THE FORMULA: HOW TO PREDICTABLY BECOME A RICH ENTREPRENEUR IN YOUR SMALL BUSINESS
Would you like to become rich the year before you die?
Of course not!
In general being rich isn’t worth much to you. It’s what the wealth does for you not the wealth itself that matters.
In other words the longer you have the wealth the more valuable it is to you in very real terms.
This means it’s not OK just to become rich, you need to do it as early as possible or what’s the point? (I guess you could be doing it for your kids but no one will spend your money on what you value as well as you).
Let me ask you another question…
How would you feel to struggle your whole life only to never become rich at all?
Sure, it’s better to have given it your all and failed then never to have tried at all.
But, what if there was something else you could have pursued and could have succeeded at?
What did you have to give up only to fail?
So it’s not good enough to pursue becoming rich even becoming rich as early as possible.
What’s important is predictably becoming rich so all the sacrifices are worth something they pay off and you enjoy the fruits of your labor, which is what you go into this for in the first place right?
This was my thought process and it led me to a very simple question.
How do I have to think differently to get results faster than most people do and more predictably than most people do?
The answer to me is obvious:
- I need to identify all the things I can’t become rich without and I better do them or I’ll never make it there.
- I better eliminate everything unnecessary so I can focus on the things that really matter.
This is where I idea of The Essentials of Becoming Rich comes from.
Turns out answering those questions isn’t actually that easy in fact it took me about 8-9 years of reading, study, testing, etc. to really get clear not just on the surface level essentials but the essentials within those essentials that actually make accomplishing them possible.
Now I’m sharing them with you in what I call The Formula.
Here’s what you need to know about The Formula.
It’s not about some trends or technologies which are going to change from year to year. They are essential precisely because they are present in EVERYTHING.
No matter what business you’re in, no matter what time you’re in as you’ll see it is impossible to predictably become rich without these.
The flip side is if you nail these you’ll inevitably become rich over time.
Now, this isn’t easy.
If it was easy everyone would be doing it and since we know the 1% aren’t that rich and there are by definition only 1% of them we know 99.9% of people aren’t doing it. Mostly, they don’t know how or don’t care to, which largely goes back to not knowing how.
I’m going to show you how, it’s going to make perfect logical sense to you and then you can do whatever you want with it.
If you’re driven you can join us and we’ll work on it together because I really find business and entrepreneurship and investing and building and creating, quite fun.
To reiterate – I’m not going to talk to you about any specific business or product or service or idea.
If you look at any industry you’re going to see winners and losers.
What you’ll come to understand here applies to all the winners to the extent they win financially and is ignored by the losers to the extent they lose.
You can literally look at people’s financial success and measure them against how well they apply this formula and figure out with a high degree of accuracy how financially successful they are, why, and what the gaps are to go to the next level.
Big claim right?
Well you tell me as we go along.
Let’s get started.
What does it mean to be rich?
It means having a lot of money.
If you aren’t rich, which I presume you’re not at least not as rich as you’d like because you’re reading this, it’s because you don’t have a lot of money.
Let’s clarify for a minute because we might have some objectors. When we say “money” we don’t necessarily mean cash in the bank.
Money includes any sort of cash equivalents so might include stocks, bonds, profitable real estate, gold, silver, etc. In other words anything giving you a financial return that you could sell to get cash.
This does not include in my definition things like a large wardrobe of clothes, boats, vehicles etc. Those things don’t provide a return, those are things you buy with your wealth they don’t represent reasonable stores of wealth themselves.
Anyway, we’re getting off track.
So, you don’t have a lot of money, which means you need to get money (or equivalents).
We’ll talk more in a minute about how to do that, first the basics.
Then it’s not enough simply to get money you’ve got to actually keep it.
Again, we’ll talk about keeping it in a minute since that’s a part of the formula.
Third, most everyone on the planet gets money and most keep at least some of it and they aren’t rich. So what you need to do is to get LOTS and keep LOTS then by definition you’ll be rich.
This probably seems stupid simple to you at this point and really obvious, bear with me, remember I’m going back to the essentials so we eliminate everything unnecessary and can focus on what truly matters.
So beginning with the end in mind we need not just a little, we need A LOT – we call this UPSIDE. The first problem most people have is what they pursue in their lives has very little upside.
We can determine this by asking the question “what’s the best that could happen?”
For example, you’re a welder what’s the best income you could make?
You look around you, you see the top welders are making $30 or $50 or $80 or $120 per hour. Whatever it is it’s not very high in the scale of being rich.
So even if you worked 80 hours a week (about 4000 hours per year) you still wouldn’t do especially well, definitely not be in the 0.1% of income earners, which is pretty much the minimum you need to be rich.
Let’s not forget very few people will do as well as “the best that could happen”.
There’s an easy way to measure this.
You can do this either by affecting a lot of people or affecting them in a very major way. Preferably some combination of both but it’s easier to affect a lot of people.
Think about the biggest most successful companies. How many people are affected by their products or services? Millions, in fact you won’t find a single exception (though you’ll find some cases where this applies indirectly), which is why it’s an essential.
But if you get the foundation wrong being big works in reverse hurting you more as opposed to helping you more…the pendulum swings both ways. You can win big or lose big so you’ve got to first nail the foundation, which is where we’ll circle back to now.
What do we mean by “The Foundation” when we’re talking about becoming rich?
We’re talking about profit.
Profit is very simple, it’s the difference between how much you make and how much you spend.
Put another way it’s the difference between how much you get and how much you give.
Notice something very important here for all the people who talk lots about giving (you do have to give and we’ll cover this in a moment), giving too much can make you broke.
The key is to give a lot profitably.
As we'll see, the idea is to give something that’s worth less to you than what you receive while it’s worth more to the other party than what they are giving you in exchange.
This creates a balance in the market and is a nice win-win, which means it can be done over and over again, which creates growth and hence compounds to riches.
We’re ahead of ourselves again though.
We need to start at the very beginning.
How do you get money?
People will say all sorts of stuff about giving value, providing a service, etc. but it’s actually more basic than that.
There’s only one way to get money and that’s for someone who has money to give it to you.
The process of getting someone who has money to give us money we call MARKETING.
So, the most basic skill and not surprisingly the best predictor of entrepreneurial success is the ability to effectively market.
There’s 7 basic marketing skills to learn each with sub-skills so we won’t cover those here, but just give the basics.
The easiest way to get someone to give you money is to offer them something of value in exchange for the money.
In other words, you find someone who has money and has demand (something they want or is of value to them that they don’t currently have) and you offer to meet this demand in exchange for an appropriate amount of money.
The easiest way to do this is to find someone who is already spending money and find a way to meet their demand better/cheaper/faster/easier than they were before in exchange for the money they were spending anyway.
Coming up with that solution that’s better/cheaper/faster/easier is a whole other problem we’ll touch on in a minute.
Follow this process (yes I realize the actual pieces are more complex that’s why we’ve got dozens of trainings and tools to help you navigate through the process as it applies in your specific business because the methods vary based on who the customer is what you’re selling etc.) and voila you’ve got money!
Now how do you keep the money?
This might seem like a really basic question because you think “of course it’s easy I just don’t spend it” but you’d be mistaken tons and tons of people in fact some of the biggest companies in the world make a lot of money without keeping it in fact often spend more than they make and go into debt.
Why is it so hard?
Well realize the process of finding someone who had money, identifying their demand, understanding them, coming up with a solution, communicating to their demand, delivering on the transaction and ultimately concluding it all cost money.
There’s a good chance this whole process cost as much as they gave you or more and this is where a lot of people go wrong.
Remember we mentioned the problem of making up for losing money with volume and how it’s not good enough to increase volume if you don’t have a solid foundation?
Well this is the second part of the solid foundation.
Volume is only great once you’ve figured out how both to get money for the increase in volume and keep it. Then you can scale up to a huge volume.
This is why businesses naturally go through 5 stages of development and why following those phases in order is so important to success.
So, how do you actually keep more?
You start by realizing that anytime you spend money (or pretty much anytime) there’s an exchange.
You are giving something up in trade for what you get in return just like your customer did in the earlier example.
The key is making sure you’re getting more for what you’re spending than you’re giving up.
Don’t worry this doesn’t need to be unethical or thievery because value is contextual “one man’s trash is another man’s treasure” as they say.
Your job is to identify where something is of less value so you can move it to where it is of greater value. The more you can do this the more money you’ll keep over time.
I should add here at some point because the whole point isn’t just to make and keep lots of money. It’s to enjoy and benefit from the fruits of that money so you’ll spend money without monetary reward and instead this should feed your values.
For example, I love traveling unique memorable experiences I believe these enrich me, they also cost me money. I’d have a lot more money if I didn’t spend on these but I believe in terms of my own values I’d be a lot poorer person.
This being said, when it comes to becoming financially rich you want a financial return on your expenses.
Let’s look at a quick example.
Say you’re a driver and that’s how you’re making money. You’re getting money by driving people around.
If you spend too much on fuel or on your vehicle you’ll lose out.
It might be that having a nicer car can help you to make more money but if you’re not making that much extra compared with what it’s costing you, then you shouldn’t do it.
Sound logical? Of course it is, but most people aren’t in the habit of thinking of each expense (btw expenses come in the form of time, risk, opportunity, reputation, relationships, etc. as well as money) as an input and looking to minimize the input while maximizing the output.
This is important because we’ve got limited resources so we want to craft what I call The Dream Life Ratio to get the best relationship between inputs and outputs.
The process of minimizing inputs and maximizing outputs is also a learnable skill, which is great.
This is the foundation you should focus on in pursuing wealth.
- Identify and fulfill on demand of people who have money in order to get them to give you money.
- Reduce your inputs and increase the corresponding outputs.
With this foundation you’ve made money and kept money and you’re ready to scale big, to grow your impact.
By the way, for anyone who cares about having a huge impact, this fundamental applies. You can’t have a big sustainable impact if it doesn’t produce more than it consumes or it will burn itself out.
This three part cycle:
Get – Keep – Grow
Is what we call the core of The Formula.
The easiest way to get someone to give you money is to offer them something of value in exchange for the money.
It’s the core because everything else is built around it.
The remaining three parts concern HOW to successfully do those three aspects at the core.
They are just as essential as the three elements of the core are as you’ll see.
Let me check in with you is this all making sense? If not, maybe go back and re-read the logic should be super simple and easy to follow here.
Notice how every one of these things is absolutely essential. It’s literally impossible to become rich without any of those three Get – Keep – Grow.
Likewise, if you increase any of those you’ll automatically become wealthier.
You might call this Automatic Wealth.
Not following the last point?
Ok, it’s like this. If you get more while spending the same you’ll automatically keep more, which means you’ve got more.
If you get the same but spend less you’ll automatically keep more, which means you’ve got more.
If you’ve got a profitable ratio of Get and Keep then you simply grow the impact bigger you’ll automatically magnify your wealth.
In the grand scheme Grow is the most important.
After all, McDonald’s isn’t the biggest burger company because they get the most for each burger or keep the most for each burger they make. It’s because they sell more burgers profitably than anyone else (yes I know the story is they make the money on real estate, the point is the same, their wealth comes from scale not from any individual transaction or asset).
This brings us to the last three Essentials – the ones we use to make the core three possible.
These are most easily expressed as:
Learn - Collaborate - Build
Let’s start with learn.
- How do we know who to has money?
- How do we know how to meet their demand?
- How do we communicate with them successfully?
- How do we decrease our inputs?
- How do we increase our outputs?
- How do we grow the impact of this whole thing?
Simple…well not so simple but simple on the surface. We need to learn and we don’t just want book knowledge we want to develop skills.
We call this the process of Mastery.
And not just any mastery, mastery that will add value within our process (yet another example of minimizing inputs and maximizing outputs).
If no one values your mastery it’s got zero output and your input learning was wasted.
If on the other hand you spend too much time, energy, money, etc. developing the mastery (input) then you might lose out if the output isn’t really huge.
Skills are the leverage point to transform our lives because the only thing we truly have power over is our own decisions and behaviors.
Conditioning ourselves to do more efficient and effective behaviors we call mastery.
You could get lucky and do the right things by fluke (hard to sustain) but we’ve already established we’re not interested in luck, we want to become rich PREDICTABLY so the way to do that is with skills.
Mastery will get you a long way but here’s the truth:
It doesn’t matter how good you are, you can’t do it all on your own.
How do you grow beyond yourself
You’ve only have so much time, so much strength, so much memory and so many resources Interestingly, the easiest way to learn is by taking advantage of the learning of others, which is why you’re reading this.
There are no truly self-made billionaires. They all had a team and you need one too.
The thing is people can be your greatest asset or your greatest liability. In other words not all teams are good.
This as much as learning is the secret to growth.
In fact you can get away without a lot of the rest if you’ve got a great team supporting you.
Another thing remember we were talking about opportunities with high upside?
What’s the easiest most predictable way to find such an opportunity?
Collaborating with others of course. There’s no shortage of opportunities out there you just need to find someone who has identified them. This is how Steve Jobs found the personal computer and the MacIntosh.
It’s also how you can take a good foundation with low upside and scale it up into something with huge upside.
As always there’s a set of skills to learn here. We call this skillset Leverage Team.
The Difference between income and wealth
So, you’ve got the expertise and you’ve got the team...what’s missing?
This is probably the biggest distinction people who aren’t rich don’t get.
The greatest wealth is built in ownership and the easiest way to keep and grow is to invest what you make.
It goes way beyond this though.
How do you decrease your inputs while increasing your outputs? Build it once and use it over and over again, each use decreases the input relative to the output. This allows you to make a more compelling offer to your customers.
This allows you over time to keep more of what you make.
This is the skill not only of building ownership but understanding assets (something you build once and provides value over and over) and most importantly leveraging those assets together to multiply their value, which is the secret most companies never discover but grows your wealth faster than anything else.
Confused a little?
Let’s go back to the basics.
First, when you grow a company the real value isn’t just in the profit the company produces, it’s in what the company is worth if you sell it.
Companies can be worth 3 – 100 times what they are earning depending on a whole range of factors.
Imagine you increase the profits of your company by $100k but grow your net worth in the process by $2 million.
This is only worthwhile though if you actually own the company otherwise you just added the net worth to someone else.
This isn’t just true of the company itself but of the assets within the company.
Rather than simply solving a problem once, maybe you develop some technology to solve it over and over again with incredible efficiency.
This is the difference between working a business and building a business.
This is what gives you freedom and makes your business more competitive than others.
What should you build?
Assets that help you to make more, keep more, and grow bigger & faster.
How do you know what to build or how do you actually build it?
You develop mastery and leverage a team.
These six things:
They are the 6 pieces of The Formula.
They are the 6 Essentials of Becoming a Rich Entreprenur in Your Business.
They are the Essentials of Building a Super Profitable Business.
They are the things you MUST focus on if you want to become rich – you can let go of most of the rest to make your job easier and faster.
They are the skills you must develop if you’re going to make becoming rich PREDICTABLE.
They all work together.
Getting more through Profitable Marketing makes it easier to make investments that give you great deals, give you the resources to grow impact, tell you what to master based on market demands, allow you to afford a great team, and give you resources to multiply.
Keeping more through Getting Deals makes your value proposition more compelling so your marketing is more profitable, leaves you with more to invest in growing impact, this helps to get a great team, and of course you can get better returns on your ownership.
Growing Impact increases awareness to help your marketing, economies of scale allow you to negotiate better deals, it makes your mastery pay off more, you attract a higher level team, and makes ownership more valuable.
And so on.
Obviously, these 6 things aren’t easy but where can you start?
Start with what you can influence and control your own behaviors, which means your mastery, your learning, your skills.
What are the most valuable skills for you to develop now?
Could you benefit from learning to learn better and faster?
If so it will always pay off to develop Mastery Skills.
If you’ve got a Profitable Sales & Marketing Machine then you usually move to optimizing and growing.
You do this by learning to Get Deals to boost your profits fast.
Then to Grow Impact to scale from thousands to millions.
As you grow you’ll start having issues with team.
- How do you find the right people?
- How do you get the most out of them?
- How do you make them productive?
- How do you manage effectively?
- How do you train and fire?
- How do be a great leader?
These are all skills of Leveraging Team.
Finally of course is the heart of it all, the question of ownership of building assets of reinvesting your profits into other investments and ventures.
This is the field of Multiply Ownership.
Wherever you’re at the key if you want to become rich, especially predictably rich as quickly as possible is to focus on these essentials to strip away the unnecessary to put your time and effort into what will move the needle in your life so you’re able to enjoy more of it, to benefit from your efforts and not simply pour more after something that never shows up.
This is The Formula.
I hope you’ll join us.