The hierarchy of your values dictates your business and financial destiny. It dictates how you perceive, decide and act and determines what your daily habits and character become.
When “developing a serving and highly profitable business” is at—or near—the top of your hierarchy of values, the more inner drive you will have to create a sustainable and high-achieving business. The higher these objectives and the strategic action steps required to meet them are on your list of values, the more probable will be your desired outcome.
To elevate business and financial development even further up on your present hierarchy of values, write down 100 benefits for doing each of the following six actions:
1. Building a business that serves ever greater numbers of people.
The wealthiest individuals on Earth have directly or indirectly built great businesses that served vast and ever-growing numbers of people. If that becomes your mission, you will have a higher probability of its achievement.
Some of the wealthiest businessmen include John D. Rockefeller, Standard Oil; Bernard Anault, LVMH (Louis Vuitton, Moet, Hennessy, Tiffany’s, Bulgari, Fendi, Christion Dior); Elon Musk, Space X, Tesla; Jeff Bezos, Amazon; and Bill Gates, Microsoft. Some of the wealthiest businesswomen include Francoise B. Meyers, L’Oreal; Alice Walton, Walmart; Julia Koch, Koch Industries; Mackenzie Scott, Amazon; and Jacqueline Mars, Mars Incorporated.
2. Directly or indirectly (through delegating) mastering the efficient and effective management of the business so it will maximize profits.
This includes the application of many time-tested management laws, including Parkinson’s Law, the Pareto’s Principle and Ricardo’s Law of Comparative Advantage. The more efficiently and effectively your business is managed, the more profitable it has the potential to become. Working on the business takes more than just being in the business.
3. Saving and reserving an ever-progressive portion of profits.
As an example, Microsoft maintains cash reserves of 100 percent of annual revenues. Apple, Southwest Airlines and Berkshire Hathaway each maintain cash reserves of more than 50 percent of revenues.
Warren Buffett keeps a giant pile or cushion of cash on hand—over 100 billion USD in reserve. Why? He wants to assure he covers normal business costs; he temporarily cannot find a reasonable value investment; he prefers not to pay dividends, and therefore corporate taxes, or have his investors have to pay short-term capital gains taxes; he has not bought back shares he has; he is being precautious and wants to firmly cope with any uncertain environment changes he suspects; or he desires to invest in certain quality value companies in the near future. He loves to run Berkshire with more than ample cash.
Some financial theorists say that leaders who hoard cash in their companies are irresponsible in their deployment of capital. In a stable, predictable and safe world, that theory might hold, but the world is not stable, predictable or safe. It is wise to keep plenty of prudent cash reserves on hand. Leading companies have higher cash-to-assets ratios and higher cash to liabilities ratios than average companies. They keep extremely conservative balance sheets and are risk averse. Great businesses hold three to ten times more cash assets than average for their industries right from the time they start.
4. Investing in ever-greater degrees of leverage and volatility to receive ever-greater yields and returns.
You can probably handle 10 percent total portfolio risk without much reaction. When you live in alignment with your highest values, you tend to have more resilience. You can wisely decide what to do (without overreacting too quickly) and apply the appropriate speed of execution in response to your risks.
The true long-term investor welcomes volatility because a wildly fluctuating market means that irrationally low prices (below the mean) will periodically be attached to solid businesses. A wise investor is totally free to either ignore the market or exploit its folly when the timing is obvious.
5. Amassing a great fortune.
If you don’t have a reason to continually build your wealth, you probably won’t, and will likely instead buy consumables that decline or depreciate in value instead of buying assets that appreciate in value. As you accumulate your fortune, your money begins to work for you as its master instead of having you work for it as its slave.
6. Creating an inspiring financial cause that leaves a lasting legacy.
There is one appealing way to avoid capital gains taxes, assuming you were planning on leaving a legacy. You can donate capital property with unrealized gains to a registered charity. The unrealized gains will be deemed to be nil and the donor would be entitled to the donation tax credit based on the fair market value of the property at the time of transfer to the charity. Focus on how your growing financial wealth will flow through you in the service of others.
Business and financial development gradually transitions from working for others to working for one’s self; from working for a paycheck to working for your own dream company; from paying higher tax ratios as a slave to paying more moderate-to-reduced tax ratios as a master.
The more benefits you identify and list by answering these six questions, the more reasons you will have to build your business and your wealth. When your “why” is big enough, your “hows” will take care of themselves. The greater the cause and number of reasons you have for building your business and financial wealth, the greater your outcome.
author, consultant and founder of the Demartini Institute. Drdemartini.com