The ideas are very simple, so simple, that they have been overlooked for many years, by many investors. Here is an in depth look at the Buffett Way:
1. Understand the Business: You have to be dealing with things that you are capable of understanding. If you can understand how it works, how it makes money, and how to run it, then you have no business getting involved with it.
2. Sustainable Competitive Advantage: What makes it different that its competition? This is one of the keys. The business has to have intrinsic value. Moreover, the business should be like an old castle on top of a mountain, everyone knows about it. Its at the top compared to its competition and has the best view of the land -and what’s coming ahead. The business should have a strong competitive advantages, such as: price, quality, uniqueness, service, management, brand awareness, location, etc. These elements will create a barrier of entry for its competitors, thus providing you a solid sustainable long term investment.
3. Able and Trustworthy Management: The day to day operations are vital. Warren Buffett once asked a business graduating class “which of your classmates would you invest in”. Usually, it’s not the smartest or the brightest student, but the most honest. After all, you have to trust the information given.
4. Discounted Price: There has to be room for error, a buffer. So, try to purchase businesses at a 20% discount. There have been investors, such as Sir John Templeton, who often made it a point to buy assets at 20% of their value, a whopping 80% discount!
Leverage in business is essential. Leverage is often used in finance when an investor or institution uses another entity’s monetary assets in order to purchase something of value by only putting up a fraction of the cost and borrowing the rest against the item of value. In real estate, this is your down payment, in FOREX it is the ratio in which you leverage your money -you can set is as high as 250 to 1- in stocks it is buying on margin, and so on. Leveraging allows you to put in very little or nothing and have an extremely high return on investment. When using leverage, it is important to note that generally speaking leverage increases the risk of a deal, however it does not have to. There are ways to use leverage in which there is no risk to you at all, and very little risk to your partners and investors.
Now Lets Look at the 4 Types of Leverage It
1) Other People’s Money: At any given time, within a 50mile radius there are thousands of investors looking for a good idea! Good money follows good ideas, and good ideas get the money.
2) Other People’s Talents, Skills, & Ideas: There is a story about Henry Ford in which he was put on the stand, and the opposing attorney tried to demonstrate Henry Ford’s lack of knowledge. It was well known that Henry Ford was not an educated man, and was ignorant of the many facts of life. As the interrogation preceeded, the attorney began asking Henry Ford some vary basic questions which he did not know the answer to. Henry Ford’s response was simple, he snapped his finger and asked one of his employees and they answered. Another question came, and again another employee answered it. And so it went on. Until the attorney used this as proof of Henry Ford’s ignorance at which point, Henry Ford replied by saying that he did not need to know any of this himself, all he needed to do was to be able to get the answer.
Just like Ford, you do not need to know much, all you need is to be able to get the answers.
3) Other People’s Credit: If you find a great deal and all you need is credit, your only one step away. Just like money, when you have a good deal credit is easy to find.
4) Other People’s Labour: Does anyone work for free? Of course, when you first start a business, you are working for free in the hopes that one day you will be rewarded so why not give others the same opportunity. Whenever you need something done by a certain party, you can always include them in the deal, gain their expertise, ideas, knowledge at no out of pocket cost. You can pay them as the deal goes through, much like brokers get paid. In the end, its a win-win.
Here is an example so you can see leverage in action. Lets say you found the perfect deal. Its a nice house in a decent neighborhood which is priced 50% below market value. The sellers are out of state owners and need to sell due to an emergency. The problem is that you do not have any money, credit, or real estate know how. The solution is simple. First, learn as much as possible about real estate regarding this particular purchase. You can go to a Real Estate Broker and ask them to represent you. When you purchase the property he will earn a comminsion. Quickly he will look for lenders and potential buyers of the property (if your looking for a flip). Many hard money lenders (up to 65% Loan to Value) come nocking on your door. At this point there are 3 possibilities: first, you take out the hard money loan and sell the property for a quick profit. In this scenario you risk nothing and make a good profit. Second, you take the hard money loan and don’t find a buyer in time and the lender repossess the property. At this point you did not loose money or credit and learned a lot in the process. Third, you find another buyer before your purchase. This is the best case scenario since you can sell the property before you buy it!
In order to make more money all you really need to be aware of is how to do it. If you ask some of the richest and most successful people in the world they would agree that what they do for money in comparison to the masses is easy. In fact, if you think about the top one percent income earners and how they time spend their time, its not working! They do not trade time for money, and the really great ones do not even trade money for money. Instead they are trading ideas for money and with these ideas increase the number of income streams and their bottom line.
Now to do all of this, to do any of this, only really requires an increase in awareness. When I first started my company I did not know how to do it. As I experimented and kept moving forward like a magic trick one of my strategies worked so well that the flood gates came rushing in! What I had learned had a very profound impact on my business and on my life and it was extremely simple! Ironically, most of my competition was not doing what I was doing and in no time I gained a pretty significant market share in one of the largest cities in America -Phoenix. Within 6mo I opened up operations in 5 other states and the rest is history. All of this from slightly increasing my awareness on how to make money!
Fortunately, awareness can be learned! By continually focusing and learning more about business, the art and the science of making money, and by studying some of the richest and most successful people in the world one can gain insight and awareness into how they did it. What is even more amazing is that if you look at some of the richest top one precent, the really great ones, they earned every penny of it. The Bill Gates of this world, the Warren Buffets, the Andrew Carnegie, all came from very average backgrounds and like a rocket ascended to the top.
Becoming succesful in any endeavor in life is all about attitude. Attitude precedes and attracts all of the people, circumstances, and events that occur in your life. Changing the way you see the world, the way you see yourself, and the way you see your own potential is the key. Before becoming rich you first must fully realize how easy it can be to become rich and that you can do it. You must be able to visualize yourself being rich and living a rich like. You must be able to see it, to touch it, and fully experience it. And dont worry, it will come. Here are 3 easy steps to get started:
1. Mental: Write down what you truely desire: Write it down on a card, carry the card with you, and repeat it and ponder it daily. Do this as often as you can remeber. Just let your imagination go. You do not need to know how you will get your desired outcome, but know that it will come to you. For instance, my card says $1,000,000 per day.
2. Emotional: Attitude, fully believing it is possible is the key. Without believe that it is possible, that it is attainable, you will lack the necessary emotional surge and will necessary to make your dream a reality.
3. Inspiration: At some point, a moment of inspiration will come through. When this inspiration comes, go with it. Go with it fully! Do not hold back one iota, put yourself fully in it, fully immerse yourself. Let your will take to your destination.
We do not need to know how we will get there or what steps to take, we just need to know where we are and where we want to go!
There are many ways to becoming rich and successful but out of all of the strategies there is one that surpasses all of the rest. Furthermore, this one strategy is so power and profound that it can have an immediate and lasting effect of epic proportions. This one strategy is what keeps the top one precent where they are, this one strategy is what separates the great from the masses, this one strategy is the biggest difference between the “have’s” and the “have nots”.
The strategy of course is Teams. The great and the powerfull have teams of analysts analysing every proposed business ideas. They have attorneys looking at all of the legal ramifications. They have accounts looking into the numbers. All of the titans of business have teams! Highly functioning, highly capable teams. While the average investor is a 9-5 employee who’s knowledge is limited to what he sees and hears, there are investment teams researching and delving deeply into each possible investment. These teams can be found at all of the major trading houses around the world. And while the very customers of the trading houses are loosing money, the trading house is making money in very same market. Teams are the difference, and business and life is a team sport.
There are few ways to get a team going. Before getting a physical team going, I would suggest starting an imaginary Dream Team. This exercise can be quite profound. Pick up to 12 players to be on your Dream Team. Who are they, and what do they bring to the table? Each member is someone that you have looked up to, learned from, and someone who is profound in some way. Now imagine having this team in front of you. How long will it take to achieve the success you dream of? How high is your teams potential? Great Teams Can and Do Change the World!
Becoming rich is both a science and an art. In our current society there are a number of ways to do it. You can become rich by becoming a famous actor or athlete, you can become rich as a result of inventing something, you can work for it, you can also become rich by being lucky and win it; however, for most of us, that are not extraordinarily talented, the best way to become rich is through business. Here are 5 Steps that you must take in order to become rich:
1. Increase Your Income & Decrease Your Expenses: First thing you Need to do is to decrease your expenses. Then increase your income. To do so, you can pick up a second job, or try to find a higher paying job, or you can try to create another stream of income. Increasing income is something that all big business try to do quarter after quarter and you should be no different. In your pursuits for riches, try to increase your income.
2. Increase Your Abilities & Resourcefulness: Second, you want to work on your ‘Resourcefulness” and work directly with your imagination. Remember that Becoming Rich is both an art and a science. So, you should study the science of it. If you get the science of it down, there is still a good chance you can become rich. To become super rich, aka wealthy, you will need to get the art of it down as well. Always work on your business and entrepreneurial skills and be open to new ideas and new ways of thinking and seeing the world.
3. Save, Save, Save: Now that you have increased your income and decreased your expenses you will need to build up capital. Doing business without Capital is possible, but it is a lot more difficult, and in the end, you can not be a Capitalist without capital.
4. Invest, Invest, Invest: Now comes the Fun Part. You can take some of your capital and Test some of your ideas. Test them see how they work. If they pass the tests, then you can start your own business. Being resourceful will be key. You do not want to spend too much time or money on an idea that will require elements that you can not provide. Ideally, you can create a business by using a very small amount of your capital or if you have a decent amount of capital you can buy one. Buying a businesses can be a great shortcut to wealth. Once you have a business -money making machine- you can save, save, save and again reinvest in another money making machine such as a business, real estate, and other assets.
5. Rinse and Repeat: Get Better at all of the Above. Getting better is key. Money is like energy, its like a basketball that finds its way in the hands of the best player. You want to become the best player. The more responsible you are with money, the more money you will have! It will be attracted to you, and when you have it, unlike many, the money will not slip through your hands, instead it will multiply.
Here is a very short snippet of how to go about making money. First you have to realize your current situation and given that there is no way I would know this, I would advise you yourself take a look. So, most irregardless of circumstance business or becoming wealthy is about 2 things. First, you have to always strive to increase your income and assets while decreasing your expenses and liabilities. Second, the way to do the first is by continually learning, growing, and expanding your skills and abilities. What you can do is a direct reflection of the tools you have to work with and your overall resourcefulness. A resourceful person can make do with very very little! Becoming great at business is not about knowing a lot about a little but knowing a little about a lot.
Welcome to How to Money! I will be sharing with you some of my experiences in the business world, how I got here, and how you too can get here. In a very shorty amount of time I have built a number of business spanning across 5 states, all within a 1.5 year period and starting with about $300. From my experience all it takes to make money is a little imagination and a whole lot of fun. In the end, if your are not having fun with this stuff, not to be too serious, drop it and go “follow your bliss” as Joseph Campbell would say.
Here I'll share my knowledge, discovery and experience related to my hobby and work. Most articles on this site are related to investing, business start ups and expansion, and tips on how make money. More
