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I guess my post on how to become a millionaire is passé.
This article from Forbes may not make you a billionaire (unless you had two billion to start with), but it does make three excellent points.
The first secret of the truly rich is that they are never afraid to fail.
To separate yourself from the pack, you usually need to take a chance. But, as the article states, it must be a “calculated risk”. If not, you should head to Las Vegas and play roulette with your capital. Less work and the buffets are much better. And the chances of success are about equal.
Do not be afraid to run the risk of failure, if you want to succeed. Just do it wisely.
The second secret of the truly rich is that they look creatively at problems to find new revenue sources.
Following the herd is not the road to riches. Safe, and possible a very good living, but you will never reach the highest levels of success.
Always look for new ways to add value to your customers’ experience. This may be in product improvements. Or, it might be new products or services that complement your existing offering.
Note that you want to assist your customers and not simply sell them things. If you satisfy their needs, they will buy. If you try and sell them products or services they do not want, you will quickly lose them as sources of revenue.
Despite the author’s stated point, revenue is not necessarily the end all. If you can “squeeze the lemon” and reduce your costs, you will add to your profitability. At the end of the day, it is profit (i.e. the cash in your wallet), not revenue, that matters more.
See tomorrow’s post, Squeezing the Lemon, for an example of the interrelation between revenue, cost, and profitability.
The third secret of the truly rich is that they marry well.
Marry well in the sense that you have a highly supportive spouse. Emotionally, that is. Although financially is never a negative.
I would extend this advice to friends and associates as well.
Surround yourself with people who support you and do not try to ruin your dreams. I am not saying to only associate with “yes men” who tell you want you want to hear. You need people to tell you the truth. But you do not need people around that are negative influences on your objectives, due to their own fears, jealousies, and risk aversion.
A Real Life Example
In the mid 1990s, two friends and I started a publicly traded junior oil and gas company. Our experience and knowledge in the industry were limited. One person was a Petroleum Land Manager. Another a Tax Specialist with oil and gas experience. I had worked in the oil services industry as a senior Controller and Board member. So we had some experience, but not very much. Many people laughed at us and predicted a quick end.
We were relatively young and wanted to take a chance on running our own business. We all had marketable skills so that if the venture did not succeed we would survive. As a result, we were not afraid to fail.
But not being afraid to fail is not the same as not caring about success. You need to act as though it is life and death.
Before setting up the business we looked at every possible scenario and risk that might arise. We developed a strong business plan and any risks we took were well considered.
One of the main drivers for starting the business was our creativity. We may not have been too strong in oil knowledge, but we were excellent at finding and structuring tax effective deals. This gave us an enormous advantage when negotiating with others who did not fully understand tax and finance. And most people that we negotiated with were strong on the business side but relatively weak on the finance end. As a result, we were able to successfully acquire properties on beneficial after-tax bases.
When we began, we spent long days getting up to speed. We also left well paying jobs elsewhere and received only $2000 per month in salary from our company. After tax, there was not much left to live on. But we believed in our business model and left our money in the company rather than taking it in salary. Two of us were single, but the third had a wife and two children to support. Without the patience and understanding of his wife, our Land Manager could not have joined in the venture. Without him, we could not have began.
Fortunately, at the end of the day, when the company was sold, her patience was more than rewarded.
As for the people that laughed at us, many were individuals who worked in the accounting and oil industry themselves. The fact that they thought we had no chance of success was concerning but we focussed on two things.
One, we had confidence in ourselves. We knew that our business plan was extremely sound, and that we had assessed our business risks and properly planned for them. We were prepared to start a business.
Two, we considered the sources of the negativity. Almost all had taken the safe path. Partners in accounting firms, middle management in large oil companies; people that had never taken the risk or responsibility to start and manage their own ventures. To have these types criticize our efforts meant nothing. We saw the criticisms merely as projections of their own fears and jealousies.
While we never became billionaires from this business, it was a highly profitable venture. In terms of money, in developing the skills to continue in future ventures, and in the confidence to succeed.
