When 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.
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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.
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(Image in today's post by lusi)