I am writing this in Antigua on a weekend break during a Rotary Club service project in the schools. The other day we drove to a part of the island I have not been to. On the way we saw a beautiful mansion on a high hill. On the way back I saw what I thought was the back of this mansion only to realize a few seconds later there are two of them on neighboring hills.
The story I heard is they are owned by two brothers who came to America, won a lottery and returned to Antigua to start businesses with their newfound capital. They own stores, apartments and other businesses. They also have virtually identical mansions.
This story isn’t as much about luck as it is about the need for businesses to have adequate capital and working capital. It’s huge when you have enough money to do things the right way. I see the opposite of this too much and often it’s owner inflicted. By that I mean that the owner of a business will bleed the cash from the business in salary, perks, personal expenses and distributions to support a personal lifestyle.
The downside is the business is undercapitalized and the owner wonders why it won’t grow. Human nature says it’s tough to lower your personal lifestyle and keep money in the business. But the owners that do this reap more rewards later when the business is larger, has greater profits and will eventually sell for a higher price (and be much easier to market).