man looking at documents on the wall

Staying Afloat: Tips on Surviving Inflation for Small Businesses

The Consumer Price Index (CPI) climbed 1.3% between May and June in 2022 in the biggest one-month jump since 2005, and it’s only expected to increase over time. As a small business owner, you’re already dealing with tight profit margins, so the added pressure of inflation can make it tough to stay afloat. Fortunately, there are strategies to help you weather the storm.

Cash Reserves

Inflation can eat into your profits, so having a cash cushion to fall back on can be a lifesaver. Keep a few months’ worth of expenses saved up to give you some breathing room if business starts to slow down.

Keep Valuable Employees

Wages inevitably rise with inflation, so it’s important to keep your best employees by offering competitive salaries. Providing benefits and steady work will lower your staff turnover, which may cost you a bit more now, but will help you to save on training and induction expenses, in the longer term.

Improve Profit Margins

If your margins are tight, now is the time to start looking for ways to improve them. Evaluate your strategy and see if there’s room to increase your prices without losing customers. Search for cheaper alternatives for your supplies and materials that won’t compromise the quality of your products or services.

Use Technology

Technology can help you save time and money. Automating repetitive tasks will free up your employees to focus on more important tasks that will lead to growth and new sales. Search for software or free online tools that can assist in this regard.

Business Loans

If you’re struggling to make ends meet, a business loan can give you the financial boost you need. Shop around for the best rates and terms but be sure not to overcommit to a debt you won’t be able to recover from.

Stock Up on Supplies

If your business makes use of non-perishable supplies, it may be worth stockpiling some items. This way, you’ll avoid having to pay higher prices down the road, and if resources become scarce due to global tensions, you’ll have the breathing space to find alternative solutions.

Improve Productivity

If you can find ways to increase productivity, you’ll cut down on expenses and automatically start seeing growth in profits. Check if there are any bottlenecks in your process that you can eliminate and use productivity trackers to monitor the effectiveness of how your staff spends their time.

Use Accounting Software

Accounting software can help you keep track of your finances and ensure you’re making the most of your money. It will also reduce the risk of payroll errors that have the potential to hurt your business in ways you can’t afford. Opt for a free software solution to avoid paying a monthly fee for this service.

Low-Cost Marketing

Marketing and paid ads are undoubtedly expensive, however, with the boom of digital solutions, there are plenty of low-cost options available. A banner maker, for example, can allow you to easily design banners online for your website and other marketing material to improve your efforts to reach your target market without spending on costly software.

Summary

Dealing with inflation can be a challenge, but it’s not impossible. If you’ve invested time and money into your business, you’ll want to do everything in your power to avoid liquidation, so it’s vital to be proactive rather than reactive. Start by identifying the biggest problem areas in your existing business model and you’ll soon find yourself easily sustaining profits.

By Lisa Walker

working on laptop in front of a window

Becoming a Full-Time Digital Nomad in 7 Simple Steps

If the idea of travelling around the world while earning a full-time living sounds appealing, maybe you should consider becoming a full-time nomad. Remote work is on the rise, but it’s important to do your research before taking the plunge. Today, Marissa is here to offer a step-by-step guide for adopting a digital nomad lifestyle.

1. Support Yourself by Becoming a Freelancer or Business Owner

For many aspiring digital nomads, becoming a freelancer or business owner is a top option. If you go this route, consider forming a limited liability corporation for the built-in benefits. This structure allows you to:

  • Reduce your paperwork burden
  • Pick a location for establishing the LLC
  • Limit your legal liability and get additional flexibility
  • Avoid double taxation and gain other tax benefits

Before you form your LLC, make sure to check your state’s LLC regulations, since they can vary. One option for lessening your burden and avoiding legal fees is to use a formation service to get your LLC set up.

2. Sharpen Those Business Skills

Building and improving your business skills can help you navigate the world of remote work with ease. So, if you want to further your education in the world of business, consider going back to school. For instance, if you’ve always wanted to earn your MBA, you can easily do so at home without having to rearrange your entire schedule.

Many online businesses let you start when it’s more convenient for you, so start by researching the start times offered by different programs. This way, you can easily fit those courses into your day.

3. Explore Different Remote Work Options

One perk of being a digital nomad is the chance to try out different professions. Consider remote work possibilities such as:

  • Freelance writing
  • Translation work
  • Bookkeeping
  • Freelance photography

4. Learn the Basics of Invoicing

According to recent employment data, picking up freelance work has become increasingly popular. However, just doing the work is not enough — it’s also important to get paid! That’s why learning how to invoice is essential. Starting with an invoice maker can be a life saver and help you maintain records, as well. If you’re working in a foreign country and hope to save money, look for a payment method with minimal transaction fees.

5. Find Tech-Friendly Rental Units Quickly

For a remote worker constantly on the move, finding appropriate and affordable rentals quickly is crucial. Secure a rental unit before moving to a new city, and consider renting through sites that offer 24/7 customer support in the event of unexpected complications.

Rentals with fast Wi-Fi connectivity are a must. Make sure your unit also offers access to other technology you may need, as well as proximity to any landmarks, local activities, or historical neighbourhoods you wish to experience.

6. Set Clear-Cut Work-Life Boundaries

One danger of working remotely is letting work bleed into your personal time. To truly enjoy your remote lifestyle, establish clear-cut boundaries by:

  • Setting a strict cut-off hour for stopping work
  • Using a designated office space
  • Scheduling in daily relaxation time
  • Prioritizing work tasks

7. Cut Back on Your Travel Expenses

When travelling often, it’s important to budget carefully. You can make your dollars stretch farther by cutting back on travel expenses. To do this:

  • Use online comparison tools
  • Take advantage of coupons and sales
  • Use points and perks on credit cards

Summary

Becoming a full-time digital nomad can allow you to travel the world while working but may require some planning. With these seven steps, you can work remotely while pursuing your passion for travel.

By Marissa Perez

pawn looking into mirror and see a queen

This year’s most meaningful birthday gift

My birthday was yesterday, and I received quite a few gifts, and still have some gifts in transit. And I just want to engrave a gift into the memory by dedicating a blog post for it.

Tl; dr;

A marble chess set that is the same age as mine. However it does have some broken pieces and I will need to find a mason or a sculptor to fix it or replicate the piece.

The gift giver

She is a special friend of mine, and depending on how it goes I will demystify her in later blog posts, and also update this one too. I endorse her for the well-thoughtful gift and also her dedication to help other people. She also has a constant improving mindset, and actually follow through with actions; which I highly value.

The present

marble chess set

This is the chess set, which now sits in my office and I look at it every day. All pieces are hand crafted from marbles, and the chessboard is also marble with wooden boundaries. If you look closer, the wooden boundaries is also hand crafted with symbols.

The special thing about this chess set is it was created in 1991 (approximately), which puts this at the same age as me. Therefore, it adds to the preciousness of the gift. Also there are some broken pieces which I need to fix. To me it just means nothing is perfect and by continuously improving we get better over time.

The broken pieces

There are 2 broken pieces, the pawn that loses its base, and the rook that is broken into smaller pieces.

I will need to replace this pawn with a new hand crafted piece to bring the chess board back to its glory day. It could take quite a bit of time to find someone who can work on this, but I have high hope.

I will need to glue this piece together, but it would be great if I can pass this to the sculptor to carve the piece from scratch too. Luckily all the smaller pieces are not missing as we broke it accidentally.

Summary

The chess set will be a beautiful piece of decoration in my home later. As time goes by, it will remind me of who gave it to me, how fragile things are and whether improvements complete me in a good way.

“A diplomat is a man who always remembers a woman’s birthday but never remembers her age.” – Robert Frost

By Tuan Nguyen

chess board with pieces

Scattered thoughts – chess and traps

Playing chess really helps me think about different problems and finding solutions for them. One of which is realizing there are 4 different types of people when it comes to dealing with traps, whether it is in playing chess or living your lives. Today we will discuss the first 3 types.

Tl; dr;

  • The victim: these people are oblivious or too suspicious to the traps in front of them, and sometimes walking into them without knowing until it’s too late.
  • The trapper: these people will lay out the traps and patiently waiting for the preys. It takes creativity to do so.
  • The spectre: these people voluntarily play into the trapper’s setup, with the knowledge and understanding that ultimately they will get what they want.

The victim

The victim is simply someone who have not encounter a trap before, therefore they are more likely to fall into it and does not realize the damage until it’s too late. I also include people who are too suspicious of a (seemly) obvious trap so that they fall into another one.

Any chess player will tell you that they fall into their opponents’ traps multiple times before they learn how to avoid or counter them. We all start here, at the bottom of the food chain. At first, we fall into simple traps, like the fool’s mate or the scholar’s mate in chess. Over time, with practice, we learn how to avoid these traps and then start falling into more advanced tactics. And the cycle begins again.

There is a simple way to avoid falling into traps, which is learning from your own mistakes and other people’s mistakes. Be observant and think critically on how and why things are done that way.

One example is the credit card trap. Most people who utilize credit cards spend the money they don’t have to impress people they don’t like. As a result, they are pulled into a financial hole that is very hard to get out, and they become gold mines for credit card companies.

The trapper

Trappers are the ones who create and set up traps. They are exceptionally creative when it comes to lure preys into their convoluted design traps. Essentially there are 3 things to make a successful “operation”:

  • The trap: designed to come out with a decisive advantage after the victim falls to it.
  • The bait: something to lure the prey into the trap, needs to be beneficial for them in hindsight.
  • Patience: probably the most important element, the nature of traps requires it. You need to wait for the preys to fall into it. It will be less effective if you need to coerce them into the trap.

A good trapper has the creativity to design the trap, the mean (or matter) to give out baits, and the patience to wait for the results. Following the example above, we can see credit card companies are expert in this field. They have the high interest rate credit card as trap, giving out credits and also interest free period as baits, and the patience to reap the results.

The spectre

These people study the system, understand it really well, and therefore willing to fall into certain traps if they know they can benefit from it overall. They can walk in and out of traps as if they are ghosts, and I just like the word “spectre”. Coincidentally, it really fits here.

In chess, we have an attack called the fried-liver attack. It is vicious for the receiver if they don’t know how to deal with the attack. However, some players intentionally play into this attack, as they can utilize something called the Traxler counter-attack. Which renders the fried-liver attack useless, provided that they play it right.

To put it simply, the spectres go into the trap, take all the bait and run away before they are imprisoned. There are 2 things required when it comes to be a spectre.

  • Critical thinking and self-learning: extensive study is needed to understand the system before walking into such system. 
  • Self-control: baits are very delicious, and taking too much can make you fall into the trap without knowing, even with all the studies and knowledge. I often say “Greed is good”, but probably not in this case. Understand the limits, take what you can, and get out as planned.

Summary

There are a lot of traps in the world, and sometimes we just need to be a bit sane to realize them. Once we identify the traps, it’s time to learn how it works and use the system for your benefits. Most people stops at realization and start blaming the trapper, which is a waste of time and non-beneficial for everyone. Why not turning it around and use it to your advantage?

“Never interrupt your enemy when he is making a mistake.” – Napoleon Bonaparte

By Tuan Nguyen

note book with text chaos planner in the cover

Executive Diary – first employee

When the business started in 2018, my business partner and I did everything on our own. From meeting with clients to actually do the development, while working on our full-time job. As Digital Envision grows, we found the need to employ people to accommodate with the new projects coming in.

Tl; dr;

Hiring the first employee is always one of the hardest decision you ever make in the early time of the business. The interview is instinctive as you don’t know what you’re doing. The best way is just to hire one and see how it goes. If you spend time reading on interview techniques and questions, don’t spend too much on it. I encourage people to read for a little while and jump into hiring. Taking too long will cost you opportunities.

Where to find talents?

We tried several ways to find our first employee. Since we did not have funding to hire someone in Australia, we decided to look elsewhere. There were a few places that we were seeking like facebook groups, job boards, etc. We needed a general admin at that time to handle our paperworks, so Philippines seemed to be a great place to look for one. We posted on various VA facebook groups, and received tons of applications. That is great, and we only needed to pick one from the pile.

It turned out to be one of the hardest thing to do. We did not know what to look for, every applications look great, and I remember that I felt guilty if I rejected an application without a rational reason to do so. That process took us over a week or two to select a handful of applications to interview. We did 10 interviews in 2 days and now the selection got even harder. After seeing their faces, I found it hard to reject any of them.

At the end, we selected one who has experience working as an admin for an Australian company before. And she was very good. We believed that we made the right choice.

Working with the first employee.

It was weird when I had someone else in the company beside the business partner. Suddenly we had someone to give tasks that we didn’t want to do. And we had a lot of them. However, I got used to it very quickly, and in a short time, she became a crucial gear in our machine. She also helped us to recruit more employees, and we started to employ more and more people since.

There was only one problem, we have an office in Indonesia, and she was the only one who lives in Philippines. And there are a lot of storms and typhoons in her area, resulting in power outage and internet connection issues. Over time, we lean more to our Indonesian staff, as the internet and power in the office is more reliable. We ended up leasing her out as a VA to another client of ours. After a while, the client wished to take her in full time, but wanted to sign the contract with her directly.

We decided to let her go.

Lessons learned.

Although our first employee was doing really well, and we still consider lucky to have her when we started up, there were a lot of things that I learned and put processes to prevent them from happening again.

First thing is, power outage and internet connection problem. Working from home is not reliable, especially in South-east Asian countries. We start working at 9am Australian time, which means it is 5-6am in Indonesia. What happens if the power is out at that time? One of the reason why we wanted to keep people in the office is to prevent this from happening, and minimize the disruptions in services.

Second thing is, we learned that sometimes giving people too much freedom is counter-productive. We gave our first employee a lot of flexibility, she could work when she was available, and just need to fulfil 8 hours a day. However, sometimes we can see the performance dropped off significantly. We avoid that by implementing KPI measures, this still allows certain freedom, but at the end of the day, results are what we look for in our employees.

Thirdly, as she was our first employee, we felt uneasy to let her go. Looking back, we should have let her go 6 months before we actually did. Now, we implement a warnings system, in which if someone has 3 warnings, or “strikes”, they are out of the company. “Hire slow, fire fast” is a motto that we adopt into the company. Luckily, we only needed to let 1 person go since she left the company.

Summary

Having employees often feel uneasy at first, since you let someone that you don’t know have access into your business. But it is a necessary step to grow your business. It is crucial to select the right person for the job. However, if it turns out to be unsuitable, you need to be very decisive and let them go quickly. Keeping a bad employee not only has negative effects to the company, it also affects other employees as well. We cannot help everyone.

“It’s not the people you fire who make your life miserable. It’s the people you don’t.” ― Dick Grote

By Tuan Nguyen

chess board with pieces

Finance – How I approach interest rate rising?

The topic of interest rising has been in the news lately. RBA increased 50 basis points, FED increased 75 basis points. I just want to note down some thoughts on what I’m doing to deal with it, and some wild predictions in the near future.

Tl; dr;

  • Opportunities for purchasing more assets are coming.
  • Increasing income from rental properties, and pricing will be lowered.
  • Increasing needs for offshore resources.

What are affected from central bank raising interest rate?

I’m no economist, but I would like to share what I understand about this. Feel free to correct me if you have a better view.

First thing’s first, what is a basis point? It is basically a number, representing 0.01%. So when you hear 50 basis points increment, it just means that there is a 0.5% increment from the current interest rate. At the time of writing, the current interest rate is 0.85%, an increment of 0.5% from 0.35% in May 2022.

Secondly, how does banks make profit? For simplicity, we will ignore the Fractional Reserve banking system, anh just focus on the simplest way. Let’s say you know a lender (A) who is willing to lend you money for 1% interest rate per annum. Then you go to someone (C) who needs money to purchase something, say a property. If you can lend them money and charge them 3% in interest per annum, essentially you can pocket the 2% difference. Now replacing A with the central bank, C with the consumer, and you are the bank.

With the above picture in mind, what if A raises the interest rate to 2%? To preserve the profit of 2%, you will need to raise the interest that you charge C to 4%. This explains why the banks are quick to pass the raised amount to the consumer. It is also worth noting that not just mortgage rates are increasing, all other interest rates are also soaring, e.g. business loans, consumer loans, etc.

Opportunities are appearing.

Over the last 2 years, when the interest rate was so low, a lot of people borrowed money to purchase various assets, e.g. properties, shares, private equities, etc. The prices of these financial assets went off the roof, and most people argue that they went beyond their intrinsic values. Naturally, when the interest rate goes up, some unfortunate investors will not be able to hold on to their assets and are forced to sell, and sell fast. At that time, opportunities present itself, what I need to do is to recognize those moments and seize them at a bargaining price.

I am lucky to meet many people who open my eyes on investment assets. Properties and shares are not the only thing that people can invest in. If you know the right people, you can do things like private lending, private equity. And if you spend time researching on niches, you can purchase collectible items, e.g. stamps, coins and notes, trading cards, watches, etc. These items will be sold first if their owners need money, and at that point, they can be sold for a fraction of how much they are bought, and that’s how you make money.

What about properties?

I intend to hold mine through this hard time as I can afford the rising interest rate. What’s good about it is that after a few more years, my portfolio will still be positive. And when the boom time comes, I will have a sick positive cashflow portfolio still and can refinance to get more cash out of the banks.

Moreover, as the interest rates increase, mortgages will be harder to get, and there will be less buyers in the market. The bargaining power will be transferred to buyers instead and we will be able to take advantage of that. Who knows, the purchase of my life is still lying ahead.

Employment market changes.

When there are less money invested into companies, management will start asking the questions like, who can we fire to save cost? Are we overpaying our employees now?

I believe there are people who are overpaid at the moment, purely due to the overflow cash supply. And when the money tide is out, they will be the first ones to go. Moreover, management in Australia are used to their employees working remotely. Suddenly, having offshore employees is not something that is impossible. I am in that space and it is a golden opportunity for us to grow our business.

Summary

Some people said we are heading to a recession, others said depression. I think there will be hard times ahead. And with preparation, we will be able to come out of it triumphantly. I just hope that when it happens, I will be able to help improving other people’s lives.

“He that can have patience can have what he will.” – Benjamin Franklin

By Tuan Nguyen

note book with text chaos planner in the cover

Executive Diary – part time to full time

Picture this, you are an ordinary employee, working a 9-5 job. Then one day, you and a friend meet up and discover the idea that both of you have been having all along. You both decide to open a business together to execute that idea. There is one problem: both of you are enjoying a full time job, and mortgages to pay.

Tl; dr;

I was blessed to keep my full time job a little while longer, while my business parter had to jump to full time position in our company early.

The transition was smooth in my case since we established a good foundation for me to go into the business officially. Before that I was working part time with no pay for nearly 2 years.

Starting up

We started the company in September 2018. Back then, we had 1-2 clients, not enough for any full time position just yet. Fast forward to a few months later and we managed to get our first big client, Stockdale & Leggo. Although it was a small project, but it gave us the confidence that we can sustain the company.

Then everything went sideways.

My business partner – Rod, got laid off from his company.

We faced our first big obstacle, would he find another full-time job, or take the leap of faith and become the first full-time employee in our company? We discussed and decided to take the latter option, as we believed deals should be made within the working hours, not after hours. And having someone fully dedicated to the company is better than two half minded ones.

Struggling through hard times

We just assumed that networking is the key to getting new businesses. So I introduced him to BNI, and went to a couple of them to see which one is suitable for our business. Eventually we found a chapter for Rod to join and start building our networks. The first few months after we joined were quiet, and he spent a lot of time meeting new people. I couldn’t do it because I was still in my full-time job. Therefore I can only supported him after hour, doing things like quoting for projects, and even development works.

Then COVID-19 hit.

I remember there were times that we only had less than $5,000 in our bank account, and BAS time was approaching. We were that close to being insolvent. However, we pushed through with some timely contracts. And everything started to pick up about 6 months into COVID.

Since COVID forced us to all working from home. I had the luxury of networking with new people via teleconferences, while ensuring my productivity of the full-time work after hour. We met more people than ever before, and business owners started to realize they didn’t need a local development team to work on the projects. We were given many chances and gained our clients’ trust from there.

Decision to take the leap of faith

Since the beginning of 2021, Rod and I had decided that the time for me to go full-time is mid 2021. No matter what happened, I would go full-time at that point. A deadline is needed when you do something important, so it doesn’t get pushed back again and again.

And I did. I went officially full-time on the first of August, 2021. After I sent my resignation in July, the last month was relatively easy for me in Adslot (which was the previous company that I worked for). This period prepared me to adapt to the new environment. The first few months were busy as we took in new projects. We had more projects than we could handle. However, we didn’t price them correctly, so we still suffered from cashflow perspective, and it still lingers until today.

What did I gain?

I met a lot of people in the business world. They taught me a lot of things, either from their experience, or from their readings and meeting with other people. It is a whole new world and I look at money and wealth very differently now, comparing to the time before Digital Envision.

Everyday is a new day for me. I have no idea how it is going to turn out. Every day poses new problems that I need to solve, or delegate. In my opinion, life is the most exciting when I cannot predict what is going to happen next, and therefore having new experience every single day.

What was sacrificed?

Obviously, being a full-stack developer in the last 2 years is like being a rabbit which has to choose between a big pile of carrots, and a bigger pile of carrots. Australia still ridiculously lacks of experienced developers, and it is no longer weird when I see a $200,000 package for a senior developer. Jumping out to my company, I accepted a minimum-wage salary, which affected the lifestyle greatly. To this day, I can’t really go out with friends without thinking about the budget that I have for the month.

Another thing that I can think of, is the serviceability to take loans. I could have purchased another property at the end of 2020 before the bull market started. However, I decided to keep the cash to prepare for the leap. I had the contract of the property that fit all the criteria on the table, waiting for signature. And now it goes up about 30%. But I have no regret, as this was the plan.

Summary

Moving from your safe full-time job to your own business certainly is a risky move. But I would say it was worth it. I have absolutely no regret since the day I handed in the resignation email. At least later on, I can tell my kids about the risk that I took to give life a better meaning, to give it a chance to influent more people than ever before.

“If you’re not sure about a certain decision, you should try a leap of faith; for you know not how deep you would fall, when you jump.” ― Mr One ZED

By Tuan Nguyen

note book with text chaos planner in the cover

Executive Diary – create an elevator pitch

Elevator pitch is a quick overview of what a company does. It has to be simple, easy to understand, and short. As the elevator ride is almost 30 seconds, the pitch is encouraged to be said within that duration.

Tl; dr;

Preparing an elevator pitch and memorize it is necessary when you are a business owner. It prevents you from getting caught off guard when people ask what do you do. A good elevator pitch consists of 3 parts:

  • “Do you know…”: state the problem that you’re solving.
  • “What we do…”: state your service or product.
  • “So that…”: state what happens if the problem is resolved.

Why do we need an elevator pitch?

Do you know, when I started working full time for my company, Digital Envision, people often asked what I do. And I did not have an answer that I feel comfortable with. I felt like if I said I was a director of Digital Envision, I would be bragging. If I said I was working for Digital Envision as a developer, I would be downplaying my position. And I believe that I’m not the only one.

In an effort to tackle the problem, I started to look for a solution, and someone suggested to write and memorize an elevator pitch. At first, I was skeptical because it sounded so salesy. I mean, there’s literally the word “pitch” in the name. But after looking at the examples, and the methods people use to create them, I now see elevator pitch no different than an introduction between people. And it is exactly that.

The “Formula”

What I did, was reading a lot of articles about how to create an elevator pitch. And one of them sticks to me as the most logical and easy to remember. It only has 3 steps:

  • Establish the problem, starting with “Do you know …”. Just 1-2 short sentences stating exactly what is the problem that you are solving.
  • Present what does your service/product do. You can start with “What we do is …”. Again, 1-2 short sentences give a summary of what your services or products do.
  • Suggest the result if the problem is resolved. You can start with “So that …”, talk about how the clients be better off with the problems no longer available.

Let me give you some examples. I am blessed with managing 2 different business models. So I have prepared 2 elevator pitches and depending on the situation, I will bring one out or the other. I am still working on combining them together though.

Elevator pitch for Digital Envision

Do you know that there are so many innovations being created in Australia? Lots of those innovations require developments of websites and mobile applications. What we do is using our digital development skills and expertise to realize these novel ideas. So that our clients can realize their ideas and dominate the market in a timely manner.

Elevator pitch for VA For Everyone

Do you know that companies are having a bad time finding talents inside Australia? There is a massive shortage of labour in this environment. What we do is give our clients access to the enormous talent pools overseas, while keeping the headache of managing offshore staff away. So that our clients can meet their progress development goal and bring products to the market in a timely manner.

How does it help me?

I did it so that I don’t need to think about the answer anymore. It becomes a very smooth talk once I memorize the “script” and put more tone into it. Being prepared gives you confidence when going into networking events, and avoid rambling on about your business. Also I want to systemize things and this fits perfectly into my system.

One thing to note is that this pitch is alive and constantly changing as the business develops. I would suggest to revisit the pitch every 6 months to make updates as needed.

Summary

Elevator pitch frees us as business owners from getting nervous about conversing with other people. It also helps us listen to other people better as we don’t have to think as much. And I believe conversation is all about listening and understanding what our counterpart is passionate about.

“Good luck is a residue of preparation.” ― Jack Youngblood

By Tuan Nguyen

note book with text chaos planner in the cover

Executive Diary – do you need business partners?

In the Executive Diary series, my audience will be severely limited. This is because I’m talking to you, to the business owners, to the directors of your own company. Why is it called Executive Diary? Because I live it everyday. And I think it would be great for you to have a point of reference when it comes to problems that you are having.

Today we will discuss on whether you should go starting a business by yourself, or having someone(s) with you from the beginning.

Tl; dr;

I strongly suggest to have at least one business partner. They provide invaluable resources that most business owners take it for granted. Some examples of them are:

  • Keeping you accountable.
  • Bringing skills and expertise that you don’t have to the business.
  • Having a second set of eyes and perspectives to every problems in the business.
  • Workload is shared, and you have less chance to burn out.

Why do we need a business partner?

Building a business from scratch is going out of our comfort zone in a massive manner. What it felt like to me is moving from a 38 degree hot spring pond into a cold shower. It challenged everything I thought I knew about running a business. Some people may start the business as a side hustle, and over time they add more and more time into the business. That is actually fine and there is nothing wrong with that.

However, once you are serious about the business, it’s time to jump into a full time role and there is a whole new world out there. That world can be monumentally terrifying, and sometimes you need a hand to keep yourself sane, to keep you accountable, and to bounce ideas off of. This is when a business partner comes into the picture.

Benefits of having a business partner

Apart from what we discussed above, a business partner also brings contacts, skills and expertise into the business. They can help you in fields that you are inexperienced in, for example, I know about accounting and finance, then I can partner with someone who has skills in operations. And together we can make the business whole. It is nigh impossible to have someone who knows everything. And while some people may argue that you can hire mentors and business coaches to help you with missing skills, the third parties will never have the commitment that your business partners have.

Another advantage is that you have extra sets of eyes when it comes to problems in the business. And believe me, there are a lot of them. You wouldn’t believe the things that a business owner may encounter daily, things that you wouldn’t think they exist, such as massive consequences when dealing with both Russia and Ukraine companies under the effect of recent events… Back to the topic, having another eyes on the problems provide another perspective, and it is great to see the problem in different angles and we can find better solutions.

Moreover, having someone with you in the business reduces the workload working on the business. There are a LOT of tasks that you need to do once it comes to managing a business, especially when you have employees. In my case, we have over 40 employees in our company and even with the help from HR staff, we still have tons of work to do.

Limitation of having business partners

It’s not all fun and roses when having business partners. Like a coin, everything has two faces. I can only think of one thing when it comes to the other side of the coin. Decision making speed.

Sometimes, having too many options and over analysing can lead you to analysis paralysis. Therefore it can slow down the decision making process, especially if you only have 1 business partner as there is no deciding vote. It is recommended to have at least 3 people in the business with equal shares, so you can always put things into votes and resolve matters that way.

Summary

There are advantages and limitations when it comes to having business partners. However I believe that the pros outweigh the cons, and having at least one is recommended if anyone asks me.

“Alone we can do so little; together we can do so much.” – Helen Keller

By Tuan Nguyen

chess board with pieces

Lean FIRE – how to get there?

Financial Independence, Retire Early, or FIRE, has been a rising trend of our generations for quite a while. And it is an ocean of information out there for you to research and study. In this blog, we will talk only about lean FIRE and how can we get to that stage.

Tl; dr;

There are only a few repetitive steps required to achieve lean FIRE.

  • Pay yourself first.
  • Spend less than you earn.
  • Invest.

Most people will fail in the first 2 steps, one simple explanation is that, they lack conviction. The system works, you just need to keep going and do not derail from the plan.

Invest simply into a handful of ETFs and keep putting money in regularly, otherwise known as Dollar Cost Averaging strategy.

What is FIRE?

Basically it is a lifestyle where, your investments generate enough income to replace your daily jobs (hence the term Financial Independence). You can finally quit the 9-5 job that you may resent and do what you want to do, never to have another job again (hence the term Retirement Early).

There are multiple different types of FIRE, in which there are 2 main types that are often discussed:

  • Lean FIRE: your investments generate barely enough income to support your most basic needs. You can quit your job but you can only live in the simplest lifestyle. Clearly we don’t want that, but it is a good milestone to know that you are now working for more than just to meet your needs.
  • Fat FIRE: your investments generate a lot of income that it can sustain the wildest lifestyle of your dream. To know your dream spending, ask yourself this, if you had a million to spend in a year, and you couldn’t buy investment assets, what would you do with it?

Calculate lean FIRE goal

If you know your monthly spending, that is good. But if you don’t, it is a good idea to start recording your income and your expense per month. After about a year, you should have a good idea on how much you spend, and that can be the figure that you need to determine when to reach lean FIRE.

For example, living in Melbourne, Australia, my monthly expense falls around $2,000 – $2,500 per month. So my goal for lean FIRE is $2,500 x 12 = $30,000 income per annum. That means if my investment portfolio can generate $30,000 per annum, I have achieved lean FIRE. We will use this figure in future calculations.

Above is a super simplified method, there are obviously contingencies that we need to account for, but the goal of this exercise is to come up with a number that we can aim and shoot for. Achieving lean FIRE is an important milestone in the journey, since it signifies that we are no longer working because we have to, we are now working because we want to.

How to get there?

Going back to The Richest Man in Babylon; which is, as far as I know, is the first book on personal finance written. It lists 3 simple rules for financial independence:

  • Pay yourself first: when we receive your salary/wage, move at least 10% of that amount into a separate account. We will discuss on what do we need to do with that later.
  • Spend less than you earn: With the remaining amount, you can only spend at much that amount and do not borrow money to spend more.
  • Invest in what you know: this is where the 10% comes in. Over time we will build up a considerable amount of money and now we will attempt to invest for a good return.

Most people fail on the first 2 steps. Why? Because that’s how life is, there will always be another party, another emergency, another splurge item. And only someone who can say no to non-essential items when it is necessary can succeed to get past these 2 steps.

So, how do we generate the required income to cover our expenses? The most popular way is to invest in ETF shares. This has several benefits:

  • Less capital required, we can invest with as little as $100.
  • High liquidation, easy to convert back to cash if anything happens.
  • Proven track records, we can see performance dates back 30-40 years.
  • Income can be received through dividend.

Let’s say we invest in ETFs, and the portfolio generates around 4% income per annum (this is actually the main number that FIRE practitioner uses for calculation). So, to have $30,000 per annum income, we need to have a portfolio of $30,000 / 4% = $750,000.

That’s not even a million!!! You can achieve lean FIRE with just $750,000 net worth!!!

And the road to get there is even more magical. Let’s say you invest all your money in a simple ETF, for calculation sake.

 

Since inception (2009), VTS has been enjoying a phenomenal return of 15.62% per annum. Plugging that into moneysmart website, we have the following calculation result.

graph for compound interest

Clearly if we follow the system, it will take us 19 years to reach our target. But it is still doable. And we can fast track this by taking in more income in our early years and put more into the regular contributions. I have seen people only take 5 years to reach their goals, mainly by minimizing their expenses and maximizing their income, invest all they can spare into the ETFs.

What does it mean for me?

When I looked at the number, it is so obvious to me that anyone can reach lean FIRE and have a better mindset on why they work at the job that they don’t even see a future in.

Therefore, when I reach that figure, I left the company that I worked for and started working for myself. Let me tell you, there is no greater joy than working not for money but for a higher purpose. As a chess grandmaster once said, when you see a good move, look for a better one. I saw lean FIRE as a good move, and now I am looking for a great move.

Summary

Anyone can achieve lean FIRE, it is not even out of reach for an average income person in Australia. The main thing that stops us from that is only ourselves. We need to learn how and when to say no to things, and then apply the principles, trust the numbers and the system and it will work.

“When you see a good move, look for a better one” – Emanuel Lasker, World Chess Champion

By Tuan Nguyen