One of the cash flow quadrants presents people who earn their income mainly from self-employment – the “S” investor. Today we consider the investor’s characteristics.
The “S” investor is a perfectionist and typically is the chief cook and bottle-washer in his business. He owns it and dislikes having to depend on anyone else for its success. He has an independent mindset and is motivated by the need to control his circumstances.
These investors tend to spend many years in training, attaining a high level of knowledge or skill. They want to do exceptionally well. Examples of “S” investors are doctors, lawyers, engineers, accountants, real estate agents, small retailers, cleaners, restaurateurs, consultants, other direct commission agents, mechanics, plumbers, carpenters, painters, electricians, hairdressers and artists. The marks of their “S”-ship are that they are their own bosses.
“S” investors typically work the hardest. The risks are also high. The failure rate of new small businesses in their first three years is at least 70 per cent.
With business failure, the investor often has to find a steady job in order to repay the build-up of significant debt. The paradox is that even if the small business is successful, the “S” investor will usually find himself working even harder.
The truly successful “S” just had to work harder and for a longer time, often for a lifetime. You will hear the “S” investor saying: “My rate is $150 per hour.”
“My normal commission is eight per cent of gross sales.”
“I can’t seem to find the right people who can work and do the job right.”
Money is not as important to them as independence and freedom to do things their way and be respected for good work. Their clients do not expect them to fail; clients count on their perfection to get the job done and leave them alone to do it.
They are the professionals who do not want or need supervision. In fact, if you breathe over their shoulders too much as they do their job, they will walk off the job.
The “S” investor finds it hard to rely on staff to do a good job. When they do find a good staff member, that person turns out to be much like the “S” investor, that is, the staff member often ends up leaving the business to set up his/her own business to compete with the former employer.
Given that an “S” investor does not readily involve other people deeply in the business, the company is more prone to setbacks due to the owner’s ill health, injury or death.
Also burnout is likely. One way to lessen this risk is for the investor to consider selling his business when it is at its peak and then starting another similar or different business.
Doing a job “perfectly” and being recognized for it can be a reward in itself. Yet, the pressing goal is to continually improve one’s financial position and that may involve moving more and more into the “B” Quadrant.