The Pinoy Entrepreneur

According to doctors Thomas Stanley and William Danko, it is "seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes.  Wealth is more often the result of a LIFESTYLE of hard work, perseverance, planning, and, most of all, self-discipline."

Furthermore, they found out that affluent people share seven common denominators in their lifestyles that made them accumulate more wealth.    

These wealthy people know how to live below their means.  They are frugal and not wasteful.  Being frugal is the cornerstone of wealth generation.  People are led to believe that affluent people have high consumption lifestyles.  This is false.  Affluent people are actually very frugal.  They only spend what they can afford.

In the study, the authors also pointed out the both parents or spouses must posses this quality in order to make it easier to amass wealth for the household.  Even if only one spouse is a high consumer, it would a lot tougher to accumulate wealth.   

Millionaires know how to plan, budget, and control expenses.  They set out daily, weekly, monthly, and yearly goals.  They stick to the plan and push through with it.  They became millionaires and maintain their affluent status through this.

In order to build wealth, we must learn to minimize our realized or taxable income and maximize our unrealized income.  We can do this by investing in instruments that appreciate in value over time without a cash flow.  Examples of these are availing of pension plan, buying commercial real estates, or buying shares of stocks. 

On a side note, most millionaires actually don't trade in the stock market.  Most actually have a "Buy and Hold" strategy.  They buy shares of promising companies and hold them for the long-term.

Millionaires are willing to sacrifice a social status and a high consumption lifestyle with financial independence.  These people don't actually look and dress like millionaires.  They live in not so affluent neighborhoods, they don't drive luxury cars, and they don't wear a suit and tie to go to work.  

These millionaires don't accumulate wealth so they can change their lifestyles.  They don't want to change the way they live, they just wan to be financially independent.

NO ECONOMIC OUTPATIENT CARE.  

Economic outpatient care refers to "substantial economic gifts and acts of kindness some parents give their adult children and grandchildren."  Most self-made millionaires didn't receive economic outpatient care from their parents.  

According to the book, the more outpatient care the adult  children receive, the less likely are they to accumulate wealth.  This is because they think of the money they receive as part of their income to spend.  As a result, they become high consumption individuals and they tend to spend beyond their means.  They also become dependent to their parents and become unproductive individuals.

As enumerated in the book, here are the consequences of providing economic outpatient care to your children:

- Giving precipitates more consumption than saving and investing.

- Gift receivers in general never fully distinguish between their wealth and the wealth of their gift-giving parents.

- Gift receivers are significantly more dependent on credit than are nonreceivers.

- Receivers of gifts invest much less money than do nonreceivers.

Most self-made millionaires have adult children that are economically self-sufficient.  They have children that don't need economic outpatient care.  As a result, the entire household can accumulate more wealth. 

The book provided suggestions for parents in order to help raise kids into productive and self-sufficient adults:

- Never tell children that their parents are wealthy.

- No matter how wealthy you are, teach your children discipline and frugality.

- Assure that your children won't realize you're affluent until after they have established a mature, disciplined, and adult lifestyle and profession.

- Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.

- Never give cash or other significant gifts to your adult children as part of a negotiation strategy.

- Stay our of your adult children's family matters. (Ex: Grandchildren's education, allowance, etc.)

- Don't try to compete with your children.

- Always remember that your children are individuals.  They differ from each other in motivation and achievement.

- Emphasize your chlidren's achievements, no matter how small, not their or your symbols of success.

- Tell your children that there are a lot of things more valuable than money.

Millionaires are proficient in pursuing opportunities that exist in the marketplace.  The book suggests that people who target the affluent often times become affluent themselves.  Furthermore, the book elaborates that while these self-made millionaires are generally frugal, they are not nearly as price-sensitive when it comes to purchasing investment advice and services, accounting services, tax advice, legal services, medical and dental care for themselves and family members, educational products, and homes.

"Most of the affluent in America are business owners, including self-employed professionals.  Twenty percent of the affluent households in America are headed by retirees.  Of the remaining 80 percent, more than two-thirds are headed by self-employed owners of businesses.  In America, fewer than one in five households, or about 18 percent, is headed by a self-employed business owner or professional.  But these self-employed people are four times more likely to be millionaires than those who work for others." 

"You can't predict if someone is a millionaire by the type of business he's in.  The character of the business owner is more important in predicting his level of wealth than the classification of his business."

The book also showed negative bias for professions that require professionals to look affluent in order to look respectable and gain more clients.  Examples of these professions are bankers, physicians, and lawyers.  Although people with these profession earn a lot of income, they tend to spend a lot as well just to look affluent.  They live in expensive homes, drive luxury cars, and buy expensive clothes.  In effect, they tend to accumulate less wealth in the process.  The book does not go overboard and say however, that one shouldn't be in this profession if one wants to be a millionaire.  In fact, one can be a multi millionaire engaging in such profession.  What the book stresses however, is the simple fact that in order to accumulate more wealth and become a millionaire, an individual's lifestyle choice is more important than the amount of income one generates.

For people who want to start their own businesses, the book has these to say:

"Dull companies with steady earnings growth may not make for stimulating cocktail party chatter, but over the long term they make the best investments (Fleming Meeks and David S. Fomdiller, "Dare to Be Dull," Forebes).

"What is risk? Having one source of income.  Employees are at risk ... They have a single source of income."  Most successful business owners will tell you that they have tremendous freedom and that self-employment is less risky than working for others.

"The most successful business owners we have interviewed have one characteristic in common: They all enjoy what they do.  They all take pride in "going it alone.""

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STOCK MARKET MOUNTAIN

REAL ESTATE MOUNTAIN

In order to make money in the real estate business, one must learn to do the 3 F's - FINDING, FUNDING, and FARMING.  Finding involves finding highly motivated sellers and making sure that the property for sale is a good deal.  Next you'll have to know how to finance bargain deals by looking for funds.  And once you've funded it, it's time to sell it and harvest your profits (Farming).

The author recommends buying one property per year to hold into your long-term portfolio and flipping at least one property per year for short-term income.

THE MARKETING MOUNTAIN

Robert Allen referred to the Marketing mountain as the Business mountain.  Here we are required to sell something in order to earn an income.  He mentioned four businesses where this can be effectively applied - Internet business, Network Marketing, Licensing, and Infopreneurship.

      

Bill Zanker co-wrote "THINK BIG: Make it Happen in Business and Life" with Donald Trump.  I believe he was chosen to be part of the book because it was precisely this concept of "Thinking Big" that turned his business from a small training program receiving only 500 to 700 attendants to a multi-million dollar enterprise receiving 50 to 70 THOUSAND people in just one day.  Wow!

With the concept of putting up a center where people can get a quick education about things they could not learn elsewhere, Bill Zanker put up The Learning Annex.  He only had $5,000 as start up capital.  It was therefore important for him to save cost and start small.  And so he did most of the work.  He would even dress up as a clown and hand out course catalogs along the streets of Manhattan.  Afterwards, he would go back to his office and receive the calls for inquiries and enrollments.  When the calls didn't come, he would spend the time looking for teachers and speakers for future courses.  It was how he ran his business.  Albeit having a bit of success, his business wasn't growing and cash flow remained the same.  And it wasn't only because he lacked the resources and manpower, but also because he wasn't "thinking big" enough.  

Well all that ended when he decided to invite Donald Trump to speak in one of his courses.  At first he couldn't even get through Mr. Trump's secretary.  He called Donald's secretary and told her that he wanted Mr. Trump to speak in one of his events and in return offered to pay Mr. Trump $25,000.  The secretary didn't even hesitate and told him right off that Mr. Trump wasn't interested.  The next week he took a risk and tried quadrupling his offer to $100,000 dollars but the secretary still said no.  At that time he was devastated as this was the most money he had offered a speaker and he didn't think he could offer any more.  However, he considered Donald as one of his heroes, and was determined to get him as a speaker.  And so after gathering all the energy he could muster, he called Mr. Trump's secretary again and offered to pay Donald ONE MILLION DOLLARS to speak for just an hour in the Learning Annex.  This time the secretary didn't brush him off but instead told him that she would inform Mr. Trump of his offer.  "Yey! I finally got through!," he thought, but at the same time he was deeply worried as to how he would come up with the money to pay the man that he actually threw up right after.  

In less than an hour, Donald called him back and asked how many people he was going to get for the event.  Bill told Donald that he was going to get a thousand people to attend.  In his mind, this was a lot of people already as on the average he would only get around 500 people.  But Mr. Trump retorted and said that he'll only do it if Bill can promise to get TEN THOUSAND PEOPLE to attend.  At that time, Bill really didn't know how he would exactly get the ten thousand people Mr. Trump was asking for but he firmly said "yes." The deal was sealed.  And that was the time he started worrying how he would get that many people and raise more than 1 million dollars to pay Mr. Trump.  

As it turned out, his worries were baseless as a lot of people wanted to hear Mr. Trump talk.  At the Learning Annex Wealth Expo, Bill got much more than the 10,000 people he promised Mr Trump.  Over 31,500 people attended the first expo.  And as they say, the rest is history.  In succeeding events Bill was able to get even more people to attend, establishing a very profitable partnership with Donald Trump.  With this experience, Bill also realized that his self-confidence has increased.  He then started making bigger plans and invited top name celebrities, including President Clinton, to speak in his events.                       

 As Donald Trump puts it, everyone has two options in life: you can think small or you can think big.  He said, "If you're thinking already, you might as well think big.  It is your choice.  No matter what your circumstances,  nobody can stop you from thinking big."  He added that most people think small because they're afraid of success, afraid of making decisions, and afraid of winning.  This gives people who think big like him a great advantage.  

I'll end this article with a quote from Tony Robbins.  "If you want to make it big, you've got to push yourself beyond your limits.  You've got to pump yourself up and get yourself into a hyper mental state.  And YOU HAVE TO DO THIS YOURSELF.  Nobody can do this for you." 

Come to think of it, it was not my first time to encounter this idea.  A few years back, my sister told me of a friend who was actually aiming to do this.  She said that after her friend successfully established a business, her friend was able to sell it for millions!  Now, her friend is putting up another one looking to sell it in the future as well.  Giving it a deeper thought, this idea actually doesn't sound so bad.  However, the question is, how do you establish your business to make it worth so much, how do you make it so that you can sell it for millions?  Just like what my sister's friend did.

Michael Gerber, the author of the E-Myth books, provides us with a simple answer.  He said that the key is for entrepreneurs to treat their business as the product itself and not think of the items they are selling or the services they are providing as their product.  In treating the business as the product itself, the entrepreneur works on improving the business itself and as a consequence at the same time satisfying the needs of the customers as well.

He said that it is important to build a system that is independent of the capabilities of the person doing it so that the same process can be replicated else where.  It is also important to build a system so that the customer is treated to the same experience every time he/she patronizes your business.  This is what the author referred to as the Franchise Prototype.  Particularly, the author is referring to Business Format Franchising where in a system is built to run the business and people are only needed to run the system.  This, he says, gives the business a higher chance of success.

All along, the author was actually introducing to us the concept of franchising.  He explained why developing the system to run our businesses is very important.  This way we can open up branches of our businesses else where and give it a higher chance of success.  He didn't really say that you have to sell your business but in case you want to sell it some time in the future then doing without a system on how to run things will definitely not benefit you.  Furthermore, having a system is actually beneficial for the entrepreneur because it allows him to be not working in it but still earning from it.  This way your business doesn't have to be your life.   

It was truly an inspiring read.  I must say that I agree with the author.  Especially for small businesses, setting job descriptions, writing operations manuals, and other seemingly insignificant system processes are oftentimes skipped or totally ignored.  Although the success of a business is also dependent on so many other factors, developing a business format will definitely increase its sustainability.  This is why I think a lot of family businesses don't last through generations because the business format is not passed on properly from one generation to the next.

Michael Gerber wrote that most small businesses aren't actually started by entrepreneurs.  In fact, he wrote that most small business owners actually are technicians.  He defined technicians as people capable of doing the technical work involved in the business.  These are individuals who started working for somebody else until one day they decided to start their own business.  According to Gerber, the problem with this setup is that these individuals tend to assume that if they understand the technical work of a business, they also understand a business that does that technical work.  When in fact, the technical work of a business and a business that does that technical work are two totally different things. 

I definitely agree.  Knowing how to do something to start a business is totally different from running that business.  The author then presented that there are actually three types of individuals involved in a business and that these personalities are present in each one of us.  These are:

1. The Entrepreneur

2. The Manager

3. The Technician

An Entrepreneur is the visionary in us, the dreamer.  He turns the most trivial condition into an exceptional opportunity.  He lives in the future and constructs images of "what-if" and "if when."  He pushes for change which the manager and the technicians might not necessarily agree with.

The manager is the one that plans and brings order and predictability in the organization.  Where the Entrepreneur sees the opportunity in events, the Manager sees the problems.  His main focus and drive is to bring order to the organization.

The Technician is the doer.  He is happy as long as he is working.  He is not so much interested in ideas as  in learning "how to do it."  Trying new things that probably doesn't need to be done at all can frustrate and annoy him.   

Given the presence of these three conflicting personalities in us, it is therefore crucial  for us to  control each personality and attain balance so that our businesses can continue growing and be successful.