Earlier this week, I stumbled across an October article from Inc. entitled Street Smarts: Secrets of a $110 Million Man. The article carefully outlined ten essential tactics that underlie any successful entrepreneurial endeavor:
1. Numbers run a business. If you don’t know how to read them, you are flying blind.
2. A sale isn’t a sale until you collect.
3. When your short-term liabilities exceed your short-term assets, you are bankrupt.
4. Forget about shortcuts. Run a business as if it’s forever.
5. Cash is hard to get and easy to spend. Make it before you spend it.
6. You have no friends in business, only associates.
7. Don’t focus on the top line. Gross margin is the most important number on the income statement.
8. Identify your true competitors, and treat them with respect.
9. Culture drives a company. In the long run, the boss’s most important job is to define and enforce it.
10. The life plan has to come before the business plan.
Excellent advice for entrepreneurs, all around, but what really stood out for me from these ten points is how most of these tactics really help out in our day to day lives, too. Let’s look at several of them.
If you don’t know how to read numbers, you’re flying blind.
In order to succeed with personal finance, one needs to have at least a minimal ability to work with numbers – to add and subtract in a logical fashion and a basic understanding of how interest rates work. Without that, you truly are flying blind – it’s impossible to know whether or not you can really afford purchases or not. If you’re trying to get your financial life turned around but you’re quite afraid of numbers, ask for help – one should never be ashamed of asking for assistance when trying to improve oneself.
Money isn’t money until you have it.
This is a solid, simple rule to live by – don’t spend money you don’t have yet. The easiest way to do this is to simply avoid credit cards, or to only use them if you have enough cash in your checking account to immediately pay off the full balance. Doing this ensures that you’ll not run up a big debt tab that will be difficult to pay off.
Don’t focus on the top line. Gross margin is the most important number on the income statement.
What’s “gross margin”? It simply means spend less than you earn – it’s the difference between how much you bring in and how much you spend. The bigger the difference between what you spend and what you earn, the better shape you’ll be in over the long term. That means it pays to both be frugal and push yourself to earn more – one or the other alone isn’t enough to achieve strong, lasting financial success and security.
Culture drives a company.
What does this mean for you? Surround yourself with friends and people who all practice a healthy financial lifestyle. Friends who socialize by shopping don’t help. Friends who constantly try to one-up each other with the biggest, best, and latest gadgets don’t help. Friends who encourage each other to improve and do better? They help. Friends who constantly help each other out with tasks? They help.
Forget about shortcuts.
Putting yourself in a healthy long-term solution for financial success is never easy. It’s going to take work and diligence. One month of scrimping isn’t going to make all the debt go away. Instead, you need a long-term plan for turning things around. Take things one step at a time, retain the tactics that work, and ditch the ones that don’t. Be persistent, and don’t give into frivolous temptations.
The tactics for success in business, in the end, aren’t that different than the tactics for success in everyday life. Spend less than you earn, do it consistently, and surround yourself with support for that lifestyle, and you’ll do well.