Starting Your Own Business

I want to apologize. It's been quite a while since I last wrote here. You'll know why in a moment. But first, I want to recap what I consider to be "the" formula for getting financially independent.

The Get Rich Constantly Formula

Long time readers of this blog will know what I consider to be the formula to get rich. It boils down to constantly building cash flow that gets reinvested into more cash-flow-generating investments.

To get there, the formula goes like this:
  1. First, invest in yourself with whatever means you have.
  2. Get a job where you can get raises often.
  3. Save money and invest. Focus investments on...
  4. Dividend-paying stocks.
  5. Real estate, for the rent and proceeds from sales by building it yourself.
  6. A small part should be invested in a mix of bonds (municipals or corporate preferred), commodities (gold, oil, agricultural), foreign currencies, and to a lesser extend speculative capital gains opportunities.
  7. Private equity (angel investing, small startups).
  8. Building a business.
The last one, Building a Business, I have alluded to a few times, but haven't discussed in detail. So, today I'd like to focus on it.

Starting a Business

Starting your own business is a big decision. One that needs to be fully thought-out before embarking on the entrepreneurial ship.

On the other hand, a business, if built right, can help one grow cash flow. The idea is to leverage resources -- money, hard assets, other people's time and effort -- to solve a problem that people are willing to pay money for. With the proceeds from sales (of service or goods) one reinvests in the business to make it grow to its full potential. As an entity, a business lives forever and if profitable, that theoretically infinite stream of income can generate salary for many as well as dividend to shareholders (you, the business owner).

Fallacies of Starting a Business

Note that I suggest starting a business as yet another source of cash flow, similar to buying dividend-paying stocks. The idea is to leverage "the system", which is the sum of assets (patents, machinery), employees, and a plan (the business plan), to generate this cash flow.

But many people confuse working on your business with working in your business. One's goal should not be to create a new job for oneself. That you already did on step 2.

Instead, one should focus on working on the business.  This means building a rock-solid plan that is so simple anyone could execute. Why? Warren Buffett once explained why: "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will".

Hence, your goal should be to come up with a simple system that can be applied repeatedly to generate money as a business structure. Of course, this is not to say that there is no work involved in the business at first. If it were that easy, anyone would do it. The goal though, is to make it simple to operate and free yourself to work on it -- that is, generating improvements, new ideas, closing deals -- instead of doing all the jobs that can be outsourced like accounting, paper filing, greeting customers (if that's not what you're good at) or talking to suppliers (unless you're a good negotiator and enjoy doing that).

Take, for example, a restaurant. Many people can cook. Many people can cook well. But cooking well doesn't mean being able to have a restaurant. In fact, cooking well can easily get in the way of building a great restaurant. Why? Because as a restaurant, one needs to be able to provide fresh and tasty food in a short amount of time to many people. Even if you have a small restaurant that only serves four to five tables at a time, you still need to cook their meals within 15 to 25 minutes. No one will wait an hour until you roast that pork and no one will want yesterday's pork either.

In this case, cooking like your grandma used to may be a detriment to the business. The trick, so I'm told by a friend who owns a great restaurant, is to develop recipes that are fresh, delicious and can be prepared relatively quickly in a consistent and repeatable manner. Pre-cooking that pork will not work unless you know how to keep it fresh and moist and ready to serve while your customers wait.

My New Business

Okay, so you got the message. You may still be wondering why it took me so long to post something new here.

The reason is that I've been busy working on one of my passions outside of investing: nutrition and fitness. And as an investor and entrepreneur I decided to follow my own formula and turn this passion from a hobby into a business.

Today, I'm proud to present my new venture: Entropy Energy Replenishment Drink. Entropy is an anti-aging drink that helps the body's own mechanisms turn fat into mental focus (these statements have not been evaluated by the FDA. Entropy is not intended to treat, cure, prevent or diagnose any disease). Entropy was developed after many years of experimentation and studies. You should try it out. To boot, you get a 10% discount by using coupon code EPINV2010X.

Besides creating it out of passion, I partially did this to learn the steps and later be able to tell others about it. With this new business, I've now executed on all steps of my Get Rich Constantly formula above.

So now you know why the long absence. Next time, I will discuss how I put the company together and how I plan on working on it instead of in it.

My goal is to slow cook that meal once and then find ways to make it repeatable in under 20 minutes. In the beverage world, it takes a long time to come up with a good formula and flavor, but once that's done, you as a consumer get to drink it right away. And that's how it should be.