While we have a different definition of “rich” (money not being enough, not by a long shot), we’ll go ahead and focus on the money part here. The most important word in the title is the word “alone”. While successful people will tell you they never made it alone, we’ve found that this is usually false. What they are saying is that they didn’t make a lot of money until they had a bigger organization. The original time when they became rich (say a million or two for a single person) was more likely done alone than with some “life coach” or “partner”. This is because you need to be extremely good at something first before you can have a chance at getting rich.
Mentor / Partnership Myth: We’ve noticed many people ask for a “mentor or partner”. Our view of a mentor/partner is an extremely successful guy you talk to for *maybe* 15 minutes twice a year (10 minutes would be more accurate). That is all. Why would a successful person sit down and hold a person’s hand from start to finish (unless you’re his son/daughter)? It’s irrational. Instead your mentor/partner could also be “books”. Which of course is the most common resource for getting rich. No surprise.This is also what a large percentage of the rich population will recommend as well.
A Few People Get Rich Through Nepotism: Now that we have dispelled this hand holding idea, another good one is the nepotism idea. Sure, some people who are ultra rich will be able to pass down the wealth to their kids. The reality? The vast majority of people who become millionaires in any given year are first generation millionaires. This has been proven true year after year for decades now. Since most people have a distain for capitalism and the rich, they will fight this fact to death. Ensuring that they will never get rich in the process. The reality is that generational hand downs usually lead to one or two capitulations. One person gets rich, his kids end up being “okay” and by the next turn of the century it’s gone as all of the personality traits have been lost.
What Do You Do? So. We know that walking around “networking” is a waste of time (an incredible waste for both parties especially if you have no skills). This leads people with a black hole. Wheel spinning usually occurs where they say things like “where do i start” and then go to a “entrepreneur class”. This is again inefficient. No one can teach someone to be an entrepreneur.
The answer is in practical skills. The first and most important thing you have to do is figure out what you are good at. This is something that needs to be done at a young age. We’d argue it should be known by age 15-17 at the latest (probably too late). While this sounds bad it is likely accurate. If someone knows they are exceptional in topic A at age 15-17 they will easily widdle down the list of jobs/careers/businesses that need his or her special abilities.
Before we get negative comments about how early you must start, the best time to start is always today. If you have a general idea of what you’re good at, you have a starting point. Similarly, if you know you’re terrible at certain activities, avoid them like the plague (crossing all of them off the list). We used 15-17 because this is when the really rich people know they have a talent, most figure it out in their 20s and end up being “rich” but not ultra rich. Rich being $5-15 million, ultra rich being $100M+.
The one item to be extremely careful of here is “being bad at something” and “not liking something”.
That last item in quotes is usually where we see people mess up. Some people are “scared” to sell, but we can tell in seconds that they would be amazing at the position if they tried. This is why we tell people passion and interests are largely useless for making money. Money is only made when you’re good at something and there is a demand for that skill. If you’re great at sales but don’t want to learn, you’ve essentially lost the game from day one. So before moving on remember that quote. Hating something doesn’t mean you’re bad at it. Ask yourself if it makes money first, if you’re rich you can do what you like for the rest of your life anyway.
Read Aggressively About the Topic: At this point you should have at least a few ideas about your talents. No one can do that for you. Now you have to read to “learn” the trade. Reading is interesting since we’ve essentially stopped the last 3-5 years after succeeding (1-3 books a year now). Why? Reading essentially tells you things to avoid. This is a critical part of understanding books.
If everyone gets the same information on things to avoid, the only thing left is execution. Similar to any sport, business is essentially the same. You can give the same guy the same technique and coaching but executing is going to vary enormously from person to person. Then your second hurdle is quick and fast decision making (when there are situations that appear to be a 50/50 or 45/55 and you make the right move based on “feel/gut instinct”).
So to recap, Your first step is figuring out what you’re actually talented at (passion is for losers chasing dreams), then you’re going to read aggressively about these topics to avoid the major flaws. The major flaws (techniques) will then force you to execute on what is supposed to be done. When you reach this stage you’re now ideally down to a handful of skills.
What do you do with these handful of skills? You figure out which one is the most bearable. That is right. If you are good at say five different things but can’t stand two of them that’s actually fine. Stick with the three items that are either “okay” and more ideally “fun”. Remember, we already assume that all of these skills payout roughly the same. If you have two talents: 1) that makes no real money that you love and 2) one that would make millions that you hate… Guess what? You get to choose number 2. When you get rich you can then go back to number 1. But. We doubt you’ll be sick of winning and will eventually love the task you hated to begin with.
Make the Value as High as Possible: Now that you have your skill, you have to ask “how do i maximize this”. The answer is always the same: 1) ownership followed by 2) performance. If you can’t create ownership, then you’re better off going into performance. Ownership always wins because the business can be sold at a *multiple* of what is being earned. If you earn $200K in a performance based career using the skill that’s awesome. What is more awesome? Making $200K a year by owning an actual company because that can now be sold for ~$1M in addition to the $200K you’re already making. As usual, we cannot tell a random person if he should start a business or go into a performance based position. It is up to the individual to think creatively and decide which route is possible.
What is “creative”? Creative is when you realize you can outsource or find someone to fill in the gap. Why? Well if you can outsource or fill in the gap with someone else, you might be able to go down an ownership route instead of a performance route immediately. As a basic example, if you can sell homes at above market rates and someone else is able to fix homes below market rate… there is a clear path to success where both people win. Ideally, you only pay the person (trade their time for money) while you take on the equity.
No Such Thing as 50/50: Similar to the partnership idea that we killed in the first paragraph, there is practically no situation where the value being added is 50/50. So, don’t put yourself in that situation. We just gave away a big hint. If you have two skills where you’re extremely talented, decide which one commands the most value relative to the task. Why? Now it is not possible to lose ownership.
If you have two tasks that need to be done and 100 people can do task 1 and 1,000 people could do task 2… The answer is to choose task 1. The market rate for task two is likely a lot lower and there is no way you’ll be stuck in a situation where you own less than 51% of the asset. Which of course means you should never take less than 51% of anything you get involved in with your valuable time (stock ownership is not the same since you’re not contributing any time to the company).
Usually One Sale: A quick recap of what usually happens: 1) person realizes most millionaires are first generation and rarely inherited wealth, 2) person throws a ton of spaghetti against the wall to figure out where his skills are, 3) person then reads on his own time – free!, 4) narrows the list and figures out only two of the skills will be valuable in the future and make him money, 5) figures out a way to create an ownership scenario, 6) finds a way to make sure he is always above 51% equity so he can be the decision maker in the end and 7) never wastes his time looking for 50/50 situations since he knows people don’t contribute equally.
The result? Most people sell at least one asset. That’s really all there is to it. You actually don’t need to have an incredibly successful business. If you got up to $200K in profits per year, you’re essentially a millionaire (assumes 5x exit value). The tricky part? Knowing what you’re going to do next. It’s rare for someone to exit their first successful idea until they know with certainty what they will do next. We are going to emphasize that this paragraph and post is a general framework and there are always exceptions to the rule (no need to barrage the comments section with “stories that break the mold”, these stories are likely due to a different decision based on a gut instinct).
To Get Wealthy You Have to Scale: While this is a good framework for being well off (a single person with a couple million is certainly well off), scale is needed to become truly wealthy. This is also why many people think they need “business partners”. They see wealthy people give credit to their teams and tell them that without the team they wouldn’t have made it. While true, people rarely go back to their starting point (their first million or two) – usually made largely alone due to a specific skill. They give credit to their team because they are working for a wage and don’t receive equity. Exactly what you want from an employee.
If you’re interested in really getting wealthy now the game comes down to scaling a product. A product, by the definition here, is anything that can be constantly sold without any of your time being spent on the sale.
We suggest reading that sentence carefully because you can slice the answer in many ways. If you are in the real estate business selling houses, we would argue that the only “product” sale, is when *someone else* sells a home for your company/corporation. Why? Well the asset was sold, you made money off of an employee selling the asset and didn’t do anything (except the paperwork that is under the Company name). Similarly, if you sell a product that has a recurring revenue stream attached to it, we would say the initial sale was not a product sale and all the revenue after the initial sale *is* a product sale.
We realize this definition will not sit well with most people. If you sold a car to someone people would fight for days saying that it was a product sale. We use the above definition because it forces people to think of ways to earn without using any of their time. Anyone who works online knows the feeling the best. They wake up and see they sold 20+ units while they were asleep. They literally did nothing. They click refresh and see higher numbers in the account. This is not the same feeling compared to a hard sale when you work to close something. The feeling of selling something using your time is strenuous and feels like relief while the money being made in your sleep is relaxing.
What Allows You to Sell In Your Sleep: There are many ways to do this (as usual many ways to get rich!). That said the common ways are 1) recurring revenue, 2) brands and 3) employees. In the past, the employee route was the most common. This is slowly becoming a relic as many processes done by people are going away (the Internet has helped solve a lot of overhead issues). That said it still works. Any time you can pay someone to do something you can calculate the return in an excel sheet. Paying someone $50K when they generate a profit of $100K is an easy decision.
Since we stated that this was an old way to get rich, you can guess our opinion. We don’t like the model. Dealing with people is difficult. No we are not referring to people being bad. We’re referring to the management of it. We think the employee route causes a lot more stress because you’re essentially taking responsibility for the livelihood of someone you barely know. It does not feel good to fire someone who needs the money. We’ll never understand why people enjoy seeing others fail (a common theme in the USA) but it exists today (zero sum mentality).
Instead, we recommend the recurring revenue and outsourcing model instead. This way you can pay someone for a task (ideally pay them a little more than they usually make) and keep the business model recurring. This way you know you can go back to the outsourced work (assuming they did a good job) and you can earn money in your sleep. A large win to say the least.
The final item is a real brand. This is an extremely slippery slope. A real brand is something that has zero products that are sub-par. This means a real brand should not offer a wide range of offerings. It should remain within a specific price band and deviate slightly (unless you’re running a billion dollar company which we know nothing about!). The reason for this is simple (LTV of customer). As soon as the quality breaks a certain range it is difficult to make it back into the game. Use clothing as an example. High end clothing brands have a limited range. If their products end up at Nordstroms rack… they are out of luck. You don’t want luxury items to suddenly appear in every outlet, otherwise it wouldn’t be rare/luxurious anymore, brand is damaged margins get ruined.
Steps to Think About
Can it Become a Product: With the broad steps out of the way, most people don’t ask this question. People who live the “digital nomad life” have essentially created jobs for themselves that are higher risk in nature. If you run a blog for example, the value is actually in the content. Since the value is in the content, the only way it can be valued is based on any product that is already available. You have to discount the value of the users, the ad revenue etc. because the number of people would change dramatically if the author changed. Similarly, if someone offered consulting that would also be a job because the consulting is done by one person. Think this question through deeply before deciding if a skill you have will occupy a lot of your time.
What is Most Valuable for the Product: This is a loaded question. If the product is a commodity, then the value is probably in the brand/marketing. Those are two very different things. Marketing is something that someone can do quickly while a real brand (Patek for example) takes years to build. We’re guessing that most of the people reading this (unless they are rich already) will likely find something that is more commodity. If they have no marketing skills and no brand, then they are probably out of luck for quite some time. The alternative would be “market research” where you essentially take a franchise of a well known brand and place it into an area where it will be popular (essentially the brick and mortar model).
How Much of This Will Automate: Walk through all of the necessary items. Can it actually be automated? If so you’ve found something extremely good. Selling diet pills is probably the most obvious of the group (glorified caffeine pills). The stuff is all the same. Re-packaged and re-branded as something new with the same ingredients + a new tasty flavor (or something just as ridiculous). The good news is that almost all of it is automated. It’s actually harder to have custom Hats/T-shirts made than have diet pills made when you look at the total cost of the goods (harder to return partially used diet pills compared to a return on a shirt!). Since the packaging can be made pretty as well (for cheap) the ability to mass produce and have lower headaches is clear as day. As usual, any cream, perfume, cologne, small pill, ointment etc… is extremely high margin.
What is The Cost of the Skills I Don’t Have: Since you might have to bring someone else in, calculate how much you’re going to need per month/week etc to make sure you have it done correctly. As a basic example, if you plan to target high-end clients, design and brand are critical. This means you will be spending a lot more and it will influence your success quite a bit. The upside is higher margins. If you start with the affiliate route (something we have recommended an incredible number of times), you’ll care a lot less about design and be focused on sales/marketing since terribly designed websites still have incredible conversion numbers.
What is the Probability of Success: Take the amount you expect to make and multiply it by this probability. This is all there is to it. Even if you think it has a 20% chance of success it could be worth it. Why? Well if it costs $50K to start but the payout is $1M… Then you should probably do it. It means your expected payout is $200K for a $50K investment. Something many people would take hand over fist. Similar to getting better than 50/50 odds on a coin flip, you should probably say yes.
This is exactly why we laugh when people say most businesses fail. Yes that is true but they don’t ask the better question. How many of these “failed” businesses should *not* have been attempted. That is the real question. if 95% of businesses fail that doesn’t mean anything. If the payout of the 5% was over the total cost it should have been attempted every single time.
That wraps it up for now, let us know in the comments if your rich friends had a similar experience. We have no doubt that many will vary but the trend is likely similar. Getting rich alone is *perhaps* the easiest way to get rich.
