Posts

Leverage this instead of finances for BIGG Success

Cash Used to be King

Leverage this instead of finances for BIGG Success

Listen to this post! Click play to hear George & Mary-Lynn on The BIGG Success Show Podcast (Duration 3:29)

In the hit movie, Wall Street, Gordon Gekko (played by Michael Douglas) said to his protégé, Bud Fox (Charlie Sheen):

“The key to the game is capital reserves. If you don’t have enough, you can’t piss in the tall weeds with the big dogs.”

How’s your access ability?

We hear it all the time – cash is king. But it’s not just cash that matters; it’s also access to capital.

Large companies generally have that. Small business people often don’t.

So it’s crucial to manage your cash flow wisely. Make sure you’re getting a return on every dollar that goes out your door. Because…

Even if an outlay goes to your Income Statement as an expense,
it should still deliver a return to you or it’s not worth spending the money.

In addition, build up your reserve borrowing capacity. Protect your credit rating like you would any other asset. Then you’ll be able to take advantage of opportunities when they present themselves.

Watch your debt ratios so you could always tap into some money if need be. But also be aware that …

Read more

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.

___

___

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.

___

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

___

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

Related posts

How the Rich Make Money

Getting Aggressively Passive: Creating A Passive Income That Sets You Free

(Image in today's post by lusi)

Is Your Project Worth Your Time?

time_pieces Last time, we looked at the two most common ways to analyze a potential project. We focused on the money side which works great for business decisions because the cost of time is included implicitly.

___

___

But if you’re a business owner, do you include the value of your time in your calculations? How about when you’re making a personal decision? It’s important to add time into the equation.

To do that, follow this process:

  • Step 1: Estimate project hours. How much time will you spend if you do this project?
  • Step 2: Select your alternative activity. What would you do if you weren’t working on this project?
  • Step 3: Calculate your opportunity cost per hour. Your opportunity cost per hour is the amount of money you could earn (or not spend) per hour on the alternative activity you chose in Step 2.

For example, if you would watch TV instead of working on this project, then that time wouldn’t be valued at much. Maybe, instead of watching TV, you would clean your house. Now that’s worth something!

How much would you pay somebody to clean your house? How many hours would it take you to do it yourself? Divide the amount you would pay someone to do the work by the number of hours it would take you to do it yourself to get your opportunity cost per hour.

  • Step 4: Determine the total cost of your invested time. Multiply the number of project hours (Step 1) by your opportunity cost per hour (Step 3). That’s the value of the time you will invest in this project. This should be added to the money you will invest to find your total investment.

Example – Getting certified (Part II)

Let’s look at the same project we considered yesterday – you decide to go back to school and get certified for some specialty. Here are the details:

Cost: $2,000
Incremental income: $2,000 in Years 1 through 3 (then you retire)
Opportunity cost of your capital: 6%

Now let’s add in the time component. Assume that, if you put the same time into another activity instead of this certification program, you would expect to earn $2,000. That’s the opportunity cost of your time. So instead of an investment of $2,000 (as mentioned above), your investment is really $4,000.

Payback period doubles

We see that your payback period is two years. You’ll be fully compensated for your invested time and money by the end of the second year. But remember, when we didn’t factor the value of your time into the equation, your payback period was only one year. So it doubles in this case.

Net Present Value falls

We said yesterday that calculating the Net Present Value (NPV) was a better way to determine whether or not you should do a project. In this case, with the value of your time factored in, the NPV is about $1,300 as shown in this screenshot from Microsoft Excel:

Microsoft Excel Time Set Up Screen Shot

As you may recall – if our NPV is greater than $0, then we take on the project. That’s the case here so we would want to do this project. In fact, even factoring in our time, this project – under the assumptions we’ve made – would return 23%. That’s a pretty good return on our time and our money!

But not nearly as good as the 84% we thought it was when we weren’t placing any value on our time. That’s why it’s so important to include our time. As we said, businesses do this implicitly because they have to pay people to do projects. But when we’re taking them on ourselves, we have to be sure to place the appropriate value on our time. We forget this too often … to our own detriment. 

Now you have the ammunition you need to determine whether or not you should take on that project you’re considering! 

___

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

___

We thank you so much for reading our post today. Join us next time when we share a magic elixir we just discovered … it’s success in a can! 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/00322-020309.mp3

Related posts

Is Your Project Worth Your Money?

How Long Do You Have To Work to Pay for What You Buy?

(Image in today's post by egiprime)

Creating Wealth in the Next Generation Economy

balance Last century, we saw wealth created by large companies using economies of scale to keeps costs low so they could dominate markets. In the next generation economy [pdf], new wealth will be created by entrepreneurs through a network of great relationships built on trust.

___

___

Trusting relationships will save you time and make you money. The question is, “How do you build this trust so you can build relationships?”

There’s a concept called equal consideration of interests – you place your interest equal to the other party. That sounds so simple, but we believe it deserves emphasis.

Win / lose. “I win, you lose” doesn’t work because it doesn’t build the trust that is necessary to have good relationships in tomorrow’s business world. Yet there are a lot of people who place their interest above everybody else’s.

Lose / win. “I lose, you win” ultimately fails because fulfilling relationships can’t be one-sided. Eventually frustration leads to anger and the relationship (if that’s what you call it) dissolves. Yet there are a lot of people who place everybody else’s interest above their own.

Neither one is the best path to building fulfilling relationships. There is a better way …

Win / win.
This is the perfect combination in today’s business world. Win / win is equal consideration of interests. Even if it benefits me, I won’t do it if it hurts you. We’ll work together to find a better way that is mutually beneficial. That’s the key to innovation – another 21st century necessity. What works today won’t be good enough tomorrow. By working together, we can find a better way than either of us could find on our own.

Moving quickly on a new venture

We just launched a new offline venture. We had an idea for a product. We talked it over with people in our network. Based on their recommendation, we revised it … a lot! But it was much better. We reached out to potential strategic partners and got them in place. Last week, one of those strategic partners began selling our product across the nation.

It probably would have taken us six to twelve months to do this if we didn’t have the right relationships in place. Instead, this all happened in about two months. That’s another 21st century mindset – once you spot an opportunity, you have to move very quickly.

It’s hard to do that if you have to develop the concept from scratch. You need to reach out to people and firms who have the infrastructure in place to help you capitalize on it. If they aren’t already in your network, it will take longer. So building trusting relationships is essential. But there are (at least) two points to consider …

Relationship building is a long-term investment.

It takes time to build your network. We have years of goodwill built up with some of our strategic partners. This helps get revenue-generation going quickly once you have the right idea. Don’t wait to build your network until you need it. It will probably be too late then. Make relationship building an everyday thing.

Trusting people solve problems quickly.

When you trust your partner and your partner trusts you, problems can be solved much more easily. As we’ve had issues, we’ve been able to deal with them very quickly. We can hear our partners considering our interests along with their own; they can hear us doing the same thing.

The best way we know to capitalize on an opportunity quickly is when two or more people, with trust already in place, consider their interests equally and seek mutually beneficial solutions. It’s the way to create wealth in the 21st century!

___

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

___

Join us next time as we celebrate our one year anniversary! 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/00262-111108.mp3

Related posts

Relationship Building Blocks

Failure to Do This Harms Relationships

3 Keys to Effective Networking

(Image by darktaco)

The Less Money You Have the Better!

penny We were talking with one of our banker friends recently about start-ups. He said that people often look for money when they should ask if there’s a better way to run their business. Money isn’t always the best solution.

___

___

In fact, sometimes not having a lot of money to get started is a good thing because it forces you to be innovative and look for ways to save money. Obviously, it is possible to have too little money. Most of us have probably experienced that a time or two.

The baker

He told us about a person who wanted to start a bakery. She thought she needed a storefront. Our banker friend asked her who her customers would be. She said it would be friends and family at first. Then she expected word-of-mouth to take it from there. So he suggested that she just use her own kitchen or find a way to use a commercial kitchen part-time, instead of spending money on rent, utilities and all the other costs of maintaining a store. She didn’t need much money if she used this operating strategy.

An internet business

A friend of ours is putting together a really cool web site. They want to have an active community. They were going to pay a developer quite a bit of money to put together the forum area. We talked him into using open-source software and having it custom designed after his community starts building. He cuts his start-up costs drastically!

A chiropractor

Our banker friend knew a chiropractor who thought he needed to rent office space so he had a place for his patients. Instead, he found a fellow chiropractor who had extra space. He rented from this chiropractor for five years. Then he secured his own location – one he knew he could afford based on the income stream he had established.

He reduced his risk and conserved money by finding a better solution to get started. Because if you build it, they may not come. Test it out first!

The average entrepreneur starts his or her business with around $25,000. Sometimes the less money you have the better, because it forces you to think creatively and spend every penny wisely. Here are two entrepreneurs who did just that …

Bear Naked

Kelly Flatley is the co-owner of the all-natural snack food business, Bear Naked.
When her business was young, she didn’t go out and rent a large space to manufacture her product. No, she negotiated to use the commercial kitchen at a local market after they closed. She manufactured at night and made deliveries to her retail customers during the day. 

Sure, she worked some crazy hours. Don’t most entrepreneurs? That’s a concession for not having money. If you’re undercapitalized, you may have to get creative and make it up with “sweat equity”.

Newman’s Own

Years ago, we heard the story of how one of our favorites, Paul Newman, started Newman’s Own – his food products company that has donated millions to charity. The details here probably aren’t fully correct, but that’s not as important as understanding what he did.

He invested a small amount of money to start his business. He contracted with one company to manufacture the product. Another company sold it to grocery stores. He outsourced almost everything. His business was bringing in millions a year in sales, yet it only had one or two employees!

He did all this with very little money, but a whole lot of creativity! You can do it too!

___

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

___

Next time, we’ll discuss how something as simple as the font you choose can get people to do what you want. 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/00256-110308.mp3

Related posts

How To Get Your Customers To Finance Your Business

10 Signs That You Are Ready To Quit Your Job And Start A Business

(Image by sufinawaz)