In all businesses that you do, it is important to build up a triangle that consists of a stable base and a risky tip. I call it the A + P = S model (Active + Passive = Success)
(c) Valerie Chai. ALL RIGHTS RESERVE 2014
To build a successful business, there is a need to build up a strong base of repeated business that requires very little involvement and yet gives you strong repeated cash-flow. This strong base of cash-flow allows you to take on more risky deals that can potentially give you higher ROI. If the risky projects fail, you know you always have the passive income that you have built up to cover your losses.
Talent Management
The next question I usually get when I share this model will be --> "So what type of employees should you use for passive and active business section respectively?"
Well, it is always good to have your trusted, loyal, stable, efficient and not so adventurous employees to help you manage your business portfolio that are passive in nature. These employees should be remunerated for their loyalty and efficiency. It is important to ensure low turnover for this business section.
The active business section requires the employees to be a risk taker, solution creator, problem solver and good sales person. However, employees who are in this section tend to be those who job hop very often and they could even learn whatever they can from you and bring it over to your competitors or even set up another company to compete directly with you. As such, it is important for you to include non disclosure agreements and non direction competition for a few years with these employees. However, it is still very important to groom, empower and trust these employees. These employees should be remunerated on commission basis and could even be groomed to be part of the partners if they prove to have the potential.
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