Dateline: Kotor, Montenegro
Many of us were early to the game of online income streams and location independence. The idea of living wherever you want and traveling whenever you want isn’t just an idea, it’s what you do.
There are numerous ways to support such a lifestyle. For me, I do investments, work on various start-ups and, of course, run Nomad Capitalist. For others, they may have passive income, run Amazon sites or other e-commerce stores, or do any number of location independent activities. Whatever the case may be, we are all relatively early adapters.
But that is changing very quickly.
As my friend Taylor Pearson explains in his book The End of Jobs, the economy shifts over time. For instance, the 13-17th centuries were dominated by the agriculture economy. He who had the most land (i.e. the king) won because land equaled power. The economy eventually shifted to a capital economy, however, and the bankers won. Then it was the knowledge economy in which corporations were on top.
For the unaware, we are still in the knowledge economy. But our economy is already shifting away from the corporate-led world and toward something entirely new. According to Pearson, we are now moving in to the entrepreneurial economy. This is an economy where those with the ingenuity and audacity to start and run their own businesses will find themselves on top.
While the shift takes time to affect the entire economy, it is now gaining steam. Because of that, I have a hunch that we’re going to see more and more people joining the entrepreneur economy.
We were the early adopters, but it’s not going to be “early” forever.
We will see a lot more people join our ranks. And not just more people like you and me, but more married people, more families with kids and people from all different walks of life adopting this nomad lifestyle. They may not all be perpetual travelers, but remember that there are many ways to live as a Nomad.
Just as the internet grew from something libertarian that 1-2% of the population was experimenting with a couple decades ago to total global saturation, the entrepreneur economy and the location independent lifestyle won’t remain the exception to the work-life balance for much longer.
The next wave in the economic shift
As this transition takes hold, even people with offline businesses will seek to become location independent. In fact, I believe that will be the next wave in the economic shift as people figure out that they don’t have to be managing their business on the ground in order to make money.
For example, I have two friends who own radio stations in the United States. They’ve both figured out how to extrapolate themselves from the day-to-day operations of their businesses. One of them still goes in to the radio station every day just to punch the clock; the other one hangs out and does other stuff around town.
The reality is, both of them could be doing more to live location independent. The guy who’s in the office just doing nothing could be dealing with his deputies from anywhere. And the guy who’s trolling around his city could very easily be trolling around any other city in the world.
People who have gotten to this point in running their business are perfectly poised to transition into a location independent lifestyle. There are just a few steps they need to take into consideration before they can do so successfully.
Step One: A Mindset Shift
The location independent lifestyle, in and of itself, requires a mindset shift. One of the big mindset shifts that has to be dealt with in becoming a nomad is “What do I do if X happens?”
We all deal with that — online or offline.
Those of us who came early to the game have had to deal with the questions of “What happens if I get sick?” “What happens if some bug in Cambodia bites me and I die?” “What happens if this?” “What happens if that?”
We all have that.
So, yes, you may have the question of what you’ll do if your faithful employees of ten years all decide to quit when you go part-time and start to become location independent. But if you don’t have a mindset shift, you will always, ALWAYS have “what if” questions that will conveniently hold you back from making the leap.
For example, a friend of mine runs a business that’s being sold. The business has been for sale for three years now and my friend has stuck around to make sure that his brother doesn’t run the business into the ground. He wants to make sure that he gets his equity out.
Now, he could have taken out the $300,000 in equity that he’s been fighting for these last three years. If he had, he probably would have made a lot more than that and been a lot happier. He wouldn’t have been spending his time fighting to keep his business alive by sitting in an office while he sells it. He would have been making things happen.
His “what if” didn’t work out.
So change your “what if” questions from “What if something bad happens?” or “What if something goes wrong if I change?” to “What if something bad happens if I don’t change?” Or, “What if something good fails to happen because I don’t change?”
The mindset shift is important.
Step Two: Put Procedures in Place
One of the big things that I see in the nomad businesses I deal with is the real change in SOPs. When I was first in business at 19 before this whole digital nomad revolution came about, business seemed a lot less organized. Nowadays, however, we have people who are on the internet using processes, data, and analytics, split testing, A and B testing, etc.
Now, more than ever before, people have access to and are using really good data. And that means that people are putting out standard operating procedures (SOPs) for their employees to use. If you want to make an offline business location independent, you need to put procedures in place so that your staff can run things when you’re not there.
That’s exactly what I did when I ran several services businesses I’d invested in back in the United States. I knew nothing about the businesses in and of themselves. As such, I didn’t have the choice of doing the work myself if my employees screwed up.
For example, one of the companies we invested in was a small pool cleaning company. It was a great business. We just kept making acquisitions because the revenue and cash flow were so good for these companies and we made our money back quickly. I knew all about acquisitions and it was easy for me to beat the competition, but to this day I don’t know the first thing about swimming pools. I had no choice but to put together SOPs and to have a team in place that knew exactly what to do whether I was there or not.
As a result, when I sold the last of those businesses I’d created SOPs for, I left the US for good and it was those SOPs that kept everything in line. Because of the SOPs, I could not only sell my businesses to someone, but I could have kept running them from a distance if I had wanted to. (I didn’t keep them because I wanted a clean break and didn’t want US businesses. I didn’t feel like that would work for me, but it could work for you.)
Step Three: Put a Manager in Control
If you have a business on the ground somewhere, make sure to put some kind of manager in control. I met a man in Kuala Lumpur last year in one of our inner circle meetings who runs a record store in the United States. He put a manager in place who does all the work for him and basically functions as an operations manager. His manager handles everything and reports on all the lower-level employees.
Shifting power in this way, from a lot of people answering to you to one person answering to you, is essential.
In my operation — both in Nomad Capitalist and other operations — I try to minimize points of contact that I have with my people. I never want people more than two layers deep. If I have a manager, then people work underneath him/her and they report to them so we’re not creating a big corporate hierarchy.
For example, here at Nomad Capitalist, we have an editor who deals with all things related to writing and editing for the website and, particularly, the blog. Anyone who writes articles underneath her reports to her. When Reid Kirchenbauer or Pete Sisco or any of the other authors on our site write, they work with her. That way I don’t have to micromanage every detail. I just tell them to work with her. That’s been an important step to take in freeing up my time and increasing the efficiency of content creation.
Step Four: Get Your Tax Situation in Order
One of the things we talk about at Nomad Capitalist is what makes a Nomad Capitalist different from a digital nomad. Central to this difference is our focus on finances. It’s not just about living the lifestyle, but also about having all of the financial benefits that come with it.
For example, if you’re a US citizen, figure out how you can use the Foreign Earned Income Exclusion to minimize your tax. It’s important to get your tax situation in hand because it’s possible that there may be some benefits for you, even if you cannot completely eliminate taxes.
For instance, if your business is on the ground in your home country, you may be able to take some kind of salary while away. It really depends on your country, but there may be a way for you to get some tax benefits.
When you’re running an offline business or an on-the-ground business, it often becomes more difficult to determine the best tax situation. At that point, it’s worth talking to someone. If you are in that situation, I’m happy to speak to you, just apply here.
Location independence is worth the effort
Not only can you potentially gain financial benefits by becoming location independent, but you’ll probably have a lower cost of living as well. For instance, if your business is in London and you decide to live in Thailand, two great things will happen (beyond the tax benefits).
First, you’ll have a lower cost of living. This will potentially allow you to invest in more ideas, start other businesses, expand your current business, etc. Plus, with a lower cost of living, you can afford to pay yourself a lower salary (which will then be taxed less).
Secondly, by going abroad you’ll likely find some new opportunities. For example, I’m helping a guy who runs an on-the-ground business doing Airbnbs in London. He set up his business with multiple maids so he wouldn’t have to rely on just one. He’s got step two in order with SOPs and redundancies in place. No matter what happens he will be protected. If one maid quits, his Airbnbs won’t go uncleaned.
Next, he was able to set up a structure to reduce his corporate tax. As a result of reducing the corporate tax and reducing his cost of living, he is now living in a place where he can expand his Airbnb business to new locations. As a business model, doing Airbnbs in Asia is turning out to be just as good, if not better, than it was in London. Leaving actually helped him grow his business.
For more tips on making any business location independent, check out this article.