Is your small business focused on recurring revenue? I was recently reminded the importance of repeat income when you start a small business. I’m at my in-laws in Mexico for the next three weeks. Aside from having your young family take over someone else’s home, it’s a lot of fun. I also have the opportunity to talk to my father-in-law, a man who I admire for his approach to business.
Start a Small Business: Stability
I can’t think of a more stable guy. He worked at the same Ford plant for around 30 years and retired. To me, that sounds like a boring career. He lived in the same house that he built 26 years ago, didn’t take a lot of vacations, and still doesn’t like going out to eat much. He’d rather be applying himself to something useful. Here’s the thing – he’s happy. Happy to be in the same small city running around doing small errands and spending time with his wife. These weeks he’s happy to be chasing around his 2 1/2-year-old grandson.
Here’s the other thing – he’s retired very well. Around the same time that he retired, he built a very nice house in one of the best neighborhoods in town. All paid with cash. He just bought a new car; paid with cash. He retired into a retirement pension that is around a 1/3 of what his full-time job paid.The thing of it is, the own about 9 rental properties. They’re buying another one on Monday (cash again).
Start a Small Business: Manage Cash Flow
How did he achieve this comfort? We got to talking about this the other day. His formula was very simple. He said to me, “Caleb, I’ve become convinced that you need to save at least 30% of your income. Invest in properties that produce a better return than you can get at the bank and do most of your own repairs.”
Start a Small Business: Repeat Income
Each of these rental properties is effectively its own small business with recurring revenue. A bunch of them together removes a lot of the volatility of a business while providing a dependable stream of income.
My father-in-law’s route to success is so simple that anyone can repeat it. Save, limit your indulgences, invest wisely in your business. I also think that stability has a lot to do with it.
Take a look in the mirror and think how you might be able to meet the same end with your small business so that you can retire as easily.