One of the questions that arise at all times is the following. How did the wealthy become so rich? And why aren’t they spreading it around?The answers, if I may presume to speak for them, are: They earned their wealth (yes, well, a minority inherited but the forebears earned it).They saved very frugally — take a look again at the “Millionaire Next Door” success stories again. They were passionate committed driven to succeed individuals.The wealthy don’t spend just to spread the spend around — they want and get real value for money. They also own businesses, take opportunistic risks for profit making, and know how to cut their losses to move on.Owning and running a business are two disparate parts of a collaborative effort. A consistent profitmaking business is a challenging proposition in the best of times, and vulnerable to varied inside and outside conditions in the worst. Yet, it can be the most rewarding of vocations, generating excitement, passion, commitment, and enduring career opportunities to valuable employees.There are several business rules that do not change in any environment. These are particularly relevant for small start — up businesses as they do not have access to diverse consumer markets, well-heeled investors, and long-term marketing strategies.The frequent rules of cash management.They are simple, but inviolate. If you do not adhere to these rules, particularly the first few, your chances for a long-term successful business may be doomed from the start.1. Cover your operating expenses first from current and prior profits. This means setting aside enough cash in short-term liquid investments to cover your overhead for at least a year. In worsening economic conditions, two years cash coverage (or more) is a safer conservative bet.2. Know exactly what your overhead costs are: rent, utilities, payroll and benefits, financing, marketing, insurance and so on. “Your overhead will kill you!”, my dear father used to say. When his tiny business repairing sewing machines almost went under due to a 400 percent rate hike in his rental agreement (the building was owned by a church, no less), he bet the farm — everything he had — to buy a rundown property that could hold both his large family and on the ground floor, his business. He and the bank now owned his property, but at least, he was no longer subject to any man’s inflation decisions.3. Pay yourself last. This includes your family if the business crosses multiple generations. Many a family business has crippled itself distributing dividends to family members who neither contributed to, nor generated corporate profits. Goes against the grain, doesn’t it? Until you know exactly who your customers are, why and when they will continue to use your services and products, and where your real profits are being generated, you cannot afford to pay yourself.4. Cash in the till is not, I repeat, not for personal spending as it is not your ending profit margin. Stories abound regarding this casual business approach.One such scenario: After purchasing a very successful short order restaurant with numerous old and loyal clientele, the new owners worked a few weeks, then turned over the process management and customer satisfaction to staff. They were only observed on a daily-till emptying process, declaring that the best part of owning a business was taking home the profits each day and deciding what to spend them on. Ah, except that till cash was not profit. The new owners closed the business in less than nine months.5. Debt is not desirable (unless you are a start-up and then only sparingly). Your friendly banker is never as friendly if you fall behind in your financing obligations. It may be better to internally finance your new business — to a certain extent. If you are close to retirement, this decision is a completely different ball game.Know your products — the consummate constant challenge is to invest enough in inventory to appeal to a diverse group, but not so much that your cash is completely tied up. Bermuda is an extraordinary difficult environment in which to operate an inventory-driven business. You either have to constantly change, turn over your inventory (by rejuvenating, selling or discounting it) to the same group of consumers (yes, that’s us), or turn the same inventory week after to week to a rotating new group of customers (tourists).Know your consumer base. Start by understanding that they are fickle, demanding, inflexible (I want it now), disloyal to a huge degree if they can obtain the same product elsewhere, with changing taste patterns. Value for dollars must be the intangible prize, allowing them to show off to their friends their exclusive purchases. My, but that is a word that is over used in marketing pieces. Because why — everyone wants to be exclusive — in manners, cachet, trendiness, adornments, possessions and garnishments.Next: it is not enough to run a business, you must be constantly alert to change: demographics, tastes, economic pressures, mobility, the bottom line and your personal sanity. Know when to hold and when to fold.Martha Harris Myron CPA PFS CFP (USA) TEP is at Patterson Partners Ltd, an integrated cross-border tax, estate, investment advisory and related strategic planning services business in Bermuda. For additional information, please contact mmyron@patterson-partners.com or call 296 3528 http://www.patterson-partners.com