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  • Anchors or how to progress in turbulent days

    3–4 minutes

    1.0 Introduction

    As much as I wish to achieve grand dreams and change the world, I lead a mediocre life, waking up, working for someone, and shutting down. Note the part “working for someone,” which means working for someone to achieve their grand dreams and changing the world in their way.

    Now, working for someone is quite practical when you are expanding your skill set, exploring your field of interest, and harnessing your potential to create something unique. While doing this, developing a small list of core, rhythmic actions, called ANCHORS, which, when completed, mark your day as successful, will help you to PROGRESS DAILY toward “your” important goals.

    Author Austin Kleon says, “I always keep a pocket notebook on me, and then I diary in the morning, and then create a blog post, and those blog posts will become talks, which then become books. As long as I write in my diary, publish a blog post, take a walk, and read a book, that’s been a good day”.

    Any goal worth achieving demands sustained and dedicated efforts, but also with a healthy and sound mind. ANCHORS give you a daily sense of accomplishment. Because they are intentional, they guarantee to move closer towards the goals in a sustainable and compounding fashion. A happy, content, and successful life is simply a collection of happy, content, and successful days.

    2.0 Why anchors alongside habits or routines?

    Because unlike routines or habits, Anchors are not time or location-sensitive in your day. We all know how interdependent our lives are with people whom we work with, love, or care about.

    Almost always, we don’t have the luxury to do what we want to, when we want to, and where we want to. We get stuck in traffic during our time to hit the evening gym; we stay late in the office to complete work during our time to unwind and sleep; we step up to complete all chores because your partner fell sick.

    Life around us is very uncertain.

    I imagine my life like a turbulent sea with high and low tides. My ANCHORS are what provide me stability and the confidence that everything’s going to fall in place. They help my mind to be in a calm place when the external winds or currents want to wander it off.

    Even on my bad days [which are many], when I miss on workout, a healthy meal, or ticking off the tasks from my checklist, going through my anchors helps me have a peaceful sleep.

    3.0 Putting anchors to your day

    1. List all your “LIFE GOALS” on paper. Include atleast 5 goals.
    2. Roughly prioritize them from 1 to 5 on the basis of how a) badly you want it to happen, b) how realistic it is for you to achieve them given the resources, and c) how satisfied you will be while living a normal day when that life goal is achieved. Be very vivid in your imagination.
    3. Strike out the bottom 2 as they are most likely to conflict with your top 3 goals. Keep if they do not conflict with your top 3 goals.
    4. Now imagine that you are living that normal day where your goal has been realized. Vividly visualize what you would be doing that day, as a normal day. List 2-3 actions from that day to the right of the “LIFE GOALS”.
    5. Pick the tiniest action from each goal. You get your ANCHORS.

    It will take some visualization. But remember, it is for your “LIFE GOALS”. It is for those goals you live and breathe. Visualizing a normal day where your goals have been realized is crucial to finding your anchors. Dreams don’t fulfil. You undergo a process. The process of making small, incremental progress daily. Until one day you normally complete your day and find you are living the dream. Dreams eventually become your reality.

    So it is really about making your “reality” day as close as possible to your “dream” day.

  • Business Profit

    Reference Book

    • Profit First, Mike Michalowicz
    • Let’s Talk Money, Monika Halan

    Youtube Videos

    1.0 What is Business

    A human definition – Business is a Miracle. An individual creates a business out of thin air with nothing but a great idea, unique talent, and whatever few resources one has to start with. 

    1. A business takes a customer problem that is hard to solve and provides a unique solution. 
    2. The customer is willing to pay a perceived value (figured out experimentally).
    3. Then, you find a large number of customers facing the same problem, and your business rolls.

    A robot’s definition – Business is an economic machine. This works with cash as input and cash as output. Positive cash comes as output only if your machine’s product or service matches anticipated customer satisfaction.

    Before further reading, let’s decide from which angle we want to proceed with our businesses.

    2.0 What is Profit?

    Profit is the money a business makes (different from the money a business keeps). 

    Business profit is used for the following reasons:

    1. A metric to assess business health – Accounting or Robotic Profit
    2. Financially reward the owners – Human Profit
    3. Investment for future growth – Human Profit
    4. Save cash for future rainy days – Human Profit

    However, profit generally differs from the money you make as a business owner. The owner might often get surprised by seeing the ‘accounting’ profit on paper but still with no cash at the owner’s disposal.

    2.1 What is Accounting Profit?

    This is very straightforward.

    Profit equals Total Revenue – Total Expenses.

    Let’s break it down even further:

    1. Total Revenue (Cash in) – This comes from doing your business,
      • By selling manufactured products
      • Re-selling purchased products.
    2. Total Expenses – This is direct (doing the business) and indirect (running the business)
      • Direct
        • Cost of Goods sold (COGS) – This increases in direct proportion to the sales. 
        • Materials, Packaging, Labour (without which making or selling the product is not possible)
      • Indirect or Operating Expenses (OpEX)
        • Staff cost
        • Rent
        • Administrative expenses
        • Selling and Promotional expenses
        • Professional fees
        • Utility expenses
          • Electricity
          • Telephone
          • Internet
          • Water
    3. Now, some profit categories
      • Gross Profit (GP) = [Total Revenue – COGS]
      • Operational Profit (OP) = [GP – OpEX]
      • Net Profit (NP) = [OP – Taxes – Depreciation]

    2.2 What is Human Profit?

    This is the kind of profit an owner is interested in. The one which they can use to make important decisions & buys you freedom.The main difference between Accouting Profit and Human Profit is that former is an event while the latter is a habit.

    Maximizing Accounting profit means ‘More Sales’ and a hope that it will trickle down to ‘More Profit’. Business owners can tell that this is seldom true. Cyclically, the owner sells more > gets more short term cash > spends that short term cash > panics > sells more and the cycle goes on and on. This is known as the Survival Trap. Majority of small or big businesses are in this trap. 

    Ironically, the owner started their business for financial freedom. But the accounting profit method keeps them in a financial blackhole. Out of which, only the lucky ones survive. This fallacy is explained with a simple logic.

    • The COGS increases proportionately with sales. As the owner tries to frantically increase the revenue, the direct costs to sell also increase.
    • With more revenue at hand, the indirect cost of sustaining higher sales i.e. more staff, equipment and software increases
    • Sales are cyclical. Every business going with above approach is one bad season away from frantically adding more variety and more product offerings (in the name of growth, obviously).

    You take on toxic clients

    You take on unfit projects

    Run last minute promotions

    Change terms last minute

    Make haphazard collection calls, breaking client’s trust

    Do the work yourselves

    This does 2 damages

    1. It gives you momentary ‘high cash’
    2. It takes you further away from your vision of starting the business altogether.

        No matter how much income we make, we will always find a justified way to spend it. An accounting profit will robotically indicate you to a good season. But this perpetually comes at a cost of burnt out, frustrated robotic owners who have come far away from the Miracle of the business they envisioned.

        Human entrepreneurs making human profit are like heart surgeons. 

        1. They excel uniquely at repeatedly doing heart surgeries. 
        2. They do one thing really really well. 
        3. They attract the best customers in this process. 
        4. They learn to deliver it efficiently and perfecty
        5. hey get world renowned in that thing. 
        6. Subsequently, they dictate their premium.
        7. They take home the profit, Cold Hard Cash for freedom, celebration and food.

        3.0 How does Human Profit happen?

        Believe in the old saying: Revenue is vanity > Profit is Sanity > Cash is king. For this to happen, start with a new accounting formula:

        Sales – Profit = Expenses

        Yes, this is Profit First. Simply, take out the profit first. If one is amused by the simplicity, then there is more to believe in it because simple things have better chances of working. 

        Setting up the ‘Profit First’ for your business

        3.1 Use smaller plates

        When money comes into your main income account, periodically disperse it into 4 sub accounts in pre-determined percentages. Your income account should serve as a serving tray for all the other accounts.

        • INCOME
        • PROFIT
          • Plowing the profit back into the business is just another way of saying that I am not able to run my current operations with allocated OPEX budget. It is just another expense and not heroics.
        • ONWER’S COMP – This is the owner’s compensation. This is the freedom. This is what you work for.
        • TAX – Setup TAX HOLD to make it difficult to ‘steal’ from government
        • OPEX

        3.2 Serve Seuqentially

        Always allocate the money based upon the percentages to the accounts first. Never ever pay bills first. Pay the bills only from the money transferred to OPEX account. Not enough money in the OPEX account will tell you that the business is not able to afford such expenses.

        3.3 Remove Temptations

        Make it really hard to take out money from the PROFIT and TAXES. Use an accountability mechanism to check those transactions.

        3.4 Enforce a Rhythm

        Do your allocations and payables twice a month.