Welcome to GNF Episode 34 but before I begin I wanted to quickly give a brief teaser for next week guest. I had the pleasure of interviewing the CEO of Rufus & Coco Annke Van Den Broek who was recently inducted into the prestigious Australian Businesswomen hall of fame! Her Australian pet brand offers original, trusted and inspired products to ensure pets worldwide look good and feel great. She is an amazing woman with an amazing business so make sure you don’t miss her episode next week.
Now onto today’s Golden Nugget Friday episode on where we will be talking about the importance that entrepreneurs diversify company assets from personal wealth.
For many successful entrepreneurs, it can be difficult to tell where their business ends and their personal lives begin. We tend to spend almost every waking moment (and sometimes even sleeping ones) thinking about the how to take advantage of opportunities for growth or, conversely, how to overcome obstacles that may keep their companies from running smoothly. We also fall into the trap thinking, as long as I focus on my business and it’s successful, many other issues – both personal and professional – will work themselves out.
Entrepreneurs need to be aware this thinking can leave you underprepared or exposed to unnecessary risks when it comes to your personal financial success if a catastrophic event occurs. I have seen this happen time and time again and it is just down right dreadful. I can remember during the global financial crisis, when thousands of business had to close their doors due to the downturn in the economy. In fact, some of my past guests have shared their war stories of when the banker comes in to call their business loan leaving them 30 – 60 day to repay it or they will foreclose. Where it became even more painful is when the owner had invested everything they had back into their business. Not only did they lose their business, they lost their house, and every single investment they had. Years of blood sweat and tears went into their business because as entrepreneurs we tend to gamble a bit…. We make statements like…., I have to back myself….. the best use of my money is reinvesting it back into my business to grow. Have you heard those words come out of your month or an entrepreneur you know?
The problem is we never know when these events may happen, it could be a law suit that you fight and lose, perhaps new technology disruption like UBER in your industry that makes it very difficult to compete or even worse a major illness that prevents you from running your business. So I ask…. are you secure and is your family taken care of if something major was to happen to you or your business? In this episode we will provide suggestions to diversify your wealth so it’s not all in just one place which diversifies your risk. Please note these are only suggestions you will need to do your own research and make decisions based on what is best for your situation.
Todays episode was inspired by Steve Kearley because he does have diversity! As Steve mentioned he has diversified into a few different revenue streams. His main revenue is Benson Kearley but also has branched out into a boutique travel agency and lastly invests into Pre IPO Companies thru a company called InvestX which we will discuss a bit further later on.
Let’s explore options for diversifying, I will cover only 5 but there are so many others you could consider.
1.Start/Buy a New Business: like Steve mentioned. There are defiantly pros and cons that need to be considered. Do you have enough time to focus on a second business, if not, would you hire someone to run it or bring on a partner? How much capital will it take to get it past breakeven and profitable.
2. Risk Management with Insurance: Establish Multiple Layers of Protection for Personal Assets. Incorporating your company will provide only one layer of protection for an entrepreneur. Entrepreneurs should seek sophisticated property and casualty insurance providers who can help them assess the various sources of risk that may exist in their businesses. Such as plant and equipment, workers’ compensation suits and others. Spotting such risks early and insuring against them can provide entrepreneurs with an additional layer of protection and prevent you from having to put personal assets at risk in the event of an unforeseen lawsuit or accident.
3. Real Estate Investments – I have personally diversified this way with purchasing rental properties. This is a long term hold but if you have the right property can provide ongoing reoccurring revenue to your portfolio.Or you may purchase land/property to hold and sell when the marketing rises. I have been told in the past the real-estate usually doubles every 7 years.
4. Private and Public Market Investments and Purchase of Stocks & Bonds is another way to diversify your personal Assets and lower your risk. You can speak directly to your banker or investment broker to get advice on which investments may be best for you depending on your short term and long term goals. However, I would like to take peek and dive a bit deeper into private equities mainly because you can reap higher returns. Until now it has been difficult for individuals like you or I to invest in Private Markets because of the regulations of a sophisticated Investor. They have Multi-Million-dollar Minimums. The average investor cannot meet the minimum investment sizes demanded by private equity firms, ranging from $250,000 to as much as $25 million! Also,we have Limited to no access. The average investor does not have the necessary financial connections or relationships to access high quality deals or the knowledge to properly evaluate a private equity investment other than perhaps the one off where you know someone personally who invites you to their IPO. However, I was very excited to hear of a company called InvestX a company from Canada which uses the first-of-its-kind private equity platform for retail investors like you and I to invest in Private Equity Funds.
5. Retirement Planning: Start investing into your retirement plan early, ignore the ups and downs just keep adding to your fund on a regular basis so you have a nice nest egg at retirement age.
“Entrepreneurship is living a few years of your life like most people won’t so you can spend the rest of your life like most people can’t.”
- Warren G. Tracy’s student
Finally, for the folks on Main Street (not Wall Street)--a simple, sensible, and enjoyable guide to financial planning that shows people how to improve their fortunes by taking a few simple and painless steps.
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