Hit the Refresh Button
Look at “financial freedom” in a different way
by Chia-Li Chien | Aug. 09, 2013
How do you define “financial freedom?” Does your mind automatically answer with the time-honored, “never having to work again” or “saving up over time?” To you, does the term mean, “independently wealthy “ or just plain “rich?” Does it mean something in the far off in the future that you may or may not obtain?
It’s now a new day, and just as you hit the refresh button to get your most current email or social newsfeed, you may need to hit the refresh button for how you think of financial freedom.
As a business owner and/or entrepreneur, financial freedom could have these meanings for you in the here and now:
1. I get to choose with whom I work.
2. I get to choose who will pay me.
3. I get to control how much I make.
4. I get to say when or if I will leave my work.
5. I get to control how I spend my time at work.
The new way to think of financial independence is all the above, PLUS, knowing that you have built or are building equity value in your business, that there is a plan to have money in the bank, and that you can elect to keep working and/or choose what’s next as a way to declare your freedom.
Think of your business as an investment.
In my first book, Show Me the Money, How to Run Your Business Like a Prosperous Investor, I talk about my friend Carrie who started a business at age 24 and in three years, had over $4 million in revenue, four international offices and two franchised offices. She decided she wanted to be able to cash out—to have the financial freedom—by the time she was thirty—to start a new business!
The Carrie’s in this world are rare. We both know that. However, if you think of your business as an investment in yourself—working much the same as a certificate of deposit, over time, you’ll earn interest or dividends—separate and apart from your salary. For example, if you put $100,000 in a CD earning 3% interest, at the end of a designated period of time, say, three years, you must decide to renew or cash in.
And just like that CD, your investment in your business must also be renewed (refreshed) at various stages in your business.
• Survival Stage: Usually the first five years in business, in which the primary focus is revenue driven by transactions and volume.
• Growth Stage: Occurs when ample volume is coming through the business and the focus shifts to creating processes needed to support that volume.
• Positioning Stage: A time to reconceptualize your business model (see my article Business Owner Blues), focusing on positioning the business to capture the equity value created.
• Significance Stage: Your investment is paying off, and you have become a significant player. With your business value on the uptick, you can focus on staying in your company while mentoring and guiding employees and family, giving back to your community, planning your next business, travel, family—whatever you choose. At this point you have the financial freedom to make those choices.
So why then, statistically, do so many business owners never make it to the Significance Stage? A recent article "Sell a Business to Cover Retirement? Don’t Count on It" in The New York Times (see below reference) discusses a number of very real, probable reasons why. Often, an owner will believe he or she is ready to cash in on the investment made in the business, only to find out the business did not have the value needed. The owner may have missed some critical windows of opportunity or should have sold before an industry slump.
In my experience, I’ve seen that sometimes the owner simply does not focus on building equity value in business, because the control over the business and lifestyle is the most important aspect and singular objective. Longevity and good health, not business value, have been the focus.
Very often, I’ve observed that the business determines and defines the owner’s entire life—from family dynamics to social standing—and he or she has defined financial freedom as retirement—or a time to fade away and become insignificant. I don’t want that. Do you? Of course not!
How will you define your financial freedom?
I’ve learned over the years, since I arrived in the U.S. at twenty one and began to learn English, that the word “freedom” is loaded with emotion, passion, fierceness and yes, even defensiveness. When preceded by the word “financial,” the emotions are much the same—maybe even more so.
Business owners in business over twenty-five years often don’t want to discuss the concept of financial freedom, and may feel they are being confronted with an ego-bruising ultimatum instead of something that could mean a chance for positive change and new beginnings.
Critical issues that act as roadblocks:
• Ego and pride
• Refusing to discuss
• A mindset that can’t be changed
• Getting far behind in technology
• Lack of capital in the bank despite outward appearances
• Feeling of responsibility toward family and employees
The key, however, to the modern concept of financial freedom is how you define it. How will you obtain freedom according to your own definition of the word and the emotional punch it packs?
Most likely, that definition will include having enough equity value in the business to launch your next dream, goal, ambition or plan.
Ideally, when you started your business, you had already defined financial freedom. Which gets us back to the five points you read at the beginning of this article. Most business owners go into business for all five—meaning financial freedom—whether or not we ever realize it. However, I would encourage you to add a sixth reason to that list—
I get to invest in myself.
And that investment is the one that will pay off as financial freedom in the long term. Don’t let financial freedom translate to some nebulous idea in the far-off future that is unpredictable anyway. By building business equity value—seeing your business as an investment in yourself—you will decide and plan for what that freedom means—and will mean—for you.
As a business owner, you already possess a financial freedom that most of working America only dreams about. It’s up to you to channel that passion and determination and define what financial freedom looks like through each business stage.
Continue to invest in yourself by investing in your business, employees, family and community. Financial freedom is not “out there.” It’s here. Hit the refresh button and get a new definition of what that means to you and how it motivates you, as you build value in your business now, and in the future.
I would love to hear your personal definition of “financial freedom.” Please send me an email, tweet, or post to my Facebook page and share your ideas and vision.
About Chia-Li Chien
Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward and a faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Contact her at firstname.lastname@example.org or (704) 268-9378 .