to teach in even the best schools. Despite the invention of the Case Study, the skills, for the most part, can only be acquired by bitter experience. If you become completely consumed by a business failure and hobbled to the extent that you are unable to mount another venture, then your valuable experience will have been wasted and the world will be a worse place for it. Look for Limited Liability, or its cousins which exist in advanced economies such as the UK and the USA, and organise your ventures accordingly.
Be aware that in many places and in different ways the concept of Limited Liability is under attack, and has been disembowelled in some instances. Bad behaviour from mostly large joint-stock companies owned by no one in particular, who take risks without the possibility of consequences, have led some in power to conclude that the LLC is the root of the evil. This is not so. A class of person climbing the ladder known as Management has gained control of many parts of the economy. Having not earned their perceived wealth, they then set out to experiment with other people's money (OPM). When these experiments go wrong, various mechanisms invented in academia and imposed by politicians spring to the aid of the errant, and protect them from the consequences of their actions. They remain safe. The poor (you) pay.
Like many things in this life, camouflage is brought to bear. The problem is restated as recklessness on the part of the owners/directors hiding behind the shield of Limited Liability. The solution is to remove this shield and expose the culprits to the full force of the law. Managers glide along unscathyed.
Probably of more immediate concern to you is the banker, whom you may be tempted to pursue for some investment by way of loan. You will be required to produce a business plan, and compelled to provide security. At some point, after all of this and when you are beginning to hope that the banker is about to approve the loan, you will hear, “by the way, please sign here.”
“What is here?” You might ask.
“A personal guarantee.”
Never sign a personal guarantee. Another piece of advice I studiously ignored. A personal guarantee puts everything you personally own at the disposal of your banker. Walk away. Your venture, hopefully now with cash flows and proven performance must stand on its own. Do not pledge your children's future to events over which you have absolutely no control. Definition of foolish.
So, keep the day job, build a side hustle, treat your side hustle as a business, use the excess cash from your business (after expenses) to build your business or otherwise invest. In this way you will build. Slowly at first, but with increasing momentum your wealth will grow and so will your resilience. At some point your side hustle may grow to the extent that it can support you, and you may decide to make it your primary source of income, or you could sell it on or hire professional management and or family and friends. Whatever you do, continue to think like the wealthy. Treat your business as a vehicle to build wealth.
There will be failures that you will have to walk away from. Lick your wounds and rebound. Once you are enjoying success, this is the time to be promiscuous and start another business, and then another. All the time looking to grow your wealth by using the excess cash you have for investments. Fortune really does favour the bold.
This is enough for now. There is one App I did not mention in a previous blog under the heading “Make yourself look larger with Apps”. This is Appsheet, which uses Google Sheets to create custom Apps which you can design for your business and deploy to those who work with you. It’s easy to use, very flexible and well supported.
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