Saturday, 19 July 2014

Think life like a business

Stage I - The start up

At budding stage, you acquire the capital that you need and plan for the asset(s) you intend to sell by choosing the education / course of interest to you. If the course you graduate from is of hot demand, you will find yourself some very good offers.

Stage II - Stabilisation and expansion

At this stage, you already have the foundation. So you start to acquire more skills, knowledge, network and experience relevant to building your ideal business and see its Net Asset Value increases. While doing so, watch and calculate your free cash flow so that you can better plan for re-investment or save up for rainy days. Operating cash flow goes into daily expenses and buying of equipment. You could diversify your business by investing on alternative courses and picking up skills that would allow you to side-track should your main business fail.

Just be wary of the debt trap when you acquire assets or buy equipment that do not add value to your business.

And don't forget to pay dividend to your shareholders (those who worked for you or benefited you).

Stage III - Merger or acquisition

That is when you decided 2 is better than 1 despite the risks involved -  acquisition (you gain net asset by marrying someone with lower net asset or even higher in some cases) and merger (new partnership).
Businesses with better book value usually get a better acquisition offer.

Some businesses after merger or acquisition prosper with the common vision, mission and value bringing brighter future. Some businesses would fail to thrive as vision, mission and value fail to coincide and the net assets eventually got depleted. You go back to stage II.

Stage IV - Harvest / crisis

This is when your business goes from fully on track and stable to slowing down. You enjoy golden years and could retire on stable income (from investments, savings and / or children).

On the other hand, you could also face crisis if you fail to acquire enough assets and back up solutions (eg. insurance) as business is waning.

Stage VI - Bankruptcy / handover

This may happen at any time.

This is the time of either handing over your legacy to the future generation or ending up in bankruptcy with nothing to pass on.


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