Asset vs Liability – Assessing Your Online Business

Asset vs LiabilityTo make sure your business is founded on solid ground, here’s a quick blog post for you: “Asset vs Liability – Assessing Your Online Business”.

Most online entrepreneurs overlook this topic, because they think the overwhelming potential of an online business overrides the importance of financial literacy.

But the truth is, whether you’re in online business, or an offline brick and mortar type of business, same principle applies…

You Have To Be Financially Literate

Luckily, we have teachers like Robert Kiyosaki.

If it weren’t for him, then probably most of us are left in the dark figuring out what it really takes to become wealthy.

Yes, Robert sells books and making money out of his teachings. People especially those hurt by his teachings are mocking him as a scam guru, but for me who have benefited a lot from his teachings, I really admire him.

Kiyosaki Second ChanceFrom his very first book that sold like crazy in the market, “Rich Dad Poor Dad“, to his latest books like “Second Chance: for Your Money, Your Life and Our World“, I read them all from cover to cover.

This is not because I am a fanatic of his, but because I can get guidance from them.

One important lesson that I learned from him is, money runs this world. And if you don’t train yourself to handle money properly, you will have a hard time achieving wealth.

So, we all have to be financially literate.

What is Financial Literacy?

Like computer literacy, it is about educating yourself about the subject of money.

The basic approach for that, is going back to knowing what is an income statement, and what is a balance sheet.

  • Income Statement – this is also called “profit and loss” statement in most companies, but for individuals, it can be easily understood by comparing the income and the expenses you get for a certain period.
  • Balance Sheet – this is the statement of assets, liabilities, of an individual or organization.

Knowing these two elements, and how do they work, is essential if you are to become a true businessman.

Now, here’s where the rest of the world differs from us, followers of Robert Kiyosaki…

To other people, they consider everything you own with value as an asset. To us, followers of Robert Kiyosaki, we only consider a thing an asset if that is putting money “into” our pocket, and not the other way around.

If it puts out money out of our pocket, no matter how much resell value it has, it is considered a liability.

Assess Your Business – Asset vs Liability

So, based on the lecture in the video, it is easy to figure out whether a thing is an asset or a liability to you.

The simple basis for making a verdict is, “cash flow”.

If the income you generate from your business, whether an online business or a brick and mortar offline business, supersedes the expenses, then that business is an asset to you.

Losing Money GraphBut, if that business isn’t producing enough income to pay for the expenses, then it becomes a liability. And continuously losing money in such a business, can surely drag you down.

Having experienced all sorts of things online, I can strongly point out that neglect of this is the primary reason why there are people telling stories they lost a lot of money in a business.

Is your business making you enough money?

Or, is your business losing you a lot of money?

Conclusion

Looking through your cash flow from time to time, can help you figure out if the business is becoming an asset or a liability to you.

Of course, it is sometimes too early to judge a business, as anytime a losing business can turn around and make huge wins. But, do not make a habit of overly too hopeful with a business.

One thing I am sure with all of these: Hardwork can help a lot, when you have a fledgling business.

By working hard, putting more efforts in marketing and promotion, acquiring new customers, you can generate more income. And the more income you generate, the more you are able to cover your expenses and eventually turn a profit.

One last thing I’d like to give: If you are fond of joining business opportunities, choose the ones that doesn’t cost high. Click here for an example of an online business with low start up cost, and low maintenance cost.

Because, unless you are good at turning a profit, costs can eat you alive.

[clickToTweet tweet=”‘Dollars do better if they are accompanied by sense.’ – Earl Riney” quote=”‘Dollars do better if they are accompanied by sense.’ – Earl Riney”]

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