Where to learn to be independent – managing a business

In the spring of 2023, Ofer Malmad asked me to talk with him about how to behave during a period of financial difficulties. The full conversation is at the end of this article. Ofer was the person I consulted with, and I later went through a process while transitioning from an employee to self-employment. I mentioned that many people think that if they studied to be lawyers or dentists, it's enough to run a law firm or a dental practice, and that's not the case. Studying a profession usually teaches you how to be an employee in that profession. To be a lawyer in a law firm or a dentist in a health fund. To be a business owner that earns a respectable living, you need to learn how to manage a business. In response, someone asked me where to learn to To know To run a business? What do you need to learn? This article is an answer to A. Thank you very much, dear A. If you also have questions of any kind, you are welcome to my community – growing economically

As a mortgage consultant, I've met hundreds of employees and self-employed individuals over the years. This time, I will focus on the self-employed. I've seen that in the exact same profession, there are huge profit gaps between different self-employed individuals. I hope this article will help those who need it to increase their profits.

What is learning, anyway?

From a young age, we get the mistaken impression that learning is a finite process. We decide what we want to know, receive a course syllabus, attend X lectures, do Y assignments and Z exams, and in the end, we get a certificate and from that moment on, we are qualified. We have a certificate and in fact, some external entity has declared that we can do something.

Not only are we capable of doing something, but the studies themselves and the diploma that accompanied them are supposed to increase our income.

Both things are true in the world of employees, especially public sector employees, and completely false in the world of the self-employed:

The mere declaration that you are qualified to work as a dentist does not mean you will work as a dentist. For that to happen every day, say, 10 people would have to decide to go into a clinic for dental treatment. Unlike an employee who undergoes an interview once every few years, a self-employed person goes through several interviews. Every day. If you are a public servant lawyer and decide to pursue a master's degree, your salary will increase regardless of the subject of your master's degree. On the other hand, if you are a self-employed lawyer who decides to pursue a master's degree, there is no certainty that your salary will increase even by one shekel.

The formal studies are meant to give us the threshold The lowest which allows practicing a certain profession in the most supervised environment. That is, as mentioned, to be, for example, a salaried architect in an architectural firm. Want more than that? You should learn how to do it.

What certificate does someone receive when they study to manage a business?

The good part – there are no tests, no certificate. There is no such thing as a certificate showing that you know how to run a business, because if you Freelancer No one but your wife is interested in the question of your ability to run a business. In fact, your wife isn't interested in whether you know how to run a business either. She's interested in whether, in the end, you provide financial well-being for the household with her, or if you provide the house with stress and anxiety.

The less good part – learning never ends. If there's no certificate and no "qualification," then there's no syllabus, and in practice, we'll never "finish the material." The learning will continue forever. For over 20 years, I've been learning "how to run a business," and that's after I earned an MBA. A degree that, as mentioned, teaches more about how to be a "business manager" at Amdocs, Bank Hapoalim, or Coca-Cola, but less about effective mortgages Ltd., the business I own. I undertake this learning by reading books, listening to podcasts, attending workshops and seminars in Israel and abroad, and yes, even by reading this article.

The interesting part – the studies will continue forever. Learn in the way that interests you and in a place that is good for you to learn.

The other interesting part is that there's no specific material you need to study. Businesses in similar fields succeed by strengthening different skills. There are some constant principles or things that are at least worth knowing in order not to fall into the group of most businesses that cease operations in the first year, and the not insignificant second group of businesses whose owners are not satisfied with their financial situation.

To make studies more interesting and potentially more useful, one can also consume content abroad. Below are places I've flown to attend workshops and seminars in the past. After Corona, things are even easier. I participated in several Zoom workshops from the US. For example, a five-day Business Mastery workshop Tony Robbins I participated in it during the Corona days.

And yet, what should I learn to get started?

How does the tax system work?

Many start business without understanding how the various authorities to which a portion of business profits must be transferred operate: income tax, VAT And Social Security. This ignorance is harmful or truly dangerous for several reasons:

• A misconception that self-employed individuals pay more taxes than salaried employees.. In practice, a self-employed individual should in principle pay the same income tax as an employee, but because they are legally allowed to deduct expenses, they actually pay less income tax. VAT is a payment where there is a discussion in the link above about who actually pays it, and National Insurance, by definition, is paid less by the self-employed individual. They also receive slightly inferior insurance (without unemployment and sickness), so here too, one can talk about the same payment. Why is it important to know this? Because when a person thinks the system is unfair, they become resentful and their performance suffers. Another reaction is to try to cheat back those perceived as unfair. About this, our basic training sergeant once told us: When you urinate on the IDF, it gets wet. When the IDF urinates on you, you drown. A business that wants to be sustainable operates according to the law.
• Overpayment of taxes – Someone who is not familiar with the system and its ways Legality To pay less tax, they will pay more tax. Many self-employed people save on accounting costs and pay three times that cost in excess taxes.
• Underpayment of taxes Income tax is paid during the current year based on the estimated annual profit. The current payments are called Advances. Paying lower advance payments will result in it appearing after the end of the year, when filing the annual report, that too little tax has been paid and a significant amount needs to be supplemented. From experience, it's quite disappointing to receive an innocent-looking envelope with a single page inside that looks like, say, an electricity bill, but contains a demand for a payment of 120,000 shekels within 14 days. If this sum is not available to that self-employed person, it can crush them.

Cash flow

The classic mistake freelancers make is being happy when they sell a lot without realizing they can go bankrupt even when buying a lot of merchandise for 50 and selling it for 100. Think about a writer printing his books for 20 shekels per book and selling them for 60 shekels per book. Can this writer go bankrupt? Certainly. He can't print a single book every time someone buys one from him. So he prints 2,000 books at a cost of 40,000 shekels and waits for people to buy these books little by little. Suppose he financed the 40,000 shekels with a two-year loan; the monthly payment would be 1700 shekels or the equivalent of 26 books per month. 26 books? Not exactly, because every sale also incurs shipping costs and taxes... In short, the book selling activity could definitely be unprofitable.

Okay, there aren't many writers. In a coffee shop, the problem can be the opposite. The coffee shop owner bought coffee powder worth one shekel per cup and sells that same powder for ten shekels. What could go wrong? So, let's assume he bought coffee powder for 10,000 shekels on payment terms of net + 60. Sales are sky-high, and after just one month, he has 50,000 in his pocket. Wow... he tells himself, this entrepreneur. I don't understand why everyone said it was hard to run a coffee shop in Israel. He immediately goes and changes his car using the wealth that has fallen upon him. Until the payment day arrives, the entrepreneur "earned" 100,000 on the coffee powder he bought but... he already invested all of these 100,000 shekels in the car and upgrading the business kitchen. On the payment day, he doesn't have 10,000 to pay for the previous powder, and in this situation, they don't want to sell him new powder either... So he takes a loan... you already understand where this is going.

Financial management

Again and again, I encounter self-employed individuals who come to me for advice and don't know how to answer the very natural question – how much do you earn? Those who don't know how much they earn don't know how to manage their business and don't know how much they can spend. From here, the path to financial instability is short.

Pension

For years, people have operated with the feeling that retirement is some kind of scam. Or just something that perhaps isn't worth transferring money to today instead of going out for two more meals at a restaurant each month. All sorts of companies that try to entice people to transfer their money to them instead of retirement fuel this feeling. Well, I suggest getting to know the retirement mechanism better. Knowledge is a good answer to concerns. I am, of course, in favor of investments, but in addition to retirement, which is the last line of defense against a life of poverty, and not in its place.

Human relations

Many people who consult about the possibility of starting a business hear about the need for marketing, sales, etc. All of this is true, but I intentionally put marketing and sales at the end. It's true that nothing will work without customers, but even with excellent marketing and sales, the business will not provide what is expected of it, financial prosperity, if the other things don't work properly. I chose to put human relations in general before marketing and sales. It's quite natural to treat a customer with a credit card properly. It's less natural for many to treat suppliers, employees, the security guard in the office building, the security guard at the entrance to the tax authority building, the bank clerk, and other employees in the business properly.,

It's a big mistake not to treat others well, even if you think that the fact that you pay them or that you are supposedly not dependent on them, like the security guard at the entrance to the building, means you shouldn't treat them well.

One day, your supplier might be in a situation where more goods have been ordered from them than they can supply because a ship has been delayed. Who do you think they would prefer to supply: someone pleasant to work with, or someone they are already eager to stop working with but are only forced to continue due to financial pressure? In general, you likely prefer those who smile and speak to you nicely. Guess what? People are a bit like monkeys. They mirror how they are treated. Behave well and they will behave well towards you.

Do you know those people who feel at war all day and are sure that everyone wishes them ill? They might be right, but they should think about why that is the case.

Marketing and Sales

Marketing, sales, negotiation – this is a big topic. I've been saying that for half a century. From my bachelor's degree until today. When I was getting my bachelor's, there weren't any mobile phones yet. The internet existed through the home phone, but naturally, there were no video clips or social networks. Naturally, the field is constantly changing, and different things suit different people. For me, for example, writing suits me much more. For others, making video clips suits them much more. In any case, it's important to understand that marketing, sales, and negotiation are things that can be learned. You aren't born with them. I certainly wasn't born with them. I can certainly still improve a lot. Since I decided to make a living as a freelancer, I think I've spent hundreds of thousands of shekels on training in these fields. Don't be a freelancer if you don't like marketing and selling. Unless you want to learn how to do it. As for liking it, well, you don't like anything you don't know. Sometimes the opposite also works.

Personal conduct

Personal conduct is something that the learning and development of never ends. Even as you develop more, you will likely achieve better results.

Here you can include various topics such as physical well-being (sports, nutrition, sleep, hydration, etc.), mental well-being (meditation), work habits, work efficiency, etc. I would say that all 1600 words written so far could be written on this topic alone, but of course, that would be a significant understatement. I have read dozens over the years Books Only on this topic.

The more you develop, the more you earn.