How I Apply Financial Independence Principles to My Small Business

How I Apply Financial Independence Principles to My Small Business

Can you apply financial independence principles to your small business?

I would like to think that one can apply FIRE principles to running a successful small business.

I recently wrote about how I apply KonMari minimalist principles to my life and business and I think applying FIRE principles can work as well.

Here are the 5 ways I go about it.

1) Add up your total annual fixed cost (the costs that stay the same whether you’re busy or not)

“What is fixed cost?” you ask?

Investopedia define fixed cost as:

a cost that does not change with an increase or decrease in the amount of goods or services produced or sold. Fixed costs are expenses that have to be paid by a company, independent of any specific business activities. In general, companies can have two types of costs, fixed costs or variable costs, which together result in their total costs. Shutdown points tend to be applied to reduce fixed costs.

These can include your rent, utilities averaged out for the 12 months, wifi, phone, insurance, maintenance, etc.

If your employees are salaried, you can include their income into the equation to (In my opinion, because they’re essentially fixed costs).

2) Divide your total cost by 52 weeks or 365 days

This is how much money you have to make each week or each day to cover the fixed costs.

One example: putting money away daily for rent

My small business happens to be generating cash flow daily.

My rent is $2350 a month.

I divided $2350 by 30 days per month to come up with about $80 a day that I have to put away to make rent.

3) Put away that cost every day

So regardless of how much I made in sales that day, I always put away $80 to cover rent so at the end of the month when rent comes due, I’m not scrambling trying to find rent money.

Being a business owner, I can always pay myself less if I’m short on cash and I need to make rent.

Ideally we don’t get to that point but it’s happened before (one month I didn’t pay myself at all…It was rough lol).

I calculated the year’s worth of rent cost: 12 months x $2350 = $28,200.

I then divide the $28,200 by 52 weeks = $542 a week.

While I am not there yet, I am putting away $400 a week to essentially start saving up for a year’s worth of rent at the end of every year.

Because you never know when there’s going to be an economic downturn and you don’t have any income coming in.

I want to at least be prepared and have enough to pay rent!

Also that way, the rent builds up on itself and generates interest in the savings account, and each year, we keep building up another year’s worth of rent (assuming we don’t touch the money).

The interest generated in this way should also help offset the annual increase in rent cost as per the lease agreement.

4) Investing in passive income for your business

Last time I checked, E*trade let’s you open up a business investment account.

If FIRE is all about having enough money invested in passive income generating stocks, bonds, real estate, etc. that can cover all of your annual expenses, up to 25x of your annual expenses, why not apply the same to business?

If rent is about $23,000 a year, then a $1,000,000 invested in the S&P500 index mutual fund in Vanguard will return about that much in dividends alone, not including growth in your principle.

That means if I can invest a million dollars on behalf of my business in Vanguard, the annual rent cost is essentially paid for by the investment.

Leaving the rest of the income from the business to be invested into more income-generating businesses, or paying staff more, better benefits, buying better equipment, a better facility, etc. the sky’s the limit lol.

5) Doing research into the best way to buy something

Before we buy anything at all, we check all of our options.

  • We look online,
  • we look locally,
  • we look for free stuff off craiglist,
  • we do all of our research to see what makes the most economic sense while keeping quality of our products and services high.

We always keep looking, and once we found what we think is the best option, we educate the rest of our staff on where to find it best as well so we can all make informed decisions as a team.


Applying financial independence techniques can work for your business depending on your situation.

Sometimes, you just have to get creative with it and, to quote one of the silliest movies ever from Lonely Island, “Never stop never stopping.”

What are some ways you’re applying FIRE techniques to your business?

To your job?

Leave a comment!



Jack The Dreamer

I'm a dreamer. But you know what? All the best people are. And if you're one too, join the revolution! My blog is about being financially independent and working towards that goal each and every single day so that we can all start living the life we've always dreamed of! Jack the Dreamer, over and out!