So your first five years of operations are done. Great!

Now you need to prepare for the next five years. How is it different from the last five years? Basics remain the same however, complexity increases to a different level. In the earlier phase you didn’t have to make too many choices. Now you need to make choices and tradeoffs like business growth vs buying the latest car or gizmo; a higher level of awareness of risk vs we can do everything attitude.

What is it that needs to be focused on? Can it be simple? It is always simple once you come to understand what drives you more or what the root cause is. However, it is not easy as many things reveal themselves over a period of time. The staff you thought would stay for good leaves abruptly or the client whom you have been dealing for 10 years suddenly transfers business to a competitor.

Also read: 6 tips to improve the financial health of your business

However, there are people who do get added to the journey as well. As long as three out of four strings play well on the violin, the music is good. If it is not good, then it needs to be reworked.

Let us start with the phase two foundation.

1. Start giving yourself a salary

Many entrepreneurs we know have not given themselves a market linked salary in the initial years. Once you start thinking in that direction, the goalpost changes. In case of service businesses, it is more so. Let us say that if you are salaried and you are getting 3 lakhs per month, then the output needs to be at least 3-5 times of that.

If you start doing that the opportunity broadens and then one can really create a successful foundation. Most people generally stick to two times as a norm on account of various self-imposed constraints.

2. Practice goal-based investing

Wealth is created basis goals. Market trends can keep changing, however your child’s education needs/your own aspirations will not. A mix of safe as well as growth assets is needed to take care of inflation.

How do I know if I am beating inflation?

Most entrepreneurs are obsessed with taxation to the extent they sometimes compromise growth over that. This results in a focus on tax planning more than growth planning.

Inflation for most products is in the region of 10 - 12%. Is your portfolio including real estate investments, (the house one stays in is not counted) delivering it? That is an important thing to know.

Wealth can grow over a period of time if one is committed to the journey. Can one experience a 100x in 30 years? Chances are yes if you grow at a favorable rate.

What is that golden number? A return in the region of 17-20% per annum.

How does one begin?

A plan is as good as the belief system you hold. A key thing is aligning your behavior to your goals. It is like that piece of mithai you earn when you complete the weekly workout.

Safe assets: 20-30% of the portfolio in a mix of Fixed Deposits, liquid funds and short-term funds

Growth assets: Depending on temperament one could consider assets like mutual funds, select stocks and other equity-based ideas Once the goal is achieved one can then de-risk the portfolio into safer asset classes.

If I de-risk how would I get the return?

Sometimes return of capital is as important as return on capital as in current circumstances. Alternate assets can also be a suitable avenue in these circumstances.

Growing in a volatile environment is challenging, however the right blend of assets and advice is relevant to grow.

Also read: 6 limiting financial beliefs that prevent SMEs from achieving business success

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