Diversification

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I’m not totally sure whether I am going to get my point across in this blog post but I am going to try and verbalise what I think I know in my head.

As you’ve probably picked up from some of my previous posts, I am big into diversification and building up multiple income streams.

My experience had been that I had lost my job and regular salary a few years ago and I realised just how much I depended on that regular amount coming into my account. I then went into business for myself and became highly dependant on irregular payments from customers.

The end result was - no money when it was needed to pay the bills and I got into some really deep financial trouble. The long and short of it was that I couldn’t generate cash fast enough to make the interest repayments and these amounts were just compounding. Not ideal.

Over time I began to adjust this strategy building up many smaller income streams - shares from dividends, unit trusts, property investments, websites and other small businesses.

Initially its nothing major but its:

A) Guaranteed income

B) Its income that comes in irrespective of whether or not one of my lines go down. If my salary cheque was to run late I would still have SOMETHING coming in. If my customers paid late and I needed cash flow to meet other obligations, it was there.

Ask yourself what would happen if you lost one of your lines of income? Could you recover? Would you have SOME cash coming in to keep you afloat?

Keep this in mind when you try and balance your financial life. If you are going to rely on one amount coming in every month, then in my opinion you may be headed for trouble. 

Makes you sick…

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Doesn’t Richard Branson and his team at Virgin make you sick?!

Just seen this article about the Virigin Galactic programme where they’ll be sending up space tourists in the next year or so… Yeah we’ve seen space tourists but they’ve only been for the mega rich. This is just for the sort of wealthy…

We average entrepreneurs might laugh and turn up our noses but here’s the kicker “the waiting list of 300 people that have already paid US$40m in deposits to Virgin”…

US$40m in deposits = just shy of R320m Rand…. UNFRIGGINBELIEVABLE!

Well done to these guys though - they keep life interesting.

Business!

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I’m a junkie - that’s the realisation I came to today… Was walking through the shops at one of the shopping malls here and I kept looking at the different businesses and shops I was passing and wondering what it would be like to run them and what I would need to know to make a success of them.

 Ok I know bugger all about ladies lingerie so I’d probably suck in trying to run THAT business although it DID occur to me that if I was running it, I would have a discreet service that helped guys pick the right thing!

That’s how bloody entrepreneur brains work - they’re always searching for something more, even when they have real world issues to take care of as well…. like paying the bills!

This is a bit of a meandering end of weekend post, so don’t read too much into it. I was asked early on the weekend what kind of businesses I would like to get into… I was sorely disappointed when told I had to limit it to 5….

So here goes:

 1. Would love to run a panelbeating shop

2. Think there is enormous opportunity in waste management in SA (no shit!) - but barriers to entry are high

3. ENORMOUS opportunities around this carbon credit / business tax initiative thats coming

4. Would LOVE to run a little food or chemical factory - its been something that has stuck in my head for a while

5. This is inspired by my wife - a little smoky cocktail bar would be pretty cool as well!

As you can see - wild and completely unrelated - but shucks its fun having these ideas rolling around in my head.

What are you guys interested in?

Oooooh money….

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Say what you like… a bit of money makes entrepreneurs a hell of a lot nicer and socially acceptable.

In the last 2 days I’ve seen the announcement of 2 investment funds aimed at start-up / SME companies.

The first fund is the InVenFin (www.invenfin.co.za) technology and innovation fund aimed at identifying innovative South African technology and taking it global. These guys are backed by heavyweight technology investors, VenFin, and have a cool R50 million to throw around.

The second fund is the new financing deal that the IDC (www.idc.co.za) has in place which is US$30 million which works out at around R225m to invest in SME’s …

Just so we’re clear on that - there is a quarter billion Rand worth of financing available out there for good SME ideas, you just have to know how to go about getting the financing. 

So if you’ve got some seriously kick ass SA technology or Intellectual Property and you want some heavy weights to help you make some moola off it, then get hold of the guys at InVenFin and see what they come up with. These guys have the clout to take you all the way.

If you’re running a franchise or small business then the IDC has got US$30 million from the guys as a spin off from the arms deal. This money has to be invested in local SME’s so why not take advantage of these sources of funding if you think you have a good idea?!

Setting measurable targets

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I use to have a mate who would regularly come to me with business schemes which would “easily” make him R10k - R20k a month in passive income and people would buy into the concepts because they were “just so obvious”.

Now bearing in mind that the person involved barely had R100 to spend on evening drinks without having to swipe plastic, you always take it with a pinch of salt.

I use to have an ongoing argument with him about scaling down into measurable and realistic targets of say R500 a week to start off with. His immediate response was that it wasn’t worth starting to ONLY make an extra R500 a month. I’d have thought in his position an extra R2k a month would have been appreciated.

When my business hit the skids and I was in serious financial trouble, I had the bank and credit card companies hassling me for repayments on my car and plastic and for the first couple of months of living like this, I kidded myself that the R10k deal is around the corner and it will get me back on track. I then spent my life chasing a non existent R10k boost or deal that wouldn’t come.

From that point onwards I started focusing instead on the far more achievable goal of R412 a week (the requirement I had to pay for the car instalment). That was the figure I ate, slept, breathed and focused on. Amazingly I started hitting the goal every week, somehow the work would come and the repayments got back on track. It was measurable, seeable and most importantly REACHABLE.

People talk a lot about “The Secret” and if you focus on something long enough and hard enough it comes true. I don’t buy into a lot of the airy fairy side of it but I do know that if you become obsessed and targeted on something that you can reach, it starts to happen.

My new number is R660 per week which goes into my investment and share portfolio. Come hell or high water I focus on this figure, I align all my work goals to ensure I have exactly R660 available on the Friday of every week.

I kid you not - for the last 6 weeks (which was when I restarted this practice), it has happened. I’ll be honest its exciting because you can see it working.

I guess the lesson has to be - set yourself a measurable goal and you’ll find yourself hitting it more and more often. The more you hit it, the more you can start increasing the target. But start with something you CAN achieve….

Cash Converters and auctions

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I read a statistic yesterday that Wesbank had repossessed 1806 last month… That’s a lot of cars that are going to come onto the auction and second hand market in the next few month.

I was actually in Cash Converters on Friday last week looking for some sports equipment for my sports club and I was astounded to see what stuff was in there. I think Cash Converters is about to become my new favourite place.

You hear people complaining about the cost of living and how expensive it is to buy stuff these days but I reckon people are missing out on some serious treasure troves. Have you gone through to the Bid Or Buy website? (Check out the banner on the Right Hand Side). Laptops with an opening bid of R1 and no reserve price - they really are there.

Do yourself a favour - if you are looking for equipment for your business or just looking for stuff in general, checking out these auction sites and places like Cash Converters. It could be well worth your while.

Amway, Golden Products, Affiliate and AdSense businesses

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 Ok I’m probably going to make the REAL ENTREPRENEURS grumpy with this post, but who cares…

Multi-Level / passive marketing type businesses such as these come in for a lot of stick from entrepreneurs who have launched “real” businesses quite successfully. But I am always curious about these business concepts because I think in some ways they have the potential capacity to be a nice sideline for entrepreneurs to look at to begin developing an alternative income stream without any real capital outlay.

Amway I have looked at, but never really seen or met somebody who is making a real living off it so I can’t comment (Yes I have seen the brochures with John and Mary who make R50k a month off it but that doesn’t count).

The point is that if you scale down your expectations a little, of what you are thinking you are going to take home, you might feel a little more rewarding. Amway and AdSense are both littered with stories of guys and girls taking home thousands of Rands every month off the programme and I’ve seen a number of guys and girls join, only to quit a month or 2 into the programme.

My question to you is that if you could take home an extra R250 - R500 a month from the programmes and were able to look at turning it into some kind of passive investment or to pay off your bond - hasn’t it been worthwhile?

I use the money I make off AdSense and Traffic Synergy to go and buy shares on the JSE because thats what I know and like. The shares then become a passive income from a dividend perspective, the Adsense and Traffic Synergy stuff plods along and I still pick up my work income as well every month. Suddenly from 1 source of income I have expanded to 3 (2 of which have become largely passive).

I do know that its hardly the most exciting thing the world to receive an Adsense cheque for 100 US dollars that has taken you 7 months to accumulate or your Amway income of R200 from all the work you’ve put in…. That’s the nature of these programmes unfortunately and to be successful is the same as with any other business.

The point is that it is providing that little bit extra that you can use to invest with.

I’ll admit - I use programmes like Traffic Synergy and Google AdSense and these days they contribute a couple of grand extra to my account.

This isn’t me trying to punt any particular programme because thats not what I do. It’s me saying, that just like other readers I have had a time when I didn’t have a salary coming in and this is where the income from the passive sources became so important. Instead of living from pay cheque to pay cheque each month, here is a very small and simple way to get going and build some investments without committing too much time and effort.

Multiple income streams

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Was chatting to an acquaintance on Saturday who had recently lost his job and he was complaining about how completely screwed he was without a salary coming in every month. Hell I was there recently so I can sympathise with the guy.

But one of the things that the experience made me very aware of was the necessity to have multiple income streams irrespective of whether you are working for a fixed salary or not.

Now before you jump down my throat let me qualify that statement. I understand that most people will have a less than average chance of kickstarting a new business venture now (especially in the current economic climate). I also appreciate that many people don’t have the desire to go into business for themselves.

But seriously - what are you going to do if your salary was taken away from you at the end of the month? How many months could you survive? Entrepreneurs come in all shapes and sizes and don’t need to start businesses to find ways to survive - some write, some have rental property, some make money off their blogs, some sell hot dogs, some day trade…. it doesn’t matter HOW they make the money - the simple reality is that they are coming up with some ways to not just rely on that salary arriving timeously in the account.

Readers of this blog will know that I believe we still can expect more grief, job cuts and general cuts in economic activity - if your job is one that MIGHT be on the line then maybe its time to be looking at acquiring a support financial lifeline just in case….

The trouble is here…

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Nobody likes to hear bad news, but the reality is that people need to stay on their toes - especially as we are entering the downturn in the economic cycle. Many, who had nice solid jobs and a regular pay cheque might suddenly find themselves retrenched and looking for any ways to get their small business going just to make ends meet.

Don’t bury your head in the sand - major employers are already announcing their job cuts. Standard Bank made it common knowledge they stopped hiring in April this year. Mutual and Federal has announced 600 job cuts. Absa announced 100 job cuts on Friday.

We’ve said it before on this blog - try and form some kind of sideline business or investment even if you feel pretty secure in your own job. The last thing you want to do is find yourself unemployed and with no source of income over this period. If you take a decision to only depend on your pay cheque every month to keep you going, there could be some pain for you.

Begin to educate yourself - identify what you can do well. Can you write? Can you sell? Can you acquire other skills that might be of value to a future employer? Can you make boerewors rolls? (Don’t laugh - I know a guy who clears about R7k a month from sitting selling wors rolls).

Opportunities are there but YOU will have to think on your feet and try and find ways to make the ends meet. If you avoid the issue, you are more likely to feel the pain than if you begin to take a more proactive look around IN CASE OF EMERGENCY.

Financial services partner wanted

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We have recently become involved in a project for a financial services incubator. The idea is to offer young entrepreneurs (specifically young black entrepreneurs) a foot in the financial services door.

We are seeking:

- A young black entrepreneur with financial services exposure / experience to head up this incubator project in Gauteng

- Must be research and equity oriented

- Must be prepared to own and run the business as part of the project

This is an incubator so should enjoy some good remuneration and equity stake. If you’re interested please drop me a brief CV and intro letter to marc@rival.co.za .

Thanks!


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