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Do All Entrepreneurs Need an Exit Plan?

exit-planningMost entrepreneurs don’t have an exit plan. Most advisors and academics says they need one.

A growing chorus is singing the song of the entrepreneurs. We think they’re out of tune.

Bankers have at least two ways to get their money back or they won’t loan you money. Venture capitalists have an expectation of how they will get out before they get in.

As an entrepreneur, you have a greater stake than anybody else in your business, no matter how much money they tie up in it. You need to know how you might exit even if you don’t plan to exit.

It’s about liquidity.

At some point in your life, cash may be a more valuable Asset than a business. With every other Asset, we invest cash thinking it will turn back into cash someday. Why should our businesses be any different?

It’s about legacy.

Exit planning is continuity insurance. You’ve put your heart and soul into your business. Do you want to risk that it falls apart if you’re not able to be there for one reason or another? Of course not.

Most importantly, it’s about options.

If you plan on an exit and run your business accordingly, you’ll have the ability to walk out completely or at least step away and create some distance. At some point in your life, you may find more enjoyment from activities that don’t involve building a business.

It doesn’t mean you ever have to retire. It doesn’t mean you ever have to sell out. It does mean you’ll be able to live your whole life on your own terms.

Do you need help planning your exit? Maybe we can help. E-mail us at bigginfo@biggsuccess.com or leave a voice mail at 888.455.2444.

Image in this post from svilen001

Investments That Always Pay Off

pay-offBigg success is life on your own terms. The five elements of bigg success are money, time, growth, work and play. Today we’ll focus on money.

You may have noticed that the market is up year-to-date. That’s the good news. The bad news is that we’re still off quite a bit from the top.

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The main market indicator, the S&P 500, hit its highest level in history on October 9, 2007. The good old day, we guess you could call that.

It hit its most recent low on March 9, 2009, off 57% (excluding dividends) from that high nearly one-and-a-half years earlier. Of course, now we’re up over 49% from that March low but we’re still off about 35% from the high if we factor out dividends.

The bottom line is that our portfolios have still taken quite a hit. It made us wonder …

Are there investments that don’t lose value?

It depends on your goal.

Your investment goal

Why do you invest? Obviously, you want more money. Why?

For some people, it’s the end. However, the end is pretty empty. For most of us, it’s a means to an end. Instead of financial returns, we really want emotional returns.

We want to be happier!

If that’s the case, research shows there may be a more direct path to happiness, assuming that basic needs — food, shelter and clothing – have been met.

Invest time in work you love

We tend to follow an indirect path to happiness. For example, many people strive to build a portfolio that allows them to retire when they want.

One direct path to happiness is to do the work you love. Bea Arthur, the late-great actress, said:

“Actors don’t retire. People who work in jobs they don’t like retire.”

Invest time to find the work you love. Invest time doing the work you love. It’s an investment with returns beyond your wildest dreams.

Invest time in relationships

Some people want more money so they can buy things. There is a more proven path to happiness.

Invest your time in relationships. Research shows this delivers higher returns on the happiness scale than having more money.

The direct path creates synergy

Bigg success is life on your own terms. The bigg idea behind bigg success is synergy. One place to search for synergy is between the five elements of bigg success.

Let’s look at two of the five elements of bigg success – money and work. You don’t need as much money to be happy if you’re doing work you love.

The funny thing, though, is that research shows that doing the work you love often leads to more money. If you put first things first, you end up better off all the way around. That’s synergy!

Now let’s look at money and play. Research shows that strong relationships lead to greater happiness than more possessions. You can save money by having friends.

It’s also interesting that, in our interconnected world, those relationships may very well lead to more money if you don’t force the issue. Put the relationship first and let the money follow.

Invest directly in happiness by investing time doing what you love with people you love. That’s bigg success!

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Would you like more tips and tools to live your life on your own terms?
Subscribe to the Bigg Success Weekly – it’s FREE!

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Thank you so much for checking in with us today. Please join us next time when we discuss mixing business with pleasure. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

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Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00456-081009.mp3

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(Image in today's post by svilen001)

Live Like a King on Less

ocean-viewMost people’s portfolios have been hit hard. They’ve come back some but we’re still down. People who are close to retiring are the most worried. However, we all have to think about having enough money for retirement.

We have three options – invest more, risk more, or plan to live on less when we do retire. None of those sound particularly attractive, do they?

Unless you can live like a king or queen on less!

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That’s why a recent article in Business Week caught our attention. It says that Panama is becoming a popular destination for retirees. It’s been going on for a few years now but really seems to be gaining momentum.

We hasten to say that, even if you’re not thinking about retiring soon or you wouldn’t even consider retiring outside your country, you still might consider putting Panama on your list of vacation destinations.

In addition to the Business Week article, we referred to PanamaInfo.com as a source for the information we’ll discuss today.

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georgeFrom everything I saw as we prepared for this show, I’d say a trip to Panama is in our future! I want to check it out.

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marylynnI’m on board, George. When are we leaving? Actually, let me rephrase that … I’m good with our weather this time of the year. I want to go there in the winter when it’s freezing cold here and 80 degrees there!

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Climate

It’s tropical and humid during the day most of the year in the highlands, which includes the capital of the country, Panama City. Temperatures range between eighty and ninety degrees Fahrenheit during the day.

The main tourist season corresponds with their dry season which runs from mid-December through May. In the rainy season, though, it rains for an hour or two about every day. That’s also when the hotels offer special rates.

Topography

Panama is an isthmus that connects Central America with South America. Hence the Panama Canal!

It has about 1,000 miles of coastline and 1,500 islands nearby. A mountain slices through the middle of the country. Panama also has five million acres of parks and more species of birds than the U.S. and Canada combined.

Cost of living

The main reason retirees are flocking to Panama is its low cost of living. The government encourages retirees to spend their golden years there. Seniors get discounts on just about everything.

For example, they save 50% on tickets to concerts, the theater and movies. A movie ticket normally costs $4 (dollars are the currency in Panama). Seniors pay $2.

They also get 25% off at restaurants, a 30% discount on most travel, except flights on which they save 25%. You name it and seniors likely get a discount, even on things like dentist and doctor visits.

Not that the price is high, relatively speaking, in the first place. The Business Week article points out that Panama has first-class health care at Third World prices.

Seniors even get a 50% discount on home closing costs. Once you buy your property, you have all the ownership rights any Panamanian would have.

And you don’t have to pay any property taxes for 20 years or pay any tax on your foreign income.

To give you some perspective on how inexpensive homes are there, the Business Week article mentions a couple who bought a 3,000 square foot oceanfront penthouse in 2007 for $250,000. At that time, it would have cost $3,000,000 to buy that same property in Miami.

Of course, it’s a lot cheaper in Miami now, but it’s still not close to $250,000. Speaking of Miami, Panama is only about a 2½ hour flight from Miami.

There’s a local joke that Panama is just like Miami. Except that it is safer. More people speak English. There are no hurricanes. And Americans are more popular!

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Would you like more tips and tools to live your life on your own terms?
Subscribe to the Bigg Success Weekly – it’s FREE!

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Thanks for reading our post today. Please join us next time when we ask, “Can you have too much money?” Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00435-071309.mp3

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6 Paths to Financial Freedom

freedomToday is the fourth installment in our freedom series. We’ll focus on financial freedom.

Financial freedom … can you imagine it? To use the lingo from our last couple of posts, it means freedom from money worries or, even better, freedom to choose how we spend and live.

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Read more

If Elvis was an Entrepreneur

exitThe final chord was sung. The noise from the crowd became a roar. The lights came on. But there was still hope … still a chance that he might appear again. And then there was the voice, saying …

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Elvis has left the building.

You’re probably familiar with those famous words. It made us think:

Elvis always knew how he was leaving the building. If he was an entrepreneur, he would surely know how he was leaving the business.

Learning from the pros

Bankers and venture capitalists know at least two ways that they’re going to get their money back (plus the return they need) before they invest in our business. Shouldn’t we know at least one? It’s one of the lessons we can learn from these professionals.

Why you should know how you’ll exit

In 7 Habits of Highly Effective People, Stephen Covey taught us to begin with the end in mind. We should know how we’re getting out of our business before we get into it.

Know your exit. Elvis did. Professional investors do. Yet many entrepreneurs never think about it.

That may be a reason why studies show that a majority of entrepreneurs don’t expect their business to kick in any money for their retirement.

It’s crucial to consider your exit because small businesses are highly illiquid by nature. Unlike shares in a public company, there is no marketplace where you can go to sell it immediately.

Another reason to know your exit – perhaps a more important reason – is that it your exit should be one of the drivers of your business strategy. How you plan to get out affects everything from how you structure your business, where you get money from as well as a number of other things.

3 common exit strategies

  • Sell your business outright
    Just like selling a house or any other asset, you exit the business by giving up any claims to ownership in exchange for an agreed-upon price. On your way out, just say, “Thank you … thank you very much!”                   
  • Redirect cash flows
    Let’s say you invest $25,000 to start a business. Let’s also assume that you make $25,000 after-taxes in your first year in business (after fully compensating yourself for your time).

    Further, let’s stipulate that you don’t need that money for your existing business. Take that $25,000 out and invest it somewhere else.

    You invested $25,000 and you took out $25,000. Essentially, you have no money invested in the business. Yet you still own the business! Get your money out and say, “Thank you … thank you very much!”                     

  • Recapitalize
    You still own the business with this strategy as well. Let’s say that you invested $25,000 to start your business. You got your business started, built it up and are making money.

    You may be able to go to your banker and borrow against your business. Let’s say your banker agrees to a $25,000 loan which you can pay back from the cash flows of your business.

    It’s likely that you’ll need a good use for the money to get your banker’s okay. For example, maybe you have an opportunity to buy a piece of real estate that will house your company.

    In essence, you’ve cashed out of your business because you now have that original $25,000 invested somewhere else. Repeat this strategy over and over until you have enough money to fund the life of your dreams. That’s bigg success!

Thank you … thank you very much for reading our post today.

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Would you like more tips and tools to live your life on your own terms?
Subscribe to the Bigg Success Weekly – it’s FREE!

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Please join us next time when we ask some questions about work – life balance. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00424-062509.mp3

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(Image in today's post by btafly)