The other day I was talking to someone about a business opportunity and I said to the person that she was only selling her time. She looked at me puzzled. I explained that if you are selling your personal services to accompany whether it be to do a particular job, consulting, advising or training, you are only really selling the time that you have in life.
Look at it this way, people work in jobs for many years and hope to retire at 60 and that their investment of the time will bring them financial freedom, security and a comfortable lifestyle. Yet this is not always possible because the job market is uncertain and by the time that they retire inflation will steadily erode their retirement income.
One way to escape the trap of only being dependent on time is to come up with a new that can be sold independently from your time. What do I mean by this? I mean that if you have your own products, then your products can be sold separate from your time and at any time, in some circumstances depending on the nature of the product, throughout the night. This is a vastly different situation to the many thousands of people who earn an income based on their time, experience and expertise – which is essentially providing personalised services to an employer.
Yet if you are not able to come up with your own products, then you could look at other sources of income such as property. If you buy a property, then the rental income that you receive from the property is independent of your time. You don’t have to be at the property to earn income. In fact, you can buy a property whereever you want to and receive an income from a respectable tenant even if you live many thousands of kilometres away or even in another country.
For some would-be entrepreneurs or small business owners it may make sense to link their business opportunity with property income. This combination would involve starting a small business but at the same time making sure that they are the owner of the property where their business takes place. I know this isn’t easy. I know it requires careful thought and planning. But if you look at it this way: you can run your business at the property which you own and use your business income to pay your property rental. What this would mean is that you have a means to finance a fixed asset that will appreciate over time. This financing can be done through private financing (your own funds) as well as through bond finance from a bank.
When you combine a property with your business and use the proceeds of your business to cover your bond you are building up an asset that can later turn out to be an income generator. When your property is fully paid, you can then use the property to generate income. You may want to continue running your business from your property. But you may grow our of your property or even retire and want to make your property as a source of income.
Yes, I know some of you might be saying that it’s all very well thinking about this but what happens in the case where you can’t own your property from which you operate your business such as in a main street location for a retail business or in a shopping centre? In this case, you are probably going to have to rent or lease your retail space from the property owner and there is really very little that you can do. But for your own long-term financial planning, especially towards retirement, it may make sense if you do have surplus cash, given that your business is owned by you, and would be able to invest in, for example, a residential property where you can obtain rental income.
The point is to take a careful look at your time and expertise and consider how valuable it will remain in the future given changes in the marketplace, your age, and the need to update your skills. If you can’t come up with a new product that you own and can do what you want with, a second option may be to look for an investment property where with trustworthy tenants you can earn an additional source of income that can either help you retire sooner or supplement your retirement income.