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The Importance of the Rules and Dangers of Breaking Them

There’s a harmful statement many entrepreneurs are fond of listening to “rules are made to be broken”.  If that’s the case you’re following the wrong set of rules.  Effective rules are designed to give you the best results.  Consider traffic laws if you started driving on the opposite side of the street what would happen?  It would create chaos and slow everyone down, it might work in a small situation but on average respecting and following the traffic rules helps traffic to flow better for everyone.  The same is true for business and investing.

At Richucation we make a point of teaching the universal rules.  Lots of sources preach rules that are a bit like “don’t put your elbows on the table”, they might be conventionally accepted by they aren’t truly important in the modern age at least not in most situations.  But there are essential rules in business and investing, rules designed to ensure you are consistently growing and making money, you can break them now and again and get away with it but it’s unwise because in the aggregate you’ll end up losing out.

All too often I’ve made this mistake, allowing an employee to do something that breaks the rules to encourage them to take risks, unfortunately they were risking my money not their own, we lost money and I should have intervened.  Getting involved in a business whose foundation wasn’t solid, at first it seemed great, the lie I’d allowed myself to believe, and ultimately it lost money.  Skipping the process of acquiring security on an investment relying on the integrity of the participants and strength of the venture to move forward.  Or failing to put something in writing for mutual agreement, or proceeding without getting an agreement signed and then discovering the terms I expected weren’t honored.  The list goes on, the point is rules such as these, unwritten and even unknown though they might be for most are designed to facilitate success and it’s unwise to violate them.

What are some examples of these rules?

  • Buy/engage with a margin of safety
  • Don’t get involved in something you don’t understand, increase expertise to expand where you operate
  • Test small then scale
  • Get great quality data and use it to make your decisions

As you explore business and investing, wealth building, you’ll learn there are certain foundational essentials and that you shouldn’t avoid these.  Don’t get involved in a non-repeat business.  Get involved in businesses based on growth first, only then consider price, people with high integrity have no problems putting agreements in writing.  The list goes on, suffice to say there are rules, but more importantly you must stick to these rules, at times there will be emotional pressure or perhaps a sense of rebellion to break them but don’t, they are meant to be followed not to restrict you, but to enhance your success.  When you don’t follow them, the tendency is to lose time, opportunity, and money, you might gain a little in some way that’s easy to rationalize, but it’s nothing compared to what could have been gained if you’d just followed them.

Have a question about the fundamental rules of business and wealth building?  Want to run a question, thought or idea by us?  Feel free to contact us by clicking “Ask a Business Question” in the lower right corner of the screen.

Dreams vs Goals

Dreams and goals both are a critical part of achieving results in our lives.  Dreams tend to drive and inspire us while goals keep us on track and give us concrete direction.  All too often though within personal and business development circles the two aren’t separated in a meaningful way.  We’ll hear comments such as “make sure your goals are SMART – Specific measureable actionable results oriented with a timeframe” but then apply that same logic to dreams, which is impractical and a waste of time.  Dreams have a definite place but it isn’t the same.

So what are goals and what are dreams and what’s the difference?

Think about the concept of scoring a goal, it comes from sports and is defined clearly by goal posts, it ideally does meet the SMART standard we find in MBA programs (others have expanded on the term to include “SMARTER” or “SSMART” in an attempt to improve).  The general concept is this you must be able to clearly determine when you’ve achieved a goal, you must be able to take concrete action steps towards a goal, you must be able to apply accountability to a goal since that’s part of its usefulness, but most importantly goals are like milestones they allow you to develop a plan or strategy to get there.  All of these features are very practical and can help to guide project management initiatives to make them happen and hence the accountability, etc. are worthwhile.

But what’s a pre-requisite of being able to develop a plan to reach the goal?  Knowing specifically what it might take to get there in fairly concrete terms.  In other words goals work very well for desired results within your bounds of knowledge where a minimum of education is required in order to determine the path.  This is partially why goals are generally best laid out fairly short term because there are too many unknown variables the longer the timeframe.  General timeframes are possible say in the case of a large construction project where the details of the end product and the process to get there are clearly laid out but in the likes of an Agile development model or a start-up where there is a great deal of uncertainty it’s best to keep goals as defined by the “SMART” paradigm to much nearer term.

By contrast dreams are useful to give us a loose guiding direction from which we build goals.  Dreams are what we have when we want something but we don’t know how to get there, they can be far off and nebulous.  It isn’t necessary that they be specific, crystal clear, have timeframes, are results oriented, measurable, or actionable.  A dream could be a feeling and trying to turn it into something else often isn’t helpful because that feeling drives us.  A dream could be something we have no idea how to achieve today but can inform a very vague general direction.  Dreams can be far off.  We can say to ourselves “I want to be like that” and then formulate short term goals that we believe will bring us in that direction but may not then we can continually correct and continue.

For most people something like “I’d like to be a billionaire” is a dream not a goal.  It’s impractical to set a timeline on it.  It is deceptive because it is by its nature specific and measureable but trying to treat it as a goal rather than a dream is useless because we are so far removed as not to have a clear concept of how to get there and hence it distracts us from the present moment where we can make a real difference.  Unless you’ve already got a $100 million net worth treat billionaire status as a dream not a goal.  Start by creating immediate goals near where you are at and simply use the dream to inform the rough direction.  If you’ve never made $100k/yr. get your cashflow and personal situation under control with a $10k/mo. Or $30k/mo. goal, which can actually be actioned out and achieved accordingly.  If you’ve reached that level aim for $10 million then $40 million then $100 million and so on.

Bill Gates never set out to be a billionaire in fact he didn’t believe it was possible given his vehicle but he was very focused on dominating and succeeding in his space and that dedication led one step at a time to his billionaire status.  He targeted $100 million in revenue stating “you can’t build a software company past that point and I will prove it to you”, then later told a friend “I think I can get us to $500 million in sales but won’t be able to handle it after then because people will want more and I have no idea how”.  Today Microsoft does tens of billions per year in annual revenue.

Big dreams become real through focusing on the present.  The most capable performers set very specific short term and process oriented goals.  Follow their example.

If you need inspiration or guidance follow along with us, like us on Facebook, subscribe to updates and contact us with business or wealth building questions you might have.

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3 Ways To Save More On Every Purchase

The quickest easiest way to have more money is to spend less.  The quickest easiest way to get ahead is to get more value for every dollar you spend.  Usually, when working with people a typical person can save 10%-20% of what they make over what they are saving already just through some simple strategies.

Today we’re going to go through the master toolset for increasing value for your money.  It is the universal that if you master it you can apply to absolutely any expense in any field.  You can save yourself and businesses thousands or millions of dollars each year and you can imagine what that’s worth.

It also has the advantage of helping you to identify hidden opportunities in the assets you’ve already got to increase your income and help those around you.

It’s what we call the 3 dimensions of value.

When you make any purchase of any kind there are three components that go into that purchase determining how much value you got:

  1. What you paid for it – bigger discount or bargain = better value, in other words you’re spending more for the same thing. This is what most people are used to focusing on and by paying close attention you can usually create some savings here.


  1. How much output it provides – this is a measure of quality in other words higher quality for the same price = better value. People are pretty aware of this but often forget to measure it and definitely have opportunities where they can get ahead by getting better quality for their money.


  1. How much you use it – this is the most overlooked aspect of value…utilization. Increase the utilization of anything you purchase = increase the value for the money.  In most cases this offers the largest opportunity for improvement.


First Step = Measure Everything You Spend

Most people tend not to measure all their expenses accurately.  Either they think they spend less than they do or they are missing expenses especially non-recurring expenses like annual renewals or purchases you make every few years.  For example, a budget for a new car if you’re paying cash, a budget for furniture, a budget for clothing, etc.  The fact is this money has to come from somewhere and you’re spending it so…

Non-recurring expenses tend to be what kills people’s sense of what they’re really spending.

Bottom line before you get started on anything else make a very thorough list of everything you’re spending and review your spending on a monthly basis if not more frequently.  Know what expenses are coming up and budget for them on a monthly basis even though the money isn’t actually going out.


Getting Bargains

The first dimension of value is bargain, the larger the bargain the greater the value.  Your goal should be to always buy everything for substantially below retail.  Think about it this way.  If you and a friend make an identical amount and live identical lifestyles the one who spends less will end up ahead.  The same is true for a business.  The business that spends less to achieve the same result is going to have more profit.  This in turn means they can cut their prices and get more business and the competitors can’t compete so will eventually die out creating a compounding effect on growth.

How do you get bargains?

  • Shop on sale – being able to plan your purchases for when things are on sale will help you
  • Buy used – buying used allows you to avoid tax and to find things cheaper than they should be
  • Buy wholesale – when possible this will allow you to get lower prices
  • Negotiate on EVERYTHING – even when you think you can’t you can often save
  • Collect points – just by using credit cards I average a 2% saving across the board

One of the best things you can do is understand where the costs are that drive the price and buy in ways that eliminate the costs so the seller can offer you a better price.  A good example of this is marketing costs businesses have but are lower when selling wholesale or buying from private individuals.

For every expense you’ve listed go through and see how you can apply each of those 5 strategies.


Buy Quality

You can radically increase your value by paying attention to a quality metric rather than just the price.  For example, say you’re buying food.  The metric might be nutritional value.  In other words, one item of food might cost more or the same in pure dollar terms but be much better value on a per nutritional content basis.

Virtually anything you buy you’re buying for a specific reason and if you understand that reason you can often get that same value for less money.  For example, say you’re buying a luxury car and your objective is to get prestige.  You could buy a new Mercedes for $40k, on for $120k or a used Bentley for $60k.  Which has the best and worst value?  Arguably dollars per prestige the Bentley will give you better value because even though it’s a used vehicle people just see “Bentley” and don’t worry much about the rest.

Likewise, the prestige value of an expensive Lamborghini vs an inexpensive one is minimal in most cases unless you’re appealing to car enthusiasts who have a lot of similar cars in which case a classic might offer better value for the money.

You also might find something that’s better quality retains its value better (sometimes and you should verify each time).  For example, an expensive Chanel purse might cost $8000 but you might be able to sell it for close to that 5 years later vs an inexpensive purse you might not be able to sell at all after 5 years.  When examining your expenses consider how well the things you’re buying will retain their value.

When you’re hiring staff for your business if you pay attention to output you’ll find an employee who costs less per hour might not be nearly as cost effective due to the quality of work.  This is especially true for revenue producing roles such as sales or marketing but could also apply for project managers, programmers, engineers, web designers, etc.

Generally speaking in any case where you can get a lot of upside the quality you’re getting is far more important than the price you’re paying.

Go through the list of all your expenses and determine a quality metric and find ways to improve the quality you’re getting per dollar.


Increase Utilization

Say you buy food in bulk then half of it goes bad and you have to throw it out.  This was poor utilization.  Or you’ve got a big car or truck with a lot of seats but it’s mostly being driven around empty, this is poor utilization.  Short term rentals vs purchase or a longer term lease is often a poor use of money.  Consider that if you were going to rent a car for a month you might be better able to buy something for a good deal, drive it for the month then sell it…maybe.

The point is anytime you under utilize something you’ve got an opportunity either to potentially split the utilization with someone else to drive down your cost per utilization.

Utilization ties in closely with quality because something quality tends to allow for higher utilization.  For example, I might buy a shirt for $20 that lasts me 2 washes vs a shirt for $50 that lasts 20 washes, which was cheaper?  The $50 shirt was cheaper on a per utilization basis ($2.50/wash vs $10/wash for the supposedly cheaper shirt).

You might also wear something more or use something more because the experience is better.  For example, I might buy a nice shirt and get compliments on it so wear it regularly whereas another shirt that might not fit as well, etc. goes unused and therefore drives up the cost per utilization.

In business I might be better off to utilize an external contractor rather than hiring someone internal if I won’t use them much.  Or maybe I can split an employee with another business in order to avoid the higher contractor rates.

You could also find ways of splitting marketing costs or joint venture with another company to gain extra leverage out of each client.

The ways to increase utilization or decrease wasted utilization are nearly endless.

Go through your list and for each expense determine whether you’ve got excess capacity or perhaps the ability to drive down your costs based on higher utilization.


How Much Can You Save?

Based on applying these three dimensions to each of your listed expenses in the year how much are you able to save?  How much additional value are you able to extract?  It’s very normal for an individual to save $5000/yr. or more.  Businesses are obviously much larger numbers because the spending is higher.


Want Assistance?

Our team is happy to coach you through the process of reducing your expenses and increasing the value per dollar spent.  Usually the simple process will save you thousands without even counting what you might save on taxes.

Or alternatively can recommend someone for you to hire to do it for you.

Contact us today.

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The Worst Question Financial Advisors Ask You

I recently read an article about “what should I do with my extra cash?”

The basic premise here is cash loses value over time so you want to minimize how much cash you’re holding keeping only enough liquidity around to deal with your needs and provide a buffer so you’re not forced to sell investments when they are down.  With this in mind the question makes perfect sense.  Unfortunately, the answer reflected the common nonsense you often hear from financial planners.


What?  You ask isn’t that the point?  Maybe it’s supposed to be but in practice virtually none of them do better than the market investing their own money in fact most do worse.  In other words they aren’t necessarily great sources of information.  Worse, they are USUALLY incentivized by getting commissions based on the products they sell you, hardly an impartial source of information.  This isn’t always true of course there are financial fiduciaries who can be very good but they are the rarity and still aren’t necessarily skilled investors.

That’s a buyer beware.

Now back to the main subject here, which is a question I hear from financial advisors and planners all the time “how much risk are you willing to take on?”  AWFUL!

Why is this question so bad?

Well, we’ve talked before on numerous occasions both in our training and blog posts as well as books, etc. about how risk is defined and how it isn’t defined in a meaningful way.  Technically, the answer to the question should always be “I want the best risk weighted return”.  Here’s an example, it is NEVER sound financial advice to tell someone to buy lottery tickets.  I don’t care what their tolerance for risk is it’s bad advice but that’s what the question implies.  In other words the question comes from a place that is uneducated, which is a good reflection of the investment knowledge of most financial advisors.

Good financial advice should maximize the risk weighted returns for clients, always period there is really no other value or purpose of a financial advisor if they aren’t helping you to get a better return on a risk weighted basis then they aren’t doing their job well after all why would you pay them if not for this?

So let’s talk about what the real question should be when you get into the conversation.  “What is the time horizon in which you’ll need this money and consequently how much volatility is safe?”  In other words if you buy something with a fair bit of volatility there’s a risk you’ll be forced to sell when it is down.  That is the ONLY risk that should be considered in this part of the equation the so called “risk appetite” because all the other risk should be balanced against returns so on a risk weighted basis you’re getting ahead.

Why are other questions about risk nonsensical to ask a client?  Because it implies that there is somehow a correlation between risk and return.  In other words to get higher return you have to take on more risk.  The problem is that’s false.  You might…maybe, have to take on more volatility.  You’ll definitely have to take on greater exposure to the underlying asset but that’s not the same as risk.  Remember the way we define risk that is actually meaningful to people?

“What is the chance of loss and severity of loss?”  That’s risk the way it matters.  In this sense as we’ve noted in other articles increased volatility can actually decrease returns so decreasing risk by that definition actually increases returns.  Likewise for choice of asset class and price of asset class.

Financial advisors should be helping you to simultaenously decrease risk while increasing returns.  To do this they need to consider your financial needs over the next little while and they should educate you about potential investment performance and how to cope with potential events psychologically.  But on no planet should they be guiding you into higher risk weighted investments that’s just bad financial advice.


What’s the Best That Could Happen?

In my personal life right now I’m doing something incredibly stupid.

I’m pursuing something with a very low chance of success at the expense of things where the chances of success are very high.

This is exactly the opposite of the approach I’d suggest people take in investing but I think it offers a worthwhile lesson.

I was talking to a girl about modelling the other day.  She’d just started and was immediately fairly disenchanted with the process commenting “there’s a lot of models out there and most models don’t make a lot of money”.  These are both true statements but they ignore the bigger picture that she’s not most models and there are some models who do fantastically well.

As entrepreneurs we take a giant leap getting into business for ourselves.  The stats are against us depending on who you believe 80% of businesses fail but worse than that most never amount to any spectacular success.  Our actions are born not of what is likely but what is possible.

Instead of asking “what’s likely to happen?” we ask “what’s the best that could happen?”

The thing is this people aren’t statistics.  Our outcomes aren’t determined by the bell curve they are determined by a whole variety of factors principle among them being what choices we make and what actions we take over and over again.  In other words we influence our outcome we don’t have to settle for what everyone else gets.

Look at someone like Elon Musk creating a car company and a Space company.  The probability of failure in both of those industries was extremely high.  The challenges were almost insurmountable.  But guess what?  Tesla and Space X are both thriving ventures today.

Living an amazing life, creating amazing change, these do not come from just thinking “what’s the best that could happen?”  It’s equally important to consider everything that could go wrong and work around it.  But it’s hard to achieve those amazing things without asking “what’s the best that could happen?”  And it’s only after choosing something incredible that we put on our black hat to consider what might go wrong and get to work to make sure it doesn’t.


The Universal Problem Solving Formula

There are a myriad of micro-skills that are easy to overlook that go into any kind of success.  One critical one is problem solving.  Here’s a fact, people run into barriers and quit.  Perseverance is part of it but it goes way further than that and how do you persevere?

Yesterday I was talking to someone who I’ve noticed frequently gets stuck and quits.  Does this in business and career but in communication, relationships, etc. as well and it all comes down to the same predictable process.

Imagine you had something you wanted to communicate to someone you tried and they didn’t get it?  What would you do?

Most people would resort to one of two things.  Either they’d say “forget it” and quit (in which case if it was worth quitting over after one attempt was it really worth trying to communicate to begin with?).  Or alternatively they’d repeat themselves.  What if the person still doesn’t get it?

Usually this would lead to either another repeat perhaps with heightened emotions, a stern voice or yelling…or just quit.

Now if you were really persistent you might do one of two things or a combination.  You might ask “what aren’t you understanding?” or try to restate the same thing in a different way to try to get the person to understand.  A lot of people just don’t have the patience for this process and they aren’t likely to be particularly successful in whatever their not willing to be patient with.

Sooner or later most people will give up.  What was the gap?


Let’s consider another example.  You’ve got an important business deal you need to close but it’s in another city and you’re broke having put everything into your start-up, what do you do?  A lot of people would give up right there, they’d say “I can’t make it because…” and that story would be the reason it was ok for them to fail.  That’s a loser’s mentality.  NEVER play like that!

Some other people would put in some effort maybe they’d ask some people for a ride and what if that didn’t work?  They’d give up and tell the story about how they tried everything but it didn’t work.  Tony Robbins has an expression “if you’d really have tried everything you’d have the result”.  You haven’t tried everything you’ve just scratched the surface.  The person who has tried everything will have hitch hiked, begged, borrowed, pleaded, fought all the way there.

I have a friend who was an incredible example of this.  When he turned 18 he wanted to go to Tony Robbins Mastery University in Hawaii but couldn’t afford a ticket to the event.  Without a ticket to the event and with just enough money to get one way he flew to Hawaii without any return ticket or place to stay.  He then proceeded to go up to random people on the street, introduce himself and ask if he could borrow $17 000 for the course (or whatever the amount was).  He got turned down each time.  At this point a person could justifiably say “he’s tried everything”, no one could fault him for giving up.  But he didn’t, he harassed Tony’s staff so much that they held an emergency meeting just as the event was starting and agreed to do something they never do, which was give him the course based on zero deposit on payment terms.  In other words he got the result.  “If you are committed you’ll do whatever it takes”.

There’s a whole emotional side to doing whatever it takes and perhaps in the future we’ll feature an expert in this area to discuss it but for now there is something that’s served me well that we can learn.  What I’ve noticed is most of the people who get taken out early have something in common.  They have a lack of options on the front end to keep them going.  Here then is the process I find consistently works well.

  1. Brainstorming – most people jump to options with very few, when you’ve got a challenge discipline yourself to brainstorm a massive number of options (more than 3 typically up to around 7, never get less than 3 preferably a few more, returns tend to diminish over 7) regardless of how crazy they might be, don’t judge them at this point that comes later. When you’ve got 7 options to solve your problem you’ll be much more able to keep going when one option fails.


  1. Evaluating – go through the 3-7 options and determine the likelihood of success, you’re just guessing based on what you know but also be aware that if something doesn’t seem like it will work you should consider brainstorming 3-7 ways you could make it work. For example make one option to get somewhere is to rent a helicopter and that seems incredibly impractical and maybe it is but say it was an option and you’re just constrained by resources there are probably other ways to get those resources.


  1. Selecting – based on the evaluation prioritize the highest probability of success and most efficient activities in order.


  1. Action – implement the options you’ve prioritized immediately in an attempt to get the result.


Go back to the beginning if you aren’t succeeding.  If you’re struggling with brainstorming here are some useful tips:

  • Chunk it down – this means break the problem into smaller pieces:
    • “what’s the problem?” “I need to get from a to b”
    • “ok, what’s the problem there?” “I don’t have a method”
    • “ok, what are the possible methods?” “Car, boat, plane or bus”
    • “ok, how come those aren’t options?” “I don’t have any of those”
    • “ok, who does have one of those?” “well there are these 8 people”
    • “perfect what do you need to use their resource?” etc.
    • See how by breaking the problem down into smaller pieces and working through it sequentially it can be easier to determine options


  • Step back from the problem – this is something useful you’ll often get too close to the problem and therefore not see that the problem isn’t really what you think it is and as a result there are other options to get around it:
    • “What’s the problem?” “My credit card is frozen”
    • “ok, what do you need your credit card for?” “to make for this ticket online”
    • “ok, what other ways might there be to pay for a ticket?” “I could borrow one from a friend and pay them back”
    • “perfect, do you actually need to book the ticket online?” “I could I guess book in person”
    • “Perfect could you do that with cash?” “Yes”
    • “Ok, great, what are you booking the ticket for?” “To take this girl for a date”
    • “Ok, are there other places you could take her for a date?” “Sure, I guess”
    • “What other places…”
    • You get the idea, see how at the start the fixation might have been on a frozen credit card and maybe there are few options to unfreeze it but by stepping back you see the real problem wasn’t the frozen credit card anyway it was the need for a ticket and as soon as you change the problem from “unfreezing the credit card” to “buying a ticket” a whole different set of resources become available. Then you discover that’s not even the issue the issue is planning a date and when you realize the problem is actually planning a date a whole other set of options again become available.  The point is by stepping back and reframing the problem you can open up all kinds of options that might be useful in getting where you want to go.

In practice the above example is illustrative, actual coaching wouldn’t likely go that smooth but if you practice these disciplines yourself you’ll get very good very fast.  This is the key, this problem solving process, this process of getting resourceful is a discipline.  It is often worth generating options even though it’s not necessary because the tendency to go after what we know blinds us to potentially better practices.

“The defining factor in life is never resources it’s resourcefulness” – Tony Robbins.

Have business or wealth building questions?  Lacking the resourcefulness to become rich?  Contact us with your questions and we’ll do what we can to help.  Click “Ask a Business Question” in the lower right corner of the screen to get answers!

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How Do You Get Banks to Lend You Money?

Banks have fairly straight forward lending criteria; it can be as simple as a formula you learn (and you should learn it if you are looking for bank financing whether a mortgage, line of credit, or other financing).  On the other hand it’s amazing that someone who doesn’t know what they are doing can walk into a bank and ask for a loan and get turned down, then someone else can walk in representing the exact same business with identical needs and get the loan.  What’s the difference?

Your first assumption might be the individual in question has a relationship with the banker, might have better credit, more personal assets, etc.  Those things might all be present and yes in certain circumstances those can make a difference, but those are not the differences we’re talking about.  In this case (and this is an actual example I have personal experience with and have seen happen many times) none of those details were different from the original bank visitor, in fact the second individual was merely acting as a representative of the first.

When I or many others like me did this what did we know and how did we act differently than the first person who couldn’t get the loan?

The answer lies in understanding the language of the banks, what they are looking for, and being committed to getting the result.  When you walk into the bank you need to be focused on what they want in order to be able to give them what they want in order to get what you want.  Banks aren’t out to deny you loans; they’d rather give you the loan provided it meets their criteria.

What banks care about is security, they are generally asset lenders and their most important concern is the assurance not from you but from what’s backing you that they’ll get repaid.  In other words if things go badly how are they protected?  If you can make it next to 100% that they’ll be protected if things go wrong you’ll be very likely to get the loan.

Think about it what are the three easiest loans to get?  First, mortgages, why?  Because the value of the house is typically greater than the amount of the loan so worst case scenario they can sell the house and recover most of their money.  Second, collateralizing life insurance policies.  Again this comes down to the same thing they know there is a fixed value to the life insurance policy so when in doubt they can recover their money from the asset.  Third, loans backed by cash or GIC deposits.  In other words if you walk into a bank and put down cash or a GIC as security the bank will essentially always give you a loan based on that security because they are protected, it’s like they are lending you your money back to you and who wouldn’t make that loan?

First lesson put yourself in the shoes of the lender.  The lender makes money by making the loan so they want to do so.  The lender is generally in a better position when you repay since it’s a hassle to go through the collection process if you default.  The first most important thing to the lender is that you repay.

Second lesson banks determine whether you’ll be likely to repay primarily through three factors.

  • Assets as security such as: real property vehicles, equipment, land, cash, bonds, securities, etc.
  • Cashflow on the personal side this is measured by before tax income, in the case of a business it’s profitability. Keep in mind when it comes to cashflow you need to show track record again think as the lender they want to know it’s steady income and not one time income, in other words do you have the income to make the debt payments?  With this in mind there’s one more factor to consider when it comes to cashflow and this is the relative amount of debt.  In other words it’s all well and good that you’ve got a certain income but if you’ve already borrowed so much money it consumes your whole cashflow then it’s not safe for the bank to lend you more.  This is called the debt service ratio.
  • Credit is essentially a measurement of how likely you are to repay.

Some banks will work and get resourceful to help you and find ways but generally that’s not the case.  Generally, they won’t know what resources you have available at your disposal in terms of different profit centers, different assets, etc. to call on to provide them with what they need so it’s up to you.  You’ll need to understand what types of loans are available to you and how to qualify for them.  For example, typically, lines of credit are more difficult to qualify for than loans for vehicle or property purchases simply because of the security.  Sometimes you can restructure debt to improve your debt service ratio, other times you can provide cross company guarantees to provide more cashflow to support a loan, the list goes.  The bottom line is when you walk into a bank if you do so with the understanding of what they are looking for and what you have available as resources you can present them with plans A, B, and C about how they are going to get paid back, in essence remove the risk from the deal for them and then they’ll be able to do all kinds of great things for you.

There are lots of little things to know that vary from bank to bank, but the above points form the essence of it.  The moment I learned what banks were after and was then able to engage in conversations with them about what resources I had available that I could manipulate to give them what they needed it become comparatively easy to get approved for loans.  You won’t always be able to borrow money from any institution this way, there are times when you won’t qualify, but it gives you a massive advantage.

For further detailed training and resources on this matter please check out our Richucation training programs.

Do Employees Risk as Much as Entrepreneurs?

I just read an Inc magazine article on “the only way to become rich”.  It stated two things:

  1. The only way to become rich is by starting/owning a business
  2. Employees risk has much as entrepreneurs, their upside is very limited (2-3% wage increases per year) while their downside is unlimited (losing their job)

I’ve heard similar arguments from groups like Rich Dad education in the past mentioning how risky it is to be an employee.

Both statements are false.

It is certainly true that in theory owning a business has more upside than being an employee, though the importance of “what business?” vs “what job?” be considered.  For example, there’s more potential upside in some investment banking careers than there is in a lot of micro businesses or practices of solopreneurs so you can’t accurately generalize.  That being said the true path to billionaire status is definitely through owning a business and in the pursuit of wealth there’s a solid reason to own a business if only for the tax advantages.  But the basic statements themselves aren’t true.

First there are plenty of individuals who have become rich through a combination of a good career and investing, in fact the average income and net worth among more prominent careers are probably higher than the same among average entrepreneurs (most entrepreneurs aren’t particularly financially successful, which is part of the reason for Richucation, to help address that gap).  In fact some very rich people have gotten there that way, Tim Cook CEO of Apple being a great example, he pursued a career and it’s paid off for him massively, probably better than being an entrepreneur ever would have paid off.  Not all careers are equal to be sure but some definitely represent fairly solid financial prospects especially if the earnings are saved and invested well.  In fact I’d generally recommend this as a more consistent path to at least a modicum of wealth for the average person than entrepreneurship, which quite frankly isn’t for everyone.

But what of this question of risk?  Don’t employees risk as much while benefitting from less upside on average?  No!  It is nonsense that they risk as much!  Pundits of this viewpoint seem to suggest that if you lose our job your life and wealth are over but that’s utter rubbish!

If you lose your job what happens?  Well, you’ve still got your knowledge, your relationships, your experience, your reputation, etc.  What do you do?  Go get another job.  Most people won’t be out of work for more than a few months particularly if they are skilled in a valuable field.  If employees wish to increase their value and consequently their earning potential far be it from being limited to a 3% per year wage increase they can pursue education either deeper in their own field or into another field, they can pursue promotions, etc.  This is how someone goes from earning $60k per year out of college to $120k per year only a few short years later…certainly not explainable by a mere 3% inflationary raise.  Yes, being an employee involves trading some of the volatility of being an entrepreneur for slightly lower downside and upside and depending on your goals it might not get you there but it is far from a sure way to avoid becoming rich or a doomed miserable existence.

Let’s look at the risk entrepreneurs take on?  Say you start a new venture and put everything into it today and a year later give up in failure what have you got?  Yes, just like in a job you’ve still got what you learned, your relationships, your reputation, etc.  You can still pick up the pieces and go get a job.  The difference is you’ve also lost all your seed capital, which for some people might mean having mortgaged their home or racked up steep credit card bills.  That’s not equivalent to what happens when an employee loses their job.

Being an entrepreneur isn’t for everyone and it’s not the only path to being rich and it is irresponsible to say so.  The path to riches is the same for everyone yes and business is definitely the most powerful vehicle, but not the only one and pointing to it as the direction takes the focus off the real mechanics:

  1. Learn – nothing helps you build wealth like targeted learning in fields that are valuable
  2. Get good value for your time and your money
  3. Sell what you’ve got profitably whether it is your education or time or the time or resources of others
  4. Scale what you’re doing profitably to have greater impact with less resources
  5. Invest in assets that will preserve and grow your wealth for you
  6. It helps a lot to be part of a team, no one does it alone

That’s how you become rich, yes with a million nuances to understand but none of those require a business, none of them require giving up a job.  You need to determine what’s best for you based on the life you want to live and what you wish to achieve and then set about to make it happen by applying the principles that will make it so.

If you’re just getting started, maybe thinking about leaving your job etc. and have questions how to do it, or maybe don’t want to leave your job but still want to get ahead and have questions contact us we’re here to help you can do so anytime by clicking “Ask a Business Question” floating at the bottom right of your screen.


You MUST Do This To Get What You Want

At the start of this year I set a number of goals as I do at the start of every year.  They varied wildly from financial and business goals to health and fitness goals to travel goals and relationship goals.  One example was transforming my wardrobe.  The previous year had been an attempt on my part to really increase the quality of my dress and I’d made significant strides but I’d taken a course a few months before where I’d seen how much further I had to go when compared to people I admire in the area.  Being able to be and being consistently one of the best dressed people in a room appealed to me and does to this day.

I did several things, first, I created a benchmark against which to measure myself on this goal.  Second, I put together a series of strategies on how I would achieve it (not crazy specifics just broad generalities).  Third, I figured out the cost and resolved to pay it.  This last point is critical.

In life no matter what there is always a cost for everything we want.  The cost isn’t necessarily financial it could be emotional or reputational or relational or something else but there is always a cost.  You don’t always have to pay the cost asked, you can shop around for market inefficiencies or you can negotiate the costs lower and you should, but there will always be a cost.  Here’s the thing those who aren’t willing to pay the price will never get what they want.  More those who are willing to pay the highest price will have the easiest job and greatest flexibility in getting what they want.

Today I talked to someone who wasn’t willing to pay the price…they said they were but their actions spoke differently.  They complained about someone lecturing them prior to being willing to give them what they wanted.  When asked “is it reasonable that they do so?” they responded “no”.  Being lectured is a small price, it happened to be the price the person who could help was requiring, the person didn’t need to accept it but then at the end of the day (and it was an urgent matter) they didn’t get what they wanted.

In so many positivity and goal setting type workshops and programs the emphasis is placed on what you want, but what you want is only 5% of the total picture and no the other 95% isn’t why you want it, that’s a bunch of impractical non-sense, you can want something for its own sake.  The 95% is the process of getting there and the price to be paid.

One of my favorite quotes is from legendary basketball coach Bobby Knight “Everyone has got the will to win.  It’s only those with the will to prepare that do win.”  In basketball as in many things preparation is the price you have to pay for victory.  Wealth building is the same.

No one builds wealth overnight.  As Bill Walsh is fond of saying “most of those who try to get rich quick go broke fast”.  Committing yourself to the long term, not trying to drag it out, but being willing to put in the time it might take to achieve the result will drastically increase your chances of getting there.

Want to become rich?  There are certain things you’ve got to do.  One of them ironically is negotiating down the price of most of the things in your life because if you’re consistently putting out more than you’re getting back you’ll end up with less, which is the opposite of rich.

You’ve got to be willing to sell because no one makes any money until a sale is made.  That doesn’t mean you have to be willing to cold call or knock or doors but if you’re not willing to you’ve immediately got less resources available at your disposal than your competitors who don’t have those rules and reservations.  You’ve got to surround yourself with great people and get rid of those who drag you down (that later part is tough for a lot of people).  You’ve got to fight for, gain and maintain ownership.

There is a key distinction here though between the price paid and how things works.  For example, it can be very tempting either when things are going badly or when a big opportunity shows up to violate your ethical standards to make the money.  You need to be very careful at this crossroads because there is a price to violating your ethical standards and very often what might seem good today is disastrous in the long run and that’s part of the point.  Those who achieve the most take a long term view with short term ambitions trying to make a lot happen quickly but being willing to plan long term to get the best results and one of those is building brand, reputation, something that lasts.  The subject of the value of durability (it’s huge) is for another post but always consider it an asset.

If you’ve got a business or wealth building goal and you’ve resolved that you’re willing to pay the price but don’t know the strategies to get there contact us we’re happy to help, a community that will support you is one of the most important factors in making those tough decisions and accelerating success.  In the meantime from now on when goal setting determine what the cost of that goal will likely be and resolve in advance to pay it.

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The Wrong Reason to Hire Someone

Today I got to re-witness a story I saw play out many times in my father’s life and business.  It’s a hard won lesson that some of you are going to take hard and be resistant to.  In spite of this I promise you it’s the right advice…especially for those who resist it.  Hopefully you’re not someone who has fallen into that trap and for you this advice will be self-evident.

I’ve had the good fortune over the last little while to know someone who has been struggling to find work.  My naturally tendency is to be soft hearted, generous, kind, etc.  All good qualities and in this case qualities I have to resist.  See my desire is to hire them for something, to come become a chef for me for my home meals (something I don’t need right now) or an internet marketing assistant (something they have zero qualifications for and would require massive training which their not motivated to undertake) or who knows what else.  The problem is this would do two things:

  1. It would be charity on my part effectively representing not a fair exchange and definitely not beneficial to me in fact likely costing me far more than the money


  1. Not serve that person even though they think it would and would like me to do it it would be a short term service at long term expense


Some problems simply aren’t solved short term and some problems are solved in the macro not the one off cases and this is painful for people who want to fixate on the small scale.  Not helping someone by paying for their trip to Mexico to a family member’s wedding, it’s hard they have to stay back (don’t get me wrong, you can do these things but they are pure charity and they aren’t addressing a root cause so the problem creating the situation will perpetuate, the best charity creates productivity but that’s for another discussion).  There are lots of examples.

Growing up I saw my father do this again and again in his small business, take pity on someone, see how he could help them and give them a job for which they were ill suited and resulted in a loss for him.  On the surface this seems kind hearted, it is in a sense, but it’s a bad move for everyone for a number of reasons:

  1. It’s just plain a stupid financial decision, there’s a stage and time for philanthropy and a way to do it well and this is not it
  2. It denies someone more skilled, motivated, and capable from having the same job
  3. It hurts your company reputation and brings the whole organization down
  4. It doesn’t build up the person you’re hiring so it perpetuates behavior that needs to change
  5. It leaves you with less to give in areas that you can have a higher impact

Among other faults it’s much like the give a man a fish vs teach a man to fish analogy.

I’ve made this mistake on a few occasions both lending money and hiring people sometimes literally to the point where I took money I legitimately needed (possibly as much or more so than them) and gave it away never to be returned.

The best result for everyone comes from win-win interactions, from creating the best net effect so there’s more abundance to go around in the long run.  This is a microcosm approach that seems good up close but hurts overall.

Learn the lesson, hire the best people you can every time and if you’d like to do charity or philanthropy do that separate from business and do it in a way that maximizes the impact you can make with each hour and each dollar and you’ll have the biggest possible effect in changing the world.

If you’d like some assistance or mentorship on how to hire the best people or on other business issues contact us and we’ll be happy to help.