The Path to Financial Independence!

The first and foremost is Self-Employment.

Goa is no more Susegado! The youngsters are creative, smart and talented. Today in Goa, I see lot of youngsters starting their own businesses or engaged in many professions and home-based businesses as a means to create wealth.  It could be due to their entrepreneurial spirit or due to easy availability of Capital assistance from the piers or  through financial institutions. From an income perspective, being self employed is very advantageous. As a self-employed owner of a small business you can set your working schedule, and you have some freedom to work as and when to work and if at all you choose to work. You can adjust your schedule and workload according to family responsibilities, your personal preferences and take a day off when you want to. As your own boss, you are responsible for your own office, management, your tools, production, sales and marketing as well as billing.

The negative aspect is, although you call it as a business, or rather a Micro Business,  the fact is, it is usually still a job, perhaps a worse form of servitude if every task were to depend on you. For most self-employed people, their income stops the moment they get sick, take time off, or retire. And, many people find that being both the boss, and the most important employee, is very stressful.

As a self-employed professional, with perhaps a small number of employees working for you, the bulk of the responsibility is on your shoulders. If you take a leave of absence or are not able to do your work your income usually stops. “No work, no pay” is the rule, and very few self-employed professionals ever move past this level. So, they continue working as a worker and never end up as a businessmen. In Goa, I have come across many independent self employed Chartered Accountants, Lawyers, contractors, artists, multi-level marketing professionals shop owners and home-office business are in this category. The freedom and independence are wonderful while it last, but this, clearly is also NOT Financial Independence.

So, how many of this self employed or small businesses succeed?

All over the world, It is a common phenomena, that most small business fail in their first to three years of operation. And in Goa, the businesses fail within the first years of its operations! Why?

First thing when you start your business, you are really excited and you talk to your family, friends, your network and family connections.  You contribute your funds, then borrow the funds  from your friends and your relatives.  You get the business running.  You fulfill the orders and you wait and hope to get more business from the same customers. Few businesses are really lucky and they get some sort of new business from the existing customers, but majority of the businesses, start marketing from the scratch and try to find new customers again. Most of the businesses spend their business life in this circle and They remain where they started and never grow. Or they perish under financial losses within a year or two. 

Michael Garber provided a solution for this problem in his book "E-Myth revisited". It is my sincere recommendation to all the entrepreneurs, or those who have started the business or about to start their own business to read  this book and use it as a work book. In this book, Michael says that the businesses should be built around systems not around people. According to Michael every small business owner should be a technician, manager and an entrepreneur. He should work "on his business" instead "in his business".  In my experiences because we build our business around a person (normally the owner) we have limitations when business grows.  If we have systems in place to handle the growing business, we can deal with this issue. 

The business system makes money whether the owner is present or not. Most self-made millionaires are business owners.  As a business, you’ll have employees to hire, train, supervise and sometimes, fire. There are legal and accounting complexities and you’ll need talented (and expensive) professionals to advise you. if it is designed and managed appropriately, it can  “run itself”.  For example, in Goa The owner of a well-run Magsons supermarket chain does not have to be physically present every moment the store is open for business. Mr.Maganlal does not have to check out every item that gets in or out of their  supermarket chain to make money. On the whole the system has been developed on the model to run the supermarket on its own (ofcourse with support of the employees). Once a business is running smoothly, it creates value (and cash) indefinitely. 

Starting, organizing and running a business is one of the most reliable paths to wealth that gives you financial independence. There are tax incentives, and if things turn out well, it can create a stream of cash that lasts for generations. Remember the business model of franchises of KFC, STARBUCKS, CAFE COFEE DAY, DOMINOS. Their system runs the business in any part of the world. 

During my three and half decades of residency in the Middle East, it was interesting to witness that some of our own Indian expatriates were among the greatest beneficiaries of this pattern. They  arrived in UAE poor, opened family owned shops and expanded as larger chains like, EMKE, KM, EMSONS, MAYA LAL, CHOITRAM, LULU Super Markets, etc. HOW n WHY? They adopted a business system that works for that particular type of business. They became millionaires with their business enterprises. 

The second option is Investment.

The other route to wealth creation is investing, or using your money in ways that create value and wealth over time. The key to creating wealth through investing is that you are permitting other people to use your money (your accumulated and not borrowed) to create businesses of their own. In return for the use of your money, you share in the wealth created by their business.

The managers of the business take your money along with many other investors and add their organizational and leadership abilities to create a business. When there are profits, you get to share in the proceeds. 

Many people often think that investing is an easy way to make money and that it requires lots of cash to get started. In my opinion, it is incorrect.  You can begin investing for as little as Rupees 1000. But  it does take skill, knowledge and discipline to understand great investments.  Investing is complex and there are risks. Even highly skilled investors occasionally get an unpleasant surprises. If you have little extra cash, you must start investing. For the beginners, I would suggest to Consult with financial experts and develop your skills through practice and education or better still engage expertise. But to accumulate great wealth, do invest! With commitment, focus and discipline, you might not make it big at once, but one thing is guaranteed, over the period and with systematic investment plan, you will achieve the minimum goal of Financial Independence!

It’s said that the poor and middle class work for money; the wealthy have their money work for them. How True!