How to Generate Cash Flow to Fund Investments
To fund investments and generate passive income you need cash-flow. Most investors when starting out do not understand how to generate cash-flow.
Cash Flow Problems
As an employee, there is very little money you can spare for investing after meeting your basic needs. There is a limit to how much belt tightening you can do fund your investments. After all, there is a need to live in the present. You can start a part-time business that will help generate not only extra cash flow, but will also save you tax dollars that can be used for investing.
Becoming self-employed improves cash flow but is still not the ideal situation. Things start to change once you become a business owner. The problem is that a growing business has huge cash needs to grow. Most business owners have a tendency to redeploy their capital in growing their business rather than investing. This is not a very healthy financial situation because if something goes wrong with the business they will lose everything. The only stable situation is when you stand on two strong financial legs.
How to Generate Cash Flow?
To grow rich fast, you have to sell. This is the fundamental principle. You have to buy whole sale and sell retail. You have to master selling and marketing skill. Most people hate selling but without a sale there is no money. Faster you overcome hesitation regarding selling, the sooner you will embark on journey to riches.
We examine few other creative ways to generate cash. These methods will vary depending whether you are an employee, self-employed or in business. These methods of cash generation should not be confused with investing which is creating long-term assets that provide passive income.
Flipping Real Estate
This involves buying a property below value. Making renovations or adding value by sub-division, unit titling, adding additional space etc. The last step is to sell the property for a profit. It best works with delayed settlements and early excess to the property before settling. Your cash flow will increase on how fast you can renovate and sell the property.
Flipping real estate can be risky when the property market is in a downward spiral with prices going down with few takers in the market for your end product.
Buy Build and Sell Businesses
This generates far higher profits than flipping real estate but requires a higher level of skill and experience. The trick is to buy under-valued businesses at rock bottom price. Increase revenue and profitability of the company. There will be a considerable capital gain if you sell a business with a healthy profit.
Buying and selling businesses require much lesser capital outlay than flipping real estate. There are loss-making businesses you can buy with no money down. The owners of such companies are at times stuck with long-term leases and just want themselves out. It takes much lesser effort and time to turn around a loss-making business caused due to poor management.
All you need is an excellent jockey to run your business, change in personnel and sales/ marketing effort. Quick sale of activity can be made by providing vendor finance, finding an employee with a payout, management buyouts or selling the business one part at a time.
Franchising a Business
Once you have a successful business with systems in place, it may be possible to franchise the company for additional cash flow with little or no risk. Initially, you may have to spend some money and time to set up franchise system for your business. Once this is done successfully, it costs virtually nothing to add new franchises. Your cash flow and profits increase with every addition of a new franchise.
Take Company Public
This is the secret to real wealth and riches. This is what experienced entrepreneurs do: they take their company public. Bill Gates would not have been the wealthiest man in the world had he not taken his company public. Rich sell paper assets to become more affluent.
This is trading at the ultimate level. It is like creating wealth out of nothing. Now you have other people’s money to grow and buy businesses and assets. You have to sell a dream to go public and once you have the money you have to make that idea become a reality. To succeed you will need excellent trust in yourself and your team.
Converting Expenses into Cash Flow
Most people buy stuff like TVs, cars, expensive clothes, holiday homes, and boats etc. from income after tax. This keeps them poor all their lives. Rich people, on the other hand, buy assets that give them passive cash flow and at the same time reduce their taxes. They get extra cash flow from a refund of tax dollars and also income from the asset. They keep repeating this process every year and growing more affluent, which is an upward spiral to riches.
The poor people on the other hand keep buying stuff that not only costs them money but also regular maintenance cost that keeps mounting every year. They keep sliding down the wealth ladder with negative cash flow.
Information Technology the Next Big Frontier
Today a common man has more computing power in the palm of his hand (in the form of mobile devices) than a supercomputer a few decades back. He also has access to world marketplace to sell goods, information and services through the internet.
Most people waste their time playing online games, visiting social platform, forwarding useless jokes or watching movies/ TV shows. There is nothing wrong with these if done in right proportion. Unfortunately, this becomes an all time-consuming activity with zero productive output.
The internet provides a huge opportunity to change your financial outcome at minimum start-up cost. It is a source of huge cash flow. Yes, there are internet scams and Ponzi schemes but with little knowledge, you can keep clear of them—you must take a look at the opportunities it has to offer.
Some of the biggest companies in the world like Amazon, Apple and Microsoft, Alibaba were launched by young people from their garages with shoestring budgets. Some of them were school dropouts. These are big stories that inspire us but also intimidate us. Fortunately, there are thousands of small new start-ups and success stories every year in virtually every part of the globe. It is over a trillion dollar pie getting bigger each day. It depends on you how much of the pie you want to grab.
Solve a Problem
You get paid for problems that you solve. Bigger the problem that you solve, more money you will get paid. This is true irrespective of whether you are working as an employee, are self-employed or running a business. Technology helps solve problems at a much faster and cheaper rate than anything. It can be applied to solve any daily problem that you encounter.
While starting out, do not try and solve a big problem or you will get disappointed. Facebook started as a social website for college students. It gradually got scaled up. Look at a niche problem in your locality and try and solve it with the help of technology.
You don’t have to be a computer expert to do this. You don’t even have to employ anyone. On the internet, there are hundreds of websites like elance.com, fiverr.com where experts provide technical support for any work that you may have for fraction of cost of hiring someone part or full time. You have to think like a business man and solve people’s problems.
Affiliate Marketing
Another great thing about the internet is that you don’t even need to have your own product to sell. Virtually every company in the world is paying affiliates online to sell their products. If you have used a product and are passionate about it then sign up as an affiliate for the product and start marketing it on the internet.
Drop Shipping
Have you heard of drop shipping? You can tie up with a physical product manufacturer for marketing their product. Most manufactures don’t have the time for marketing their product and will be most happy to pay you if you sell their product. You can make sales on the internet through Facebook advertising or Google AdWords. Once an order is received, you can collect the money and ask the manufacturer to ship it directly to the buyer.
You don’t need to invest in the product, own a warehouse to store them or provide after sales service. The only thing you need to learn is how to market on the internet. It costs very little but some effort is required to acquire the marketing knowledge. Anyone can do this without any expensive start-up costs.
Start Internet Business Part-time
You can start an internet business part-time even if you are an employee. Over 60% of businesses worldwide do not have a website. Large numbers of those who have websites are not mobile compatible. The majority in business does not even understand how an application can help and grow their business.
Tony, a friend of mine, understood this problem and started his own business even though he was not an expert in building either websites or applications. His target was small businesses. After taking orders, he would get the websites and applications built by various experts on the internet. He would then take up annual maintenance, website hosting, social media and promotion contracts. This gave him passive income. His business grew and soon he was hiring full time virtual assistants and technical support staff from Philippines. This was at fraction of cost of labor in his country.
Endless Possibilities
The internet has endless possibilities. You can build websites for handyman services, plumbers, electricians, childcare services, real estate renting/buying and selling for homeowners who wish to save on commissions, selling books, old clothes, cars … the list is endless and limited only by your imagination.
Remember, you have to start with tackling a small problem in narrow niche and stay focused until you start making money. The problem with the human mind is that it always wants to start big from the beginning. There is nothing wrong in thinking big but always start small. Take a few small steps to success. This is the only and sure route to success. As you gain experience and start making money, slowly but surely expand your business.
Once you learn the skill of marketing through the internet, your cash flow problems will be over.
