Running a Business You Love – Understanding Your Finances

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What good is having a business you love if you can’t pay the bills or feed yourself? Some people may find their passion and know just how to make things flow in order to deliver their product flawlessly to the consumer, yet still fail as a business. That is because proper money management is vital to your business’ survival. In fact, some may argue that money is what makes the business.

To succeed financially, you need to know where your money is going and what you are getting in return.

You need to have a clear understanding of your cost of goods and margin, as well as fixed and variable costs in order to make informed decisions.

So, what are all these costs and what do they mean?

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Cost of goods is pretty straightforward. It is the price you pay for the product you are selling. So lets say you are planning to sell T-shirts and each one costs you $10. If you buy 100 shirts for resale. Your Cost of Goods Available for Sale (COGAS) is now $1,000.

Let’s assume you opened shop and the first month you sold 40 t-shirts. Your COGAS, or inventory, is now $600 and your Cost of Goods Sold (COGS) is also $400.

Unless you’re trying to go bankrupt, you’re probably selling your shirts for more than you buy them. So, let’s say you’ve marked up each t-shirt to $15. That means for those 40 you sold the first month you business earned a revenue of $600 with a COGS of $400, leaving you with a gross margin of $200.

That’s great, right?! You made $200 your first month! Or did you?

Fixed Costs

Covering basic business expenses can be your first major hurdle before you achieve profitability. These are what your accountant would call Fixed Costs or what many may think of as G & A (though not all G & A are necessarily fixed costs).

What are Fixed Costs?

Fixed costs are those costs which you would have if you did not sell a single unit, think rent. For example, if you have a storefront that you rent for your t-shirt business and your rent is $1,000 per month, you still owe $1,000 even if you sold nothing at all. 

Some costs can be slightly ambiguous like utilities. If your store is open fewer days then your bill will be lower.

While utilities may fluctuate, they generally they are regarded as fixed. The same can usually be said about wages unless hours worked directly correspond to units produced or sold (that can get really complicated and is best served as a standalone article or series).

 All in all for now just think of it this way, if you sell could sell nothing one month and sell your entire inventory the next without the cost changing substantially on its own, then consider it a fixed cost.

What Does That Look Like in Practice?

For this scenario lets say you have rent, utilities and one part time employee as its fixed costs.

Rent: $1,000

Utilities: $300

Employee: $2,000

                Total: $3,300

Suddenly that $200 gross margin doesn’t look so good. You’re short $3,100 this month.

Why So Gloomy?

A lot of articles out there want to give you a feel-good feeling, so they paint a picture of how you’ll be making $10,000 in your pajamas watching TV. When you inevitably don’t succeed then you think that it is something you did wrong, and you really need to go read more of their advice to see how they did it. Worse still, you need to buy their program and sign up for their coaching.

That’s not me. I want you succeed now and keep on succeeding. This is the harsh truth of small businesses. Owners see that $200 margin and think they are making money, then get stressed and upset because they don’t know why they can’t cover the bills.

“I’m getting a 50% markup, why is my account overdrawn?”

How Much Income do I need?

You know that you have fixed costs to cover and now you know the total you’re spending on them each month. So now you only need to make that $3,300 right?

Not quite. To figure out the total sales we need, we have to find what is called the Contribution Margin. For that you need the cost of goods and the variable costs.

Variable costs are those costs which fluctuate as a direct result of increasing or decreasing sales volume.

Commission is a great example of this. If you pay your sales staff an hourly rate plus commission, then that commission would be variable costs.

For this example, we’ll say that you pay your employee $1 for every sale he or she makes. The 40 t-shirts that were sold have a variable cost of $1 each in addition to the $10 COGS. So that leaves you with a contribution margin of $4 for ever unit. (Sales price -COGS – Variable Cost).

Contribution margin is the amount of income which is over and above the cost of sale. This is used to find your Break Even Point or a target income.

Break Even Point

We have established that the fixed expenses equal $3,300 per month and that the contribution margin is $4. Now to find the breakeven point you can simply divide fixed costs by $4.

This gives us 825, which means that you will need to sell 825 t-shirts to come to a net income of $0. Meaning, your business paid all of its bills and neither lost nor gained any income.  

Target Income

So far, we have not included a salary for you, the owner. Often the owner of a small business doesn’t get to take a salary for the first 3-5 years. Still, you certainly will want to get paid and knowing what you need to get there is important.

Let’s say you want to earn at least the median income in the US which is roughly $2,700 per month. That formula would look like this (fixed costs + target income)/Contribution margin.  In our case that would be ($3,300+$2,700)/$4 = 1,500 t-shirts that you need to sell per month.  For perspective, this would be $22,500 in revenue.

Adjust Your Expenses

You may think that 1,500 t-shirt sales per month seems impossible when you’re just starting out. Truthfully it will likely take a lot of time and effort to ever reach that mark. Your small business may need to sustain at a loss for an extended time before even consistently reaching the breakeven point of 825 units per month.

There are some things you can experiment with or consider that may help you reach your goals faster. After all, you picked an item you are passionate about for your business. You know the ideal price points and have a good idea of what drives sales.

Can you raise your prices? If you increased to $16 per unit then your breakeven point would drop to 660 t-shirts and your target income would drop to 1,000 units.

Does the $1 per sale actually cause any additional sales? Can you reduce this or other variable costs?

Would spending more actually reduce your time to breakeven? That may sound crazy, but as you know you have to spend money to make money. Does your target market respond well to paid advertisements? Keep in mind that attracting a new customer is multiple times the cost of retaining, so an upfront investment in ads may kick start your revenue and save on expenses later. This will increase your fixed costs, however, so carefully weigh your options.

Can You Say That Again? But Try Making Sense This Time

Ok, I’ve thrown out a lot of terms and some math that may seem all over the place. While its usually best to hire an accountant or bookkeeper, you still need to know how everything works for strategic planning.

Here’s the Rundown

You have recurring costs that don’t change based on sales volume. You have some that do. You need your sales price to be low enough to still attract customers, but high enough to make a margin you can work with. You need to identify how many units you have to sell to reach your goal and build a strategy around that.

Revenue does not equal profit, and money in the bank doesn’t mean usable cash. Next time we will be discussing income verses cash flow and why that’s important to you as a business owner.  

Creating a Business You Love, Tough Questions

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Creating a business you love is hard work, but very worth while. Taking it one step at a time can be immensely helpful. Previously we went over the foundation – finding an idea. We discussed why it is crucial to base your business on an idea you are passionate about rather than one that simply looks profitable.

The next step is to determine if its feasible. So lets say you want to build and sell a wearable device that monitors glucose in diabetic cats because your pet fluffy would still be around if that had existed. Okay, this is a weird example, but it gives us a good starting point.

So, let’s examine the idea. You can apply this method to whatever your real idea is and get a feel for what your going to need.

  • Do you know how to build the technology?
    • If so, what is the cost?
    • If not, where will you have it built?
      • What is the cost of outsourcing
  • How many devices will you need?
  • How will you fund the project?
  • Is there a demand for the device?
  • How will you deliver to your market?
  • How will you get it to stay on the pet?
  • Are there ethical or medical hurdles to overcome before its rolled out?
  • Can the devices survive long term wear and tear/weather?

There may be more questions you can ask but these are some general basic questions to get you off the ground.

At each question there is a hurdle to overcome that can tear down the feasibility of your business, but its better to ask now than after you’ve poured your finances into it. Also, a negative answer doesn’t mean failure, it just means you need to adjust your business until it works.

Looking at the Questions

Do You Know How to Build the Technology, or Will You Outsource?

If you are going to develop your business offering yourself then you will need to be an expert in whatever it is you do. Also, you will need a lot of time to work for very little or no money in the beginning. Outsourcing will free you up but cost a great deal more. How much time and effort are you willing to invest in this business? If you take a look at the project and see that it is going to take more than you are willing to give, consider this unfeasible.

Don’t partially commit to something that’s success will depend on your full time and attention. Don’t partially invest in something that requires more. In business 50% investment does not equal 50% of the desired results. Often times it equals 0% or worse, wasted time and a load of debt.

How Many Devices Will You Need?

Its important to know what sort of starting inventory you are going to need. You don’t want more than you can store or sell, but too few means missed sales and potential life long customers.

Free cash and free cash flow is vital to a small business, especially a startup. Having all your funds tied up in inventory is a common mistake and one that’s cost goes beyond storage fees. Having cash on hand can mean payroll is made, the lights stay on, and your ability to operate another day. In other words, cash on hand can be the difference in having a business or closing shop.

Once you have determined your beginning inventory needs you may find that the cost is greater than the funds you are able to secure. Here you may decide that the business is not a possibility at this time, or you may consider a “soft opening”. Doing so will allow you to open to a select customer group, limited audience, or open with the premise of “while supplies last”. This will allow you to start with a significantly lower inventory and “test the waters” in a way.

How Will You Fund the Project?

There are many options to funding your business. Some choose to save up the money themselves while others pursue investors or loans. There are pros and cons to each, but however you get your funds that money is expected to be returned with interest.

Lenders and investors generally want to know a handful of things before they are willing to issue any capital:

  • What are you selling?
  • Who is your target market?
  • How will you generate income?
  • What return do you expect?
  • What is your breakeven point?
  • When do you expect to make a profit?
  • Do you have experience in the industry?
  • Do you have business experience?
  • Who will manage the business & What are their credentials?
  • What is your exit strategy?

I’ll be going over how to answer most of these as I continue through How to Start a Business You Love

If you can’t find a way to obtain funds then your business is over before it began in most cases. However, you may be able to work doing freelancing in order to put back some extra cash while building your connections and experience and start your official business at a later date.

Is There a Demand for the Product/Service?

If the answer to this is no, then that’s pretty much the end of things. You could try to create a demand, but this is extremely difficult. It has been done before, but it takes a great deal of time, capital, and for lack of a better term, luck. You will be much better off shifting or altering your offering to serve some sort of market.

If there is a demand for the product your next question is where that demand lies. Is it in your country, an online market, or it local?

How Will You Deliver to Your Market

If there is a demand but it is beyond your ability to connect your products with those who desire them, you have no market. If your target market lies within your ability to deliver your offering, then you are in a good position.

At this point you need to figure out if you will deliver your Cat glucose monitors yourself or ship them? Will you use a freight carrier service? Would you package the monitors yourself or hire staff to do so?
Much of this comes down to time and money. Remember, hiring out costs money and you will need to make sure your margin is high enough to cover labor costs. On the other hand, doing it yourself may take away from other important activities that could be needful for growth. This can be a real balancing act and requires a good deal of deliberation in finding the right solution.

How Will You Get it to Stay on the Pet?

Obviously you’re probably not working on a device for diabetic cats, but this is still a relevant question. What I’m asking you to think about is basically this- How well will your product fit the clients needs, and what are the possible issues? Will your device “slip off”?

If you have something people want, but your product, service, delivery, or customer service are lacking for a customer then you likely won’t have that customer for long. If that’s the case for the majority of your customers, then your business will be short lived.

Put yourself in the customers shoes and find all the ways things could go poorly from their perspective and work to solve them before they happen. Being proactive is exponentially more cost efficient than being reactive.

Can the devices survive long term wear and tear/weather?

Similar to the previous, your product needs to be one of quality. If you bought a toaster today and it burned out next week would you be interested in buying from that store or brand again?

Maybe they could win you over by exchanging for another toaster, but lets say that one lasted no longer than the first, would you still buy from them?

The same principle applies to whatever your product is and especially services. Imagine you go to a dentist and their service is terrible. They pulled the wrong tooth and forgot to numb your mouth to boot. That will make for one interesting yelp review.

If what you have to offer isn’t worth the price, customers will soon spread the word. You may last for a short time, but as a whole that business model is not viable.

Are there ethical or medical hurdles to overcome before its rolled out?

Various industries run into issues with certifications or license requirements. Of course, something being developed that touches in the medical field would have to go thorough rigorous testing and various quality controls as so forth. Many other, more common small businesses face other challenges.

For example, restaurants face health inspections and have to have food service certificates in many states. Additionally, there are rules regarding seating and facilities in many cases.

If your business requires a license or other criteria you don’t meet, then it may not be feasible just yet. You may try adjusting your business model to avoid actions that would trigger those requirements, or simply invest in yourself so that you are able to meet them.

Your Job

At this point you’ve found an idea you’re passionate about and want to monetize and you know you can connect with your audience. You’ve questioned it to iron out the details to find out if it can survive as a business. You’ve looked at what it is you are offering and how much it will cost to develop or purchase, who will be performing the work, inventory needs, funding, demand, and possible issues or regulations.

You should be well on your way to developing a business you love. Next time we will look at costs associated and developing a break even point as well as a target profit.

Remember to subscribe to make sure you don’t miss out on learning how you can start a business that you love!

How To Start a Successful Business You Love

Your First Steps and Where to Go from Here

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All businesses start with an idea. Some are ideas are simple and some complex, but the successful ones solve a problem. Sometimes it’s a problem you didn’t know you had. Ultimately, as long as your business adds value to the lives of consumers that’s what matters.

An Idea is key, but you need more than just an idea. You need passion as well. If you find a product or service that sells but its something you hate, you’ll never be as successful as you could be.

Your idea should be something you care about. Ideally it will be the solution you’ve been looking for. For example, you really wish there was a bowling alley in your town because you love to bowl but you hate driving to the next town over to bowl at their run down alley.

Examine Your Idea

Starting a bowling center in your town doesn’t guarantee success, but it does guarantee your interest. You’ll need to tell people about it, be excited and get them excited too. You’ll need to take everything about why it solves your problem and turn that into the “why”. As in “why would people spend their money here”. That is all business is, solving problems in exchange for money. The thing is, money solves a lot of problems. So your job is to identify why the solution your offering is more worthy than another solution to another problem.

To put it simply. I’ve got 99 problems and money would solve most of them. I have enough money for the big ones- shelter, food, clothing and some left over. Lets say the remaining problems are minor, they are things you want but don’t have. They fall into Entertainment, Travel, Goods & Services, Charity. What is going to make what you are offering more appealing than satisfying the consumers desire for something else? Your passion may make the difference.

Trust In Your Business

In order to be successful you need to know your industry, know your customer, and connect with everyone involved. That may seems a little extreme, but its true. Relationships are key to everything in business, especially where marketing is concerned.

No one wants to buy from someone they don’t have any trust in. In fact, nobody really wants very much from someone they don’t trust. For all I know there really could be a Nigerian prince out there trying to give me $10 million. I will continue to miss out because I don’t trust the emails or whoever may be sending them, so they continue to go to spam.

Now you may not care if you trust your customers, but if you’re a supplier you might. Trust allows you to work on net terms instead of cash. It also allows you to build relationships and be informed of new deals you can then pass along to the consumer.

Basing your idea around something that you love helps you to quickly build that trust. You know your product and you are thrilled to share it. You’re not a sketchy used car salesman trying to pawn off a lemon when you care about what you’re selling and people can tell.

Developing Your Business

Once you have your idea you need to decide if its something that can generate revenue. As mentioned above, why would someone pay for what you are offering? Once that question has been answered your left with the task of making sure your expenses are less than the revenue.

The easy part is finding something you’re passionate about and selling it. The hard part is making that turn a profit. For that you will need to determine how you will deliver your offering to your market. You’ll need to identify your costs and margin by asking yourself questions like “do I need an office?”, “will I hire employees?”, “will I need storage?” and so on.

You’re on Your Way

For now, focus on identifying your idea. Think about how you can do things differently and add value that others don’t. Develop your concept of how you will get your product or service to the market. Above all, make sure its something you want to do for the rest of your life. You will pour countless hours into your business at the start with little financial reward, but if you do it right you will likely set yourself up for financial success in the long run. You can have a business that will last that you’re proud of and love.

I’ll be continuing to post the step by step journey on how to start a successful business so don’t forget to subscribe! I’ll be covering everything from financials to marketing

For a complete overview check out How to Start a Business.

Nobody Wants to Work Anymore, Why That’s Awesome!

Addressing the Great Resignation

“I want 20 years of experience and a PHD. This job will require 80 hours per week. We will pay $10 per hour and no benefits as this is an entry level position.” This is how I think a lot of discussions begin when management considers positing a job opening. At least, that’s the impression I get any time I see a job posting or hear friends and family speak about their job search. So then why is there such a disconnect in the workforce?

Employees can’t find a job they qualify for, and employers are shouting “nobody wants to work anymore”. Ghosting is becoming more prevalent among employees and gig work is becoming more appealing with each passing day for some. Employers may be trying to compete with one another on wages, but there is an apparent ignorance of their greatest competition. The gig economy and passive income are more available than ever to the average person. People want to work, just not for todays employer.

Employees Have Options Now

You may find yourself asking “why would I wake up at 7 am, spend time commuting just to be trapped at a job for 8 plus hours, and be treated poorly for $10–15 an hour when I could just do my own thing with Task Rabbit, Uber, Gigwalk, Upwork, Fiverr, Udemy, Youtube, or a thousand other projects and get to do it on my own time?”

The answer is becoming more apparent. You don’t want to work for little money, respect, and freedom. People don’t want to work for less than they are worth. In America we have a capitalist society and for a long time it has worked in favor of the employer with the exception of a few unions who have occasionally tipped the scale here and there. As a whole its always been the employer that has the upper hand.

Employee Resignation

Balance of Power

As an employee you do what the employer says when they say and for the amount they say, or you get out. That’s fair, you wouldn’t hire a plumber to fix your pipes and not expect to be able to find someone else if they weren’t performing to your standards. However, on such a large scale the fairness has dwindled over time. The productivity of the average worker has increased but the wages have not kept pace, nor have the benefits or respect.

Now I am not now, nor will I likely ever be a proponent for a drastic and sudden minimum wage hike. It just doesn’t make sense from an economic perspective as it doesn’t better the lives or wealth of the employee. In fact, it actually helps to increase the wealth gap between the rich and the poverty line as well as between the rich and the middle class. I have some solutions to propose but that is a discussion for another day.

Nevertheless, something must be done to create amicability between the employer and employee. The employer has been reaping greater benefits year after year while the employee has paid for them. Today businesses are wondering where all the labor has gone. It is the employer that is in the hot seat rather than the laborer.

This is because the scales have tipped to give employees greater leverage in their negotiating power and businesses are still trying to hold onto the same, antiquated ways of doing business. We are currently in the age of a paradigm shift, and this could go very wrong or very right, but regardless of the long term outcome the status quo is soon to be no more.

Remedy

So what can businesses do to entice employees to stay or even apply?

1. Let the skillset match the job

2. Make the pay match the skills

3. Invest in developing the employees Skills Knowledge and Abilities

4. Emphasize Work/Life Balance

5. Transition from Managers to Leaders Managers

6. Transition to “gig”/contract labor where possible

Struggle for Balance Between Employees & Employer

There is in my opinion a strong connection between the rising productivity/wage gap and the ever-growing qualifications at every level of work. Employers are getting incredible deals on their wage costs today. Their savings come by hiring only overqualified employees for wages far beneath their skillsets. Until now, employees had to settle for whatever they could get and work hard to advance in their organizations, so this was an absolute win for businesses.

There was also little need to invest in the employees because they were already capable of doing their jobs and the jobs well above their paygrades. Besides, its not like they were going anywhere. Most businesses structure themselves like this, and if employees did try to “shop around” they would be labeled as a “job hopper” which would weaken their employability. In short, looking for something better was a risky endeavor for an employee.

Work/life balance wasn’t and still isn’t generally a concern for many employers. The transaction is a mutual agreement, the employee sells the employer their time and that’s the end of it. But why does the agreement feel so one sided? Because the employer held all the leverage.

Employees hold the Risk

What is the number one question you are likely to be asked in an interview? “Why did you leave your last job?” This question is difficult to answer because an honest answer can mean you don’t get the job. There’s no grand capitalistic conspiracy to keep the working folk under control of big business or anything like that, but it happens to work out the same as if there were.

If your previous employer decides to no longer engage in buying your time, then that termination reflects very poorly on you. Furthermore, it can make it difficult for you to provide for yourself or your family. However, if you decide to no longer sell your time to a specific employer, then that employer will suffer no long term consequences. Unfortunately you still may be seen in a negative light for leaving in some cases.

Power has Shifted to Employees

Now employers need to see their relationship with employees differently and for the partnership it is. Employees have always been encouraged to look out for the best interests of the businesses for whom they work, even while off the clock. Now its time for employers to do the same for their employees if there is any hope of salvaging their abilities to hold onto workers.

Leaders who care about building up their employees and operating as a team can go a long way in achieving this. Management that cares about their employees can make great strides in reducing absenteeism, presenteeism, burnout and turnover while raising productivity. This shift doesn’t have to be a negative for anyone. Instead it can be an opportunity to build a better way of doing business.

Offering greater flexibility, allowing for work on demand jobs when possible, treating employees with respect, matching skills with the job position, and investing in employees growth all seem like obvious opportunities to develop and retain a motivated and powerful workforce, but first the idea that employees are beneath the employer in this odd power struggle must be done away with.

There is strength in unity between the employee and employer. Unfortunately, as long as employers try to hold onto the power businesses will face loss and employees will continue to seek opportunities outside of the traditional model.

Creating Strong Passive Income stream

How to Build a Passive Income Lifestyle

Passive Income lifestyle for financial freedom and ongoing revenue. Residual income creation.

The thing about creating substantial passive income stream is that it’s a lot like riding a bike up a really steep hill. It’s slow and painful, but once you get to the top the hard work is in the past and you can just enjoy the ride and coast on all your prior efforts.

The work is where I lose most people. They want something they can throw money into that’s going to spit money back out at them. That makes sense, it called investing, but the problem is that if you don’t already have a lot of money, you’re probably not going to find an investment that’s going to pay out a substantial monthly income.

So, we’re back to square one — work. There is a beauty in compound interest that makes the rich richer, and passive income is like compound interest for your efforts. For example, let’s say you earn $20 per hour at your job, and you get the chance to work one hour of overtime and you take it so that you can use that money to invest in passive income.

So, you earn $35 from that hour of extra effort — let’s pretend for simplicity’s sake that taxes don’t exist. So you invest the whole $35 in some EFT like SPLV which pays dividends. Assuming average appreciation and continued dividends then you wo uld have earned $3.43 in passive income the first year. That is equivalent to a little more than 10 minutes worth of your hourly pay rate. Assuming you reinvest your earnings then next year those earnings are a little bit higher.

Now that’s something, but there are other avenues that may require more work but also have the potential for much larger streams of income for the effort. There are many ways to go about that such as writing an eBook, starting a blog, some affiliate marketing programs, designing products, and creating online courses. There are many other ways to create robust time dividends in the way of passive income, but for now this article is going to focus on these.

Write an eBook for Passive Income

The market is saturated in physical and ebooks, but the good thing is that there is an enormous market out there. Most people read, in fact you’re reading right now, and you probably have a variety of topics that interest you. People who like to read or just like to learn don’t stop at one book and never read again, they accumulate the knowledge and adventures inside the pages and it inspires them to continue reading. What I’m saying is, though the market is full of books and the barriers to entry have never been lower, you still have a lot of earning potential in content creation.

That being said you will likely need to put in some research to determine the best means to advertise your content and drive sales and the best methods may vary depending on what you’re writing about and who you’re writing for. Earning potential is truly unlimited here, but I wouldn’t expect to become a multi-millionaire from writing one ebook and calling it quits. The more you work the greater the dividends here so keep pushing out content, keep your audience engaged and I believe you will earn a substantial and growing passive income stream and the less you have to work in the long run.

Start a Blog

If you have a passion for something but don’t think writing a book is for you, or maybe you want to write content in addition to your book to create a larger audience or build awareness, then starting a blog may be a good idea. There are various ways you can generate income through blogging such as affiliate links, selling ad space, or selling products/services. WordPress is always a good option if you want to do a combination of things or want some good customizability. Medium and Vocal do provide better returns on ads if you allow them to monetize your content. Building your following can be difficult and time consuming, but as long as you’re passionate about your topic, post regularly, and post content that adds some sort of value then you have everything you need to build a significant passive income.

Affiliate Marketing for Passive Income

There are tons of affiliate marketing opportunities out there. The most well-known is Amazon Affiliate. How it works is, you advertise their products through some form of media, someone buys through your link and then you earn a commission. What I believe to be the best and easiest way to find affiliate opportunities is through Partner Stack. With most affiliate marketing products its essential to build an audience and consistently post or share content that adds some sort of value to their lives and builds trust. This is especially easy if you really care about what you’re “selling”. Its not fair to your audience to push products you’ve never tried or don’t care about and its not fair to the business either. If you do that then your affiliate success will be short lived if at all in most cases. Social media is probably among the easiest ways to get started with affiliate marketing. In addition to my love for business, I’m also a fitness enthusiast, so I’ve become an ambassador for FNX which is a fitness nutrition company. I like the products, they taste good, do what they claim and they’re reasonably priced so its not very hard to talk about them and give them my support. If I never tried a single product then I would struggle to find anything to say about them and when I did I wouldd have to hope I’m right and don’t get called out as a liar..

Designing Products for Passive Income

If you’re the creative type or even just good at coming up with catchy phrases then you may find success in print on demand products. There are plenty of venues such as RedbubbleTeespring, and Zazzle that allow you to design products and list them for sale. You get paid a commission when your product sales. I have accounts with each one to maximize my exposure, but so far Zazzle is the winner by far in terms of sales generation. You don’t have to get too complex with your work to make sales either. My top seller is surprisingly enough just a simple deck of playing cards with a white back that says “I’m Cheating” in black letters. Depending on the sales promos going on I usually earn between $0.20 and $0.32 on each deck sold and all I did was type “I’m Cheating” add a few tags and a description about 4 years ago. Now if you really want to push for all the sales you can get then you may want to advertise or at least create some social media sites for your store.

Create Online Courses For Passive Income

Full disclosure here, this is one I am preparing to start by drafting up lessons, but I have not utilized this one myself. I thought it was worth including since its one that I am going to do and once I have a deeper insight I will review it a little deeper. There are several platforms you can choose from and right now. I believe that picking one and sticking with it is the best way to start so as to not divide your traffic or your focus. Some of your best simple options are UdemySkillshareTeachableThinkific, and LearnWorlds. It seems like Udemy is the best option for starting out and keeping it simple. If you have something you know well enough to teach, then this may be for you.

The Takeaway

There are numerous ways you can create passive income, but the best of them require an upfront investment of either capital or effort. In the long run its worth the input and can pay out very good dividends. Most of these content platforms also compound in the form of followers. You may start out making very little income, but over time as you create more and more works or posts your audience will grow and sequential posts will garner greater attention.

Let me know if there are any other topics you would like to hear about or if you would like a more in depth post on any topics!

A Step Toward Financial Freedom

Modern life has spoiled us when it comes to having things done for us. Its been about 15 or so years since I used an actual map to find my destination. I’m not sure I could go back to it with much success after becoming hopelessly reliant on GPS. Unfortunately such a device has yet to be invented for real time turn by turn directions to financial freedom (at least not for us starting at the bottom). Still, there are countless resources out there to provide us with ideas to help point us in the right direction.

So I thought to myself, “self, why don’t you write down a simple model that others can use as a jumping off point?” Then I thought “stop talking to yourself like a psychopath”. Nevertheless, here is my simple look at what a game-plan for financial freedom may look like for the average person to.

Income

Pinning down the average income was a very difficult challenge. The household median salary for 2019 was $61k, but the median individual was $31k. The thing is, median does not mean average, its just the middle. So this that doesn’t necessarily paint the best picture. Average doesn’t necessarily do justice either because some outliers really skew the numbers. For example, if it were between Jeff Bezos who’s annual earnings are estimated at $78.5 billion and 100 individuals making $15,000 per year annual income then the average income would be estimated at $777 million per year. 

So I picked a nice round number that seemed reasonable based on the available data which was $40,000. Factoring in 401k contributions, taxes and insurance that should leave roughly $28,000 per year that you actually receive in your bank account. OUCH!

Expenses

The best practice for finding a home is to spend no more than 25% of your monthly gross income on your house or rent payment. That means for someone making $40k per year the maximum housing cost they should take on is $833 per month ($40k/12 = $3,333.33 x .25 = $833.33). The average utility bill in the US is $112 per month, food spend is $500 for an individual, the average vehicle expense is $710 per month and the average entertainment spend is $200.

Now Lets take Stock of Things

If you have an annual income of $40k, then the actual take home pay is roughly $28,000. That gives you monthly cash flow of $2,333. So what does that look like based on the averages?

The disposable income is unfortunately negative based on this. That helps to explain the massive credit card debt we see in America But lets modify a little, my suggestion is that your monthly spend on your vehicle be no greater than about 20% of your net income (fuel included). It may sting a bit now to forego driving around in the car that’s keeping up with your nemesis Steve at work.

But in the long run Steve will be sobbing when he’s working well into his 60s and you’ve been sipping mojitos on the beach getting fat for years. So, back to the here and now, what does that tweak look like?

Much better. Not perfect, but there is disposable income now. So how do we make this work for you? You’ve got food, shelter, electricity and a little entertainment/cloths spend $218 of extra in your budget.

For the sake of making things simpler lets contribute the $18 to a savings account and work with an even $200 going forward. So lets take stock, since we’re dealing with a cash flow of $2,333 with a disposable income of $200 then the immediate cash flow requirement is $2,138 per month.

Putting Your Freeloading Cash to Work

I’m sure you don’t want to lose a single cent of that $200 per month that you’re working hard for. That being said, a diversified portfolio is probably the best way to approach this. My preference is to have no less than 3 truly passive sources of income.

Making your first pick a stock means gaining equity and maintaining liquidity so you can take it out if you ever need to.

My second pick is Peer-to-Peer Lending because can offer a fairly high return while allowing you to reinvest and start compounding quickly. This is a little higher risk, but in my opinion worth it as my annual return has been about 24%.

The third is a relatively new investing platform called Driverloans. This offers a 15% annual return, but requires you to commit your cash for at least 3 months (the longer term the greater the return with 15% being a 1 year commitment).

Stock and Dividend Investing

The medium I use for stock investing is Robinhood, much like every other millennial. (If you haven’t gotten started you can earn a free stock by signing up from my link). The strategy I take is investing for dividend income and growth. I prefer stocks and REITS to be at least 50% of my total portfolio because it is historically a safe bet given you have a good mix of investments. My top 5 picks are SPLV, Coke, AT&T, Home Depot, and McDonalds. I invest in more, but these are good core stocks in my opinion.

An Overview

The reasoning is that SPLV is a conglomerate of dividend stocks. Its is generally one of the most steady and dependable stock choices I’m aware of. Its dividend payout is 2.57% per year.

Coca-cola (3.51%), Home Depot (2.216%) and McDonalds (2.642%) are all dividend aristocrats. That means that they have historically raised their dividends year over year and are very likely to continue.

AT&T is a strong, stable company with an extremely impressive dividend of 6.837% and has generally experienced stable earnings.

To me these give a reasonably good mix of the economy as a whole. You can try spreading out your investments among these just adds another layer of security for me.

Peer-to-Peer Lending

My choice here is is LendingClub fore no real reason other than this is what I tried first. The average return using lending club is advertised between about 6 and 8 percent, but there’s a little more to it than that. The way loans work an 8% interest rate on a 3 year loan of $1,000 (LendingClub offers 3 and 5 year loans) actually provides a total return of $128 or 12.8%. You can actually take this a step farther and leverage your money a bit more. 

LendingClub only requires a $25 investment for a single loan. So assuming an initial investment of $1,000 at 3 years per loan you would receive about $25 per month of your principle back. If you reinvest your principle each month then by the end of the first 3 year cycle your actual return on principle would be closer to about 20% (more if you reinvested the interest as well).

Driverloans

This is more or less a straightforward 15% interest with not much leveraging you can do. It has limited liquidity, but not a great deal of risk involved either. The initial requirement is $50 so the expected return for 1 year should be about $7.50 on $50. Once your initial investment is in you can add in increments as low as$5.

The Mix

Let put this all together now. Understandably, with only $200 per month to invest the results won’t seem groundbreaking at first. Thankfully, each month you invest your disposable income will grow. This is through your passive income streams which accelerate any further growth. Assuming a mix of about 50% in stock 25% in P2P lending and 25% in Driverloans, your money growth may look something like this.

Your income would be growing at about $1.12 per month. In other words, if your disposable income this month is $200, next month it will be $201.12 and the following would be about $202.25 (the rate of growth should increase month over month as well).

The Long Game for Financial Freedom

We established earlier that the income need we are looking at is about $2,138 per month. So at first glance it looks like it would take 1,909 months or 159 moths to get there. That’s horrible. Thankfully, the power of compounding interest really helps a lot. If you reinvest then that 159 years can become a bit more reasonable pretty quickly.

In fact, assuming you reinvest every penny generated by your investments, then in only 22 years the investments should provide an income equal to the needs. If you did this then your portfolio would likely look something like this:

Meaning you would have a total equity of about $239,000 and a yearly passive income of $25,778 or a monthly income of $2,147.

Reality of Your Financial Freedom Journey

I get it, you don’t want to wait 22 years for all that. What’s worse is that by then $2,147 per month will be worth less than it is right now. Dang inflation. We’ll here’s the thing, the calculations I just mentioned didn’t factor in the dividend aristocrats. Or rather, it doesn’t factor raising their dividend rates. It also doesn’t take into account your personal raises or promotions ( I recommend putting back about half of the take home from any raise you get).

More than that though, any chance you get to make a side income will take months off of your time to freedom. For example, $20 today in the stock market in SPLV should equal about $36 ten years from now. It should also offer a dividend payout of about $0.91 per year. That doesn’t sound like much, but money today is worth more tomorrow when its invested.

The Takeaway

Financial Freedom through Passive Income and Residual income
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In all honesty, this may be a lot of shallow information. Nevertheless I hope it gives you some ideas of how to break out of a 9–5 job. Research before investing, and begin taking steps to generate some passive income and create some financial freedom for yourself. The more you cut expenses and are able to invest the quicker you can become self reliant.

Compound interest is a powerful force that can catapult you toward your financial goals Unfortunately it loses its potency with every passing day because its dependent on time. Waiting to get started is costing future income and equity. There have never been as many opportunities for passive income and “side hustles” as there are today. Now is the time to take control of your finances and make some big moves.

Office Ninja is Born

In the dangerous world of office supplies there was one born of whom legend was foretold would bring peace and prosperity to the lands. From an early age the child trained, becoming one with business, learning accounting, business management, strategy and more preparing to fulfil his destiny.

One day a famine ravaged the land and there were no pens to be found. Pencils were scarce and bands of rouges patrolled the wasteland scavenging paper. It was safe for no one. Families hid their staplers, scissors, post-its and such in their cellars, under floorboard or in their attics. Some even buried their paperclips in hopes that they would be safe, but alas their efforts were in vain. There rose up an evil band of samurai who took control of the lands and demanded monthly tribute of supplies under the threat of imprisonment and death.

There was one mighty fortress on the Summit that stood against these foe and brought hope to the land, giving rations to villagers in exchange for their loyalty. Summit fortress heard tales of the chosen one and sent an ambassador to deliver invitation to this warrior to determine if the legends were true. Upon speaking with this messenger, it was Summit fortress to whom the chosen one sought to pledge his sword.

He set off on his journey to the fortress, lurking in the shadows and battling bandits that would take advantage of the citizens along the way. As he arrived at the grand fortress he was in amazement at the high towers, long halls and grandeur of it all. As he climbed the staircase amazed with all he saw, hope of what good he could bring through this alliance filled his heart and lifted his spirits.

He approached the throne room and was welcomed with warm greetings by the general of the Summit forces. Their discussions began and lasted for hours as the chosen met with many officers and discussed his training. He was introduced to a powerful, yet equally majestic beast which protected their realm. This beast was able to sniff out supply mines and was the greatest asset to the fortress reserves, her presence brought great comfort to the fortress.

As the negotiations closed the chosen began to set out for home to await message from the team. As the gates were raised and he began his journey back, the fortress knew that he was indeed the one of whom legend spoke. As such he was a threat to their way of life. Their stronghold would fall should peace reign and those who pledged loyalty to Summit Fortress would be free.

“Kill him” the general ordered as an assassin leapt into action and proceeded to follow the chosen.

He creeped in the shadows behind the chosen, just beyond sight until nightfall. As the sun set the chosen began to set up camp and, filled with thoughts of what prosperity and growth he could bring with his new found partnership he let himself let down his guard. As he lie under his tent and drifted to sleep the Summit assassin made his silent approach. He raised his dagger over the chosen and thrust it down into his chest. Awakened by a searing pain the chosen one immediately fought back. A grand battle ensued but injured and bleeding the warrior hadn’t the strength to overcome. The assassin returned to deliver the news that the chosen one was no more.

Left for dead the chosen stared at the stars and wondered if the people would ever have office supplies again. His hope faded with every drop of blood that flowed from his broken body until a kindly refugee group code named Midnight Supplies which had heard the fight wandered upon him and carried him back to their camp. They bandaged his wounds and shared what supplies they had with him. As he drifted in and out of consciousness he vowed to make his vision of a free people with fully stocked office supplies a reality. He wouldn’t let the Summit Fortress destroy the very hope that they had helped to instill in him. At all costs he would bring peace to the lands again.

Midnight Supplies heard of his mission and found it to be noble and worthy. The chosen one pledged his loyalty to them and in return they did the same. On that day the Office Ninja was born and thus begins his story…

Reasons Businesses Fail and What to Do about Them

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67% of small businesses fail within the first 10 years according to the Small Business Administration. That is a frightening statistic if you are considering opening or have just opened a small business. Buy why do more than 2 out of every 3 businesses find themselves failing? There are a number of reasons businesses fail, from internal fraud to bad products to poor management, but in this article we’re going to review some of the most common reasons businesses fail and what you can do to help ensure it doesn’t happen to yours.

No Passion

Sometimes the reason a business fails is simply that the owners have no passion for what they do. Industries evolve, especially in todays world where innovation is at every turn. Passion motivates learning, creativity, and forethought, all things which are key to competing in the free market. Its much easier for a proactive operation to thrive than for a reactive one to even survive. A strong knowledge and interest in what you do will help you to connect with your customer base and build trust and confidence and make selling your product much easier.

What to do

Find something your passionate about, identify what your product or service would be, find your target market and run the numbers to see if you could create a viable business. Don’t jump into something you don’t understand without researching everything you can.

No Plan

Have you ever just randomly walked onto a car lot, chatted up the first salesman you saw and went home in a new car while a tow truck carried the one you drove up in back to your house? No? That’s because most people do some planning before committing large portions of their finances to something. Yet for some reason many people jump into business with little more than an idea.

What to do

Look before you leap. Identify what your selling, your target market, why they would buy from you, your cost of operations, break even point and structure and flow of your business at least! Preferably you should create a formal business plan and continue to revise it until you know the ins and outs of your business on day one as if it’s been in business 40 years. That being said, you’ll still probably run into something you hadn’t thought of in your first few months, but you will be much more prepared to take it on.

Too Little Capital

A tragic error in startups is beginning with insufficient operating funds. The rule of thumb is to have cash on hand equal to at least 6 months of total operating expenses before starting your business. That is often a lot of money and business owners may get impatient or see no way to raise those funds and start without a solid financial foundation or sufficient prospects for generating enough funds to maintain operations. As a result, they are forced to close before they have had a real chance to succeed.

What to do

Understand that most businesses don’t see a profit for the first 3 years, and many business owners don’t receive a paycheck from their business for the first 5. Prepare accordingly. Secure the funding you would need if your business doesn’t generate a single dollar in revenue for the first six months, but plan smart, work hard and hope that you never have to touch them.

Too large of Upfront Investment

Up-front expenses are not uncommon in starting a business, in fact it’s rare to start a business without putting some form of investment into it before the grand opening. However, over-investing early on can actually create a disadvantage that’s difficult to overcome.

What to do

Evaluate the assets & expenditures that are necessary for your initial expected business activity. Give yourself a little wiggle room and plan to scale your business in time. Sam Walton didn’t form the Walmart Supercenters with in store dining, taxes, haircuts, nails, ect., on day one. You may have a grand vision, but overcommitting your finances and neglecting to build your audience and brand first can kill a good business quickly.

Location and visibility

You may have a fantastic product, an incredible team, and a unique customer experience, but if no one can find you, you don’t have a business. Visibility is paramount, whether you have an online or brick and mortar store.

What to do

Before you set up shop, define your target customers and research where they are and put your business there. You can find a lot of the data you need from the US Census records. If you’re online only, then you may consider running advertisements using A/B testing and target your specific customer base. SEO and keyword site optimization are very important as well. Essentially, no matter what you do a big part of your job is getting your business in front of your target market.

Poor Accounting

Many small business owners find themselves using their business to cover personal expenses, which is both a big risk, and an accounting nightmare. Others ignore the accounting altogether, which is a very dangerous game that, more often than not ends in disaster. Its very difficult, bordering on impossible to know what you’re doing well and what needs work from a financial perspective without solid accounting or bookkeeping.

What to do

Find a system that works for you, whether that’s excel, QuickBooks, or hiring out a bookkeeper/accountant. There is a reason most businesses hire accounts with at least a four-year degree. Its important work, it’s necessary, and it absolutely MUST be done right.

Additionally, having entirely separate financial accounts for your business and personal affairs is a must. It will help you keep your books, keep your taxes clean, understand your finances, make applying for credit simpler and overall, just make life easier in the long run.

Lack of Business Experience

Many small business owners are people who have found something that they are extremely good at and decided to go out on their own to make it a business. That’s half the battle but business is its own trade and skill. While I believe that anyone can learn business, most people are too busy doing what generates the revenue to take the time to learn how to build a thriving operation. Unfortunately, taxes, payroll coordination, evolving markets, paradigm shifts, increased competition, monitoring & improving efficiencies, marketing, and a slew of other functions take a backseat and the business either never realizes its full potential, or completely fails.

What to do

Effective business management means having the experience and understanding to make the calculated decisions and foresee future challenges and make necessary adjustments. You don’t have to be an expert in all things, but a good business owner does need to put the right people in the right places in order to succeed. This can come in the form of a partner, direct hire, outsourced business manager, accountant, or business consultant.

Inefficient Inventory Management

For any business, good inventory management is critical. Tying up working capital in inventory is risky, so understanding and maintaining a good system of inventory can make or break a business. A good statistical, experience-based projection of supply needs will benefit your business immensely more than simply stockpiling and hoping it all sells, especially with items like food products with a specific shelf life.

What to do

Constantly analyze your sales and inventory for trends to really zero in on where your inventory levels should be and make adjustments when necessary. Count inventory regularly to ensure your system is accurate.

Outpaced by competitors

The beauty of capitalism is the ability of anyone to join the free market and start doing business. The downside to capitalism is just the same. Competition is good for the consumers, but for every new competitor that joins the market the market share is divided that much more.

What to do

Find your competitive advantage. Ask yourself “why would anyone choose to do business with me over my competitors” and “what do we/can we do better than our competitors”. Additionally, you should be asking yourself what you are doing poorly. Look for ways to leverage your advantage & find out what the cause is behind those areas where you are not performing to the standards you desire.

Don’t get complacent. Complacency is like doing well in a race and deciding to walk instead of run since you’re already ahead.

Poor Cash Flow

This may seem obvious, but cash flow is crucial to business success. You can make $1 million in sales, but it does you no good if you can’t collect and its stuck in receivables for all time while you have bills of your own to pay.

What to do

Establish clear credit terms with your customers. Is it COD, Net 15, Net 30? Whatever your terms are make sure to check out your customers beforehand to make sure that they can and will pay you. Bear in mind that some competitors may use lenient payment terms or options as a means to entice customers, so you may be fighting market constraints when you set terms.

No Market or Limited Market

Like I mentioned earlier. You may have the best thing out there, but if you have no customers, you have no business. Your target market may be a moving target or maybe you opened shop without making sure there was a market to begin with. This is difficult to overcome, and businesses fail for this reason.

What to do

Research your target market and identify what may bring them to your business or relocate to where they are. Research similar operations and their tactics for gaining a market share. Find what there is a market for and if possible, adjust your operations to fill that need. Ultimately, this is one that not many businesses find their way out of.

Businesses fail every day, but more often than not their downfall could have been avoided. Its important to treat your business as a living creature. When its not doing well there will be symptoms that will allow you to diagnose the problem and hopefully find a viable means to get back on track. Setbacks are difficult, but learn from them, adapt and keep moving forward.

Unexpected Ways to Lower Expenses and Retire Early

When you think about creating a life of passive income and the freedom to do whatever you want with your time, controlling expenses is probably not your favorite topic. Moreover, it probably seems like a no brainer — don’t eat out every night, don’t buy a $50,000 car on a $40,000 income ect. Then there are those who tell you to go all out on saving money. Lift the salt from McDonalds when nobody’s looking, wash your used napkins with collected rainwater & reuse them, practice fasting so you don’t eat so much. The point is, there are plenty of schools of thought on the matter, but however you look at it controlling expenses is a must. You don’t have to live like you’re homeless and maybe you’ve already cut everywhere you can think of, but you’d still like to free up some more cash. I’ve compiled a few ideas you may not have thought of to save you money now and down the road without interfering with your life

Truebill App — This is actually a surprisingly helpful little tool. You just download it, link your accounts (credit, debit, investment, you name it) and it will watch your spending and help you to identify things you can cut. That’s not why I like it. The reason this is such a powerful tool is that you can have it negotiate your bills down for you and actually have the same services for less money. It’s not exactly a free service, but it is paid by money you wouldn’t have otherwise had. That’s confusing but I’ll explain. Lets say Truebill negotiates your internet plan down from $80 per month to $60 per month without losing any speed or features. Well you pay Truebill 40% of that savings and you keep 60%. There’s no charge if they can’t lower your bill.

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Solar — So this one is not going to be a win for everyone, but its still worth looking into. Even without a battery solar panels on your home can cut your energy costs up to 90%. Initial installation can be pricey and is usually around $30k, but if your electric bill is about $150 per month or higher your savings will cover the payment and then some. Plus this protects you going forward because energy cost on average rise 5% year over year. Right now solar panels will qualify you for a 26% federal tax credit (that will be declining slowly over the next few years). State level tax credits vary, but most states do offer a credit of some amount. It also extends the life of your roof due to the protection it gives from direct sunlight and adds equity to your home. Possibly the best benefit to solar panels is that you can actually use them as a slight source of income through what is called Net Metering, which is selling excess power generated back to the utility company. There are some things to consider before installing such as the age of the roof, its ability to support the weight of the panels, HOA stipulations and amount of direct sunlight your home receives. I did go with solar and I’m very happy so far, you can take a hard look at it here, full disclosure I do have a referral code (2367) that should save you some money and earn me a little as well. Please look around and see whats best for you before committing to anything.

Electric vehicle- Much like solar, purchasing an electric vehicle will qualify you for a tax credit. Depending on your income and location those credits can be very significant. In addition to that an electric vehicle on average will save $632 per year in fuel cost over a gas powered vehicle. If you added this to a solar home your savings could be increased an additional $485 per year. Additionally, the average savings on maintenance for an electric vehicle is about $800 per year.

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Cash back- this is by far the least savings, but still worth an honorable mention. There are plenty of apps and cards out there for this, but my favorite is Fluz because its stackable with other rewards and allows you to earn money through sharing your link (what I’m doing here, but only because I really do believe its will benefit everyone who uses it). Where this becomes a decent benefit on cash back is in recurring charges, not one offs (though that cash back is nice too). One example is Netflix, if you’re paying the $15.99 per month and you were to download Fluz, link your card and pay using the app then you would get $0.16 cents back every month. I know, that’s not a lot but its $1.91 per year you didn’t have so honestly, why not?

These ideas are probably not for everyone, I get it, but if you’re serious about saving money and retiring early or just having some more free cash to do what you enjoy, they are definitely worth looking into. The most important thing to note is that there are a lot of creative ways out there to boost your earnings or lower your expenses so remember to always be vigilant for new opportunities.Breaking Free for Financial Freedom

Leadership and Management

Leadership and management are two terms that are often mistakenly considered synonymous. Ideally, they should be, but too often managers are pushing employees rather than leading and that seems to be a contributing factor to the great resignation taking place right now. Employees are tired of being over worked and undervalued while their input is ignored and contributions unnoticed. Its time to reevaluate the way we view management. A manager should be a leader, but what does it mean to be a leader?

What is Leadership?

The precise definition of leadership has evolved and is ever changing, but one core element has always remained and that is followers. Followers are the cornerstone of leadership because without employees or followers there is nothing to lead and given the importance of followers its apparent servanthood cannot be excluded from the requirements of leading. In fact, servanthood is such a great aspect of true leadership, that being a leader does not require a formal title, because it is focused on developing and working toward common goals and edifying the others in the process. I know that was a bit of “word soup” but let me try to clarify.

Whether or not you subscribe to any religion or faith system you can see how powerful this concept is for a leader by reviewing the life of Jesus. Whether or not you take the bible as fact, history tells us that, with no formal title he raised up an ever growing following that disrupted the course of history and continues to this day, by placing his focus on growing, teaching and caring for those he led. This can be seen in other prominent figures that had lasting world impacts such as Martin Luther King, or Mahatma Gandhi. Leadership can be summarized as the ability to command respect regardless of your position.

Management

Management is essentially an authority role. Managers can make decisions, give direction and set goals and, while it does overlap leadership in a lot of ways, the most important functions of management are much more bureaucratic than leadership oriented, such as planning, organizing, staffing and delegating. All these are necessary and keep the business going and moving forward but being a manager without being a leader is like running a car with too little oil. Sure, it works for now, but damage is being done and eventually things are going to break.

Exclusion or Inclusion

Leadership without management brings to mind a scene from the 1994 movie Forrest Gump, in which the character Forrest begins running for “no particular reason at all” and finds himself the leader of a substantial following who, when he finally stops, wait in anxious anticipation of the inspiration and direction they are sure to receive from him, only to be met with “I’m kinda tired, I think I’ll go home now”. Despite their contrast, leadership and management serve similar purposes as two crucial parts to a whole functioning system. A business or other organization may survive but it cannot reach its fullest potential with one and not the other.

The necessity of both competent management and leadership lies in the nature of both. Leadership has a strong connection with ethics, as it is concerned with guiding and edifying followers in pursuit of a mission, while management is not governed by ethics, but rather by goals and outcomes. An example of this can be seen if you look at the Enron scandal. This was a business which was managed well, but lacked ethical leadership. It can be argued that the lack of proper ethics caused the fall of the company, cost around 14,000 people their jobs and affected countless others. Of course, the business did fail, it can be argued that its impact was only so far reaching due to very skilled management. Leadership alone lacks structure to build a thriving organization. In contrast, without the order and stability of management a leader can achieve very little.

What’s the Point?

At the end of it all, every business has managers, but not all businesses have managers who are effective leaders. Learning how to coach, encourage, and pour into the knowledge, skills, and abilities of your team is something will ultimately give your business a competitive advantage. When a team believes in the leadership of their organization, they are willing to go miles beyond what is required of them in order to be a part of something they can be proud of. In a time where “The Great Resignation” is upon us, businesses need leaders more than ever, and employees need to be engaged and built up rather than pushed around.