(Today’s article is a clip from the most recent post at the Blog Marketing Academy. Thought it’d be worth sharing in THE EDGE).
Money is a form of energy. It is like the gas in your business fuel tank. So, it is really hard to have a sovereign and self-reliant business if you don’t have any financial reserves.
Does your business have a “rainy day fund”? Do you put any percentage of your business income into reserves or diversify any of it into wealth preserving (or growing) assets?
Entrepreneurs who don’t manage their money can really reduce their durability by not having any reserves. It means your business cannot weather an economic slowdown. Or if that promo you just did didn’t work out as well as you planned, it means you could have a tough time paying your bills.
Obviously, the first level priority here is…. make more money.
When your business is flowing more money (more energy), then everything opens up. That is ALWAYS the first level priority. Make more money.
Secondly, keep expenses under control and keep a really high profit margin. Most solopreneur businesses (especially online) can have very high profit margins. So, as long as you’re not out there blowing money, you should be able to maintain a high profit margin in your business.
Thirdly, keep business reserves. Take a chunk of business income every month (target at least 10% if you can) and put it aside. Consider it a “rainy day” fund.
Fourth, consider ways to park reserves into non-cash assets that can preserve or grow the wealth of the business.
With inflation being what it is, parking cash in your bank just means it is dwindling away. Cash is trash, as Ray Dalio has said. So, how about parking chunks of business reserves into non-cash or even income producing assets?
I don’t give financial advice. That is not my thing. 🙂 But, I can tell you what I do.
I am a big believer in the future of cryptocurrency and I have invested money into it. Almost all of it personal. However, I did also take part of my business reserves account and I used it to purchase Ethereum (ETH) many months ago.
Now, anybody that knows crypto knows it goes up and down all the time. But, I put somewhere around $4K of business funds into ETH at the time. As of this writing, that account is at about $8K. Not only that, it is held on Nexo where the account is earning 4% interest. Obviously, 4% interest is lightyears better than if that cash was sitting in the bank.
I am also a massive fan (and user) of Celsius and I keep a tidy sum on Celsius and earn way more interest than from a bank. But, I use Nexo for those business reserve funds just so I can keep the funds separated. And, of course, if (or when) the crypto markets start to drop off into a bear market, I’ll need to sell.
BTW, if you’re curious to learn more about using crypto accounts (even dollars, if you’re not comfortable with crypto) to earn interest, check out my article on Plain English Crypto on earning interest on your crypto holdings (and blowing your bank away).
Have a strategy that works for you. Keep reserves for your business. And consider doing something with them rather than just having it rot in a bank making zero interest.
The point of those reserves, though, is to give your business backup funds for the unexpected.
I want to make a quick point here…
This newsletter is called THE EDGE. And sometimes, I like to discuss things that I think are on the edge of innovation. And I definitely think this new breed of bank (aka “crypto banks”) is indeed on the edge of innovation.
This is in no way a recommendation that you dive into crypto. It is a volatile thing, as you’ve probably heard. It is kinda like the early days of the internet. So, do your own homework. The bigger point is just…. think beyond just putting cash in your bank. That’s a really important thing to do these days.