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If Elvis was an Entrepreneur

exitThe final chord was sung. The noise from the crowd became a roar. The lights came on. But there was still hope … still a chance that he might appear again. And then there was the voice, saying …

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Elvis has left the building.

You’re probably familiar with those famous words. It made us think:

Elvis always knew how he was leaving the building. If he was an entrepreneur, he would surely know how he was leaving the business.

Learning from the pros

Bankers and venture capitalists know at least two ways that they’re going to get their money back (plus the return they need) before they invest in our business. Shouldn’t we know at least one? It’s one of the lessons we can learn from these professionals.

Why you should know how you’ll exit

In 7 Habits of Highly Effective People, Stephen Covey taught us to begin with the end in mind. We should know how we’re getting out of our business before we get into it.

Know your exit. Elvis did. Professional investors do. Yet many entrepreneurs never think about it.

That may be a reason why studies show that a majority of entrepreneurs don’t expect their business to kick in any money for their retirement.

It’s crucial to consider your exit because small businesses are highly illiquid by nature. Unlike shares in a public company, there is no marketplace where you can go to sell it immediately.

Another reason to know your exit – perhaps a more important reason – is that it your exit should be one of the drivers of your business strategy. How you plan to get out affects everything from how you structure your business, where you get money from as well as a number of other things.

3 common exit strategies

  • Sell your business outright
    Just like selling a house or any other asset, you exit the business by giving up any claims to ownership in exchange for an agreed-upon price. On your way out, just say, “Thank you … thank you very much!”                   
  • Redirect cash flows
    Let’s say you invest $25,000 to start a business. Let’s also assume that you make $25,000 after-taxes in your first year in business (after fully compensating yourself for your time).

    Further, let’s stipulate that you don’t need that money for your existing business. Take that $25,000 out and invest it somewhere else.

    You invested $25,000 and you took out $25,000. Essentially, you have no money invested in the business. Yet you still own the business! Get your money out and say, “Thank you … thank you very much!”                     

  • Recapitalize
    You still own the business with this strategy as well. Let’s say that you invested $25,000 to start your business. You got your business started, built it up and are making money.

    You may be able to go to your banker and borrow against your business. Let’s say your banker agrees to a $25,000 loan which you can pay back from the cash flows of your business.

    It’s likely that you’ll need a good use for the money to get your banker’s okay. For example, maybe you have an opportunity to buy a piece of real estate that will house your company.

    In essence, you’ve cashed out of your business because you now have that original $25,000 invested somewhere else. Repeat this strategy over and over until you have enough money to fund the life of your dreams. That’s bigg success!

Thank you … thank you very much for reading our post today.

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Please join us next time when we ask some questions about work – life balance. Until then, here’s to your bigg success!

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The Second Way to Create Wealth

money.jpgWhen we think talk about capital for a business, we usually think about money. One timeless wealth-building secret is to use other people’s money, commonly referred to as OPM.

The idea is to use a small amount of your own money, levered with a large amount of other people’s money.

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The most obvious example is making a small down payment for your home and then borrowing the rest. Over time, you pay off the mortgage and you own the home outright. You’ve used OPM to add a significant asset to your Balance Sheet.

Of course, with our homes we have to work to pay off the mortgage. It works even better with a business or a piece of investment real estate.

All we have to invest is the small amount needed to get started. If all goes well, our customers or tenants pay off the loan for us. Now that’s a deal!

The second form of capital

We can also use human capital to create wealth. It’s kind of the Cinderella of the capital world – it doesn’t get as much focus as money as a form of capital.

But other people’s labor, or OPL, is also a way to build wealth. Of course, by “labor”, we mean time and talent. Instead of levering money, we lever time and talent.

OPL is more important going forward

OPM and OPL are the two ways people have traditionally created wealth. OPM has received more focus because we’ve relied heavily on investments in assets and infrastructure to create wealth.

But for small business owners today, the model for building wealth in the future is likely to rely more on OPL. Thanks largely to technology, we can start businesses with less money than it used to take.

Here are three guiding principles for using OPL to build wealth:

You must consider all peoples’ interests equally.

This is the principle of equal consideration of interests. It’s all for one and one for all. As the leader, you have to consider all people in your charge equally and then do what’s best for the collective whole.

So we think going forward, the people who create the most wealth will not be focused solely on their own self-interest. You have to think about what’s best for everyone who is part of your team.

Think win / win or wait.

If you’re going to work with someone, you both must win or you should wait. A win by one is a win by none in the long-term.

As bigg goal-getters, we’re always looking for ways to add value which creates opportunities to create wealth.

Your people must buy your vision.

If you have to sell your vision, the game is over before it’s even started. You want people to see how your idea benefits them. But it has to be bigger than that. It also has to serve society in a larger way – it needs to improve people’s lives. And your people must see it.

It’s a higher form of salesmanship – of leadership – that leads to bigg success today.

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Get the tips and tools you need to be a BIGG success.
Subscribe to the Bigg Success Weekly – it’s FREE!

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Thank you so much for reading our post today.

Next time when we’ll talk about what a popular HBO show has to do with organizational structure in the years ahead. It’s related to this post so please check back in with us.

Until then, here’s to your bigg success.

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00416-061509.mp3

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(Image in today's post by lusi)

How the Rich Make Money

golden_eggs.jpgThe Federal Reserve recently published some new wealth data [PDF]. They looked at levels of net worth and the income associated with each. They defined net worth as total assets (including a primary residence) minus any money owed.

You need a net worth of over $8 million to make the top 1%, $2 million gets you in the top 5% and it takes about $900,000 to place yourself in the top 10%.

So those are your targets if life on your own terms means being in the top 10% or above.

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Making more doesn’t mean having more

This report also looked at share of total wealth. As it turns out, the richest of the rich – the top 1% – didn’t get richer. They still held approximately one-third of the country’s total wealth in 2007, the same as 1995.

However, their share of income was up significantly – from 17% in 1997 to 22% in 2007.

The wealthiest people in our country saw a bigg increase in share of income, but their share of net worth didn’t go up. Does that mean rich people got caught up in the “spend, spend, spend” economy? Possibly.

We often think, “If I could just make a little more money.” This study offers further proof that making more doesn’t necessarily translate into having more – even for the richest among us!

Make do, then make more

The crucial thing – the starting point – is to figure out how to make do with what we already have. Then when we make more, we’ll have more because we manage it all better.

We can enjoy some of it now and invest the rest for our future – for the life we dream of living.

How the rich make money

As might be expected, the average person gets most of their income from salaries and wages. As we move to the top 5%, we see that a larger share of income comes from business ownership and investment real estate.

It really kicks in for the top 1%. Plus they have built up enough assets to get a significant boost from selling those assets for a profit. It’s Economics 101 – buy low and sell high.

But it’s no panacea

We’ve recently seen people losing money in business and real estate. Like most things, it’s no panacea. It’s risky. But if you aren’t trying to get rich quick, you can greatly improve your odds.

The best advice

We also found it revealing that this study showed that the bottom 50% lost money holding assets and from the ownership of businesses and real estate.

The rich made a lot. The bottom half lost money. What do the rich know?

Before you jump into investing in a business or real estate, educate yourself. Get advice from someone who’s actually succeeded at it. If they’ll mentor you, that’s great. If they charge you for it, it will be worth every penny.

You’ll get where you want to be faster by learning from people who have done it rather than trying to learn it on your own.

So if life on your own terms means building wealth, get started creating multiple streams of income today – even if it’s just part-time!

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Get the tips and tools you need to be a BIGG success.
Subscribe to the Bigg Success Weekly – it’s FREE!

___

Please join us next time when we ask, “Are you talking to the right person?”

Thanks for reading our post today. Until next time, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00381-042709.mp3

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(Image in today's post by barunpatro)

Make 55 Percent More Money – Part 1

watch_time

We recently did a couple of posts about project selection – how to choose the projects that are best for you. First, we talked about knowing if you should invest your money in a project. Then we integrated the value of our time into the project selection methods.

Now we want to extend that concept. We hear a lot about the right mix of assets when it comes to investing in our retirement portfolios. But we don’t often think of the activities we perform – how we invest our time – as a mix of assets.

Investing time like a venture capitalist allocates money

We should because the things we do should add value to our lives or we shouldn’t do them. So we want to approach our investment of time like it’s a portfolio … specifically, a venture capitalist’s portfolio.

A venture capitalist invests in a bunch of companies. Then they see how they perform and make decisions. If a company is hitting its marks, they keep funding it. If not, they don’t. They are constantly allocating money to the companies that look like they will generate the greatest return.

We can use this as a model for how we invest our time.

Read more