Lies You Have Been Told
It is an unfortunate truth the more often we hear something, the more likely we are to believe it. In fact we are prone to absorbing frequently-told lies and believing them.
The problem is these lies rob us of opportunities and choices. This of course limits our ability to create our Perfect Lifestyle.
What follows are a number of widely believed statements that are simply not true. Like any good lie however, there is a grain of truth in them.
Lie 1 There is no such thing as a free lunch.
Truth 1 There are a lot of cheap lunches out there.
The Lie is this:
Life is hard and you don’t get anything for nothing. You have to work really hard for everything you get. If you find an opportunity, don’t trust it because it is probably not what is seems. Do things the way they have always been done, and you won’t go wrong.
The Truth is this:
Life is wonderful and it abounds with exciting opportunities. When you see an opportunity, get excited about it before someone else does. Look for the unseen angle and look for new ways to do things. It is better to work smart than to work hard.
There are a number of examples of this from my own experience. When my wife and I bought our first home it was a wreck. It had been lived in for years by two alcoholics with psychiatric problems. There were burns in the carpet, parts of the house smelled like a urinal, no maintenance had been done for decades, and it was dark and ugly inside. At the back of the house was a tiny sewing room which had low windows. If you bent double you could see a fantastic view of the harbour. We paid $145,000 for the house, and we very quickly pulled up all of the old carpet and for $1,000 we had all of the floors polished and polyurethanes. Next we built a twenty five square yard (meter) deck out from where the sewing room used to be.
This cost $5,000. Suddenly we had a light bright home with million dollar views valued at $220,000.
Another example is when I purchased an online property business in 2004. I paid $1,750 for it. The business made more than the purchase price in the first year alone giving me more than a 100% return on my investment. It took just a few hours over the whole year to manage it.
I purchased a rental property in 2002 for $270,000. The bank loaned me all of the money so I did not have to put up any cash. I found five doctors who moved in on the very day I took possession, and they paid $500 per week. This gave me an immediate Rental Return of 9.63%. Mortgage interest rates at the time were around 7%, so even though I borrowed all of the money, after paying interest and rates and insurance, I still made $50 cash every week. Now that is a cheap lunch!
My advice is look for opportunities everywhere. Look for the unseen angle. Look for the cheap lunches. There are a lot of them out there!
Lie 2 To be successful you have to be in the right place at the right time.
Truth 2A You will naturally be in the right place at the right time at least six times a year.
Truth 2B Put yourself in the right place more often.
Truth 2C Teach yourself to recognize when you are in the right place at the right time.
The Lie is this:
It is only lucky people who are successful. They are people who happen to be in the right place at the right time. They heard a tip, or were given a chance no-one else had access to. You can’t do anything to improve your chances.
The Truth is this:
Yes there are situations where it is advantageous to be in a certain place at a certain time. But by natural probability alone you will be in such a situation at least once every two months. If you had seen and taken advantage of just half of the opportunities you were given, you would be a lot closer to your Perfect Lifestyle.
With the gift of hindsight you will recognize this! The good news is you can learn how to get yourself into the right place at the right time so these opportunities arise not just six times a year but sixty times a year! Also you can learn to recognize the good opportunities from the not so good ones.
So how do you put yourself in the right place more often? There are lots of ways depending on what sort of opportunities you are looking for. One example is when I was in my early twenties, and I wanted to be a rock star. I played my electric guitar all the time until I was good enough, and then I put an advertisement in the newspaper looking for other musicians to form a band. Another guitar player and a bass player replied and we found a singer and a drummer. Unfortunately I never became a rock star, but I gave myself the best chance. Contrast that with a guy I knew who was a drummer. He hadn’t played in a band for years, and I asked him “Why aren’t you playing in a band?” He replied “Oh something will come along.” He was wrong. Nothing did come along, and let’s be honest nothing is likely to “come along”. You have to go out and find things, and make things happen.
Once again the purchase of one of my online Real Estate competitors was an example of this. Two years after I purchased my business I found out who all my competitors were, and I emailed them all saying if ever they were interested in selling their business to contact me. Six months later, the owner of one of them emailed me to say she wanted to sell. If I had never sent that email it is very unlikely I would have even known about her plans.
Another example is my first ever teacher placement in my recruitment company. I had been trying unsuccessfully for months to place a teacher in England. I had a few teachers on my books and a few schools that had agreed my terms of business. A school in Reading, just out of London, emailed me to say they needed a PE teacher as soon as possible. Unfortunately I had no PE teachers on my books. At this stage it would have been easy to just email the school back to tell them I was sorry but I did not have a teacher for them. But this would have been falling into the trap of thinking I just wasn’t in the right place at the right time. Instead what I did was phone every College of Education in the country and I asked to speak to the Head of the Secondary program. I told each of the people I talked to that I had a great position in England for a PE teacher and asked whether they knew of any recent graduates who hadn’t found a job who might be interested. Within twenty four hours a teacher I had never heard of, and who had never heard of me phoned me about the position. By the end of the week the school had the teacher’s Resume, they held a telephone interview and the placement was made. I had to hustle and I had to get out of my comfort zone. But I was desperate to make a placement and I changed the situation to put myself in the right place at the right time.
Of course when my business got established, and I had literally thousands of teachers and hundreds of schools, I found I was often “in the right place at the right time”. One of the best examples was when I received the Resume of a young teacher who taught History and Music. Exactly two days later a school emailed me asking for a History and Music teacher. It took me about ten minutes to put the two of them together, and I earned thousands of dollars in fees.
In business and real estate which are areas I concentrate on, I go to lots of open homes, I attend motivational and business related seminars, and I meet with other entrepreneurs. I also talk to and listen to friends, relatives, acquaintances and so on to find new opportunities. If I am at a party, and I get chatting to someone, there’s a good chance they are involved in something or have access to something I have never even thought of. This is also a great source of new opportunities. It is for this reason I maintain a large network of acquaintances. I often keep people’s business cards and I almost always email people who have given me their business card, just to make contact with them. You never know when that contact will come in handy.
Action Step 16:
Always keep business cards and email addresses and websites of friends, acquaintances and casual contacts.
If you are looking for business opportunities you need to read the business news, subscribe to business magazines, read business books, look at the businesses for sale section of Ebay or the newspaper or contact business brokers. You should also use the internet to see what is happening in other countries that could open up importing opportunities.
Finally you need to always keep your ear to the ground to pick up anything of interest from anyone you meet or from anything you see or read. And of course, you need to be ready to act when you see or hear of an opportunity. You have to be willing to risk a small amount of money to give something a go. Perhaps set aside $500 or $1,000 or $50,000 dollars (whatever your budget), or be willing to borrow a certain amount of money so when an opportunity arises you can go for it.
Lie 3 The small business failure rate is very high – “three out of four small businesses fail in the first five years”.
Truth 3 This failure rate is made up primarily of:
• Starry eyed dreamers.
• Unrealistic optimists.
• Naïve redundancy receivers.
• Failed musicians, artists and authors.
• Unprepared “hopers” with no plan.The Lie is this:
So many small businesses fail you shouldn’t even consider starting a small business. Failure is a terrible thing, and you should avoid going anywhere near it.
The Truth is this:
If you are prepared, it is very likely you will be successful in business. There is no such thing as failure, only learning experiences. Even if you start a business and it does not succeed, you will have learned far more about yourself, about life and about business than if you had never embarked on a business adventure.
Don’t be put off by any statistic you hear about the small business failure rate. Generally the people who fail in a small business have little or no financial knowledge. If you do your homework, learn the basics of business, protect the downside and follow your passions, you are very likely to be successful.
In the last ten years, I have started five companies. Four are profitable and successful. The fifth was profitable but time consuming and did not fit into my lifestyle. I dropped it to concentrate on the other businesses.
My wife has also set up a successful and profitable small business.
Further, in the last few years I purchased two companies – one made an average of a 20% annual return, the other made over 100% annually. Both of these companies focused on real estate which I was passionate about. I have since sold both, at an excellent profit.
Am I a small business genius? No! But there are two things that set me apart from the people who fail in business. The first advantage I have is that I understand business and accounting. I have studied and I understand the following:
• Budgeting;
• Return on investment;
• Capital requirements;
• Cashflow;
• Compliance and tax;
• Presentation of financial statements to banks.The second advantage I have is that I only involve myself in projects I am passionate about and that help to achieve my lifestyle goals. When you are excited about getting up, getting into work and finding out all about your business and the market and your competitors, it is easy to become an expert. It is fun to look for opportunities or examine any threats.
Lie 4 It is almost impossible to have a really successful small business and make a lot of money.
Truth 4 It has never been easier to be successful and make money.
The Lie is this:
If you start a small business you should expect to struggle financially, and you will be lucky to make a go of it let alone earn enough to live on, and certainly not a really good income.
The Truth is this:
If you start out with an expectation to do well, to be successful and make a great income, the chances are you will achieve just that. The small business model and attitudes of twenty years ago are out of date and unrealistic. Ecommerce and globalization give us a fantastic opportunity to start successful small businesses.
I used to think if I lived in a really big city, whatever idea I had would reach such a large potential audience that even if only a tiny percentage of people liked the idea it would be successful. So I daydreamed about living in Los Angeles and selling a new style skateboard by mail order. But now we have had the amazing good fortune that wherever you live, the world has come to you!
We have been gifted a twenty first century trifecta: Technology, The Internet and Globalization.
We have suddenly been connected to the world like never before and the rest of the world is very happy for us to provide their goods and services.
An excellent example is my international recruitment company that recruited professionals from around the world to work in England. The staff never met the candidates. They placed a teacher from Canada into England from an office in New Zealand! Changes in technology enabled a business that would not have been possible ten years ago. These types of business are internet and email based with multiple websites in different countries around the world. These businesses can use free-call 1800 numbers from those countries and calls come directly through to the Head Office. This means for example that someone in Canada can phone the agency about a job in England, and the call comes through to New Zealand Technology also allows the business to email 150 English teachers at the touch of a button to tell them about a new vacancy. Technology allows them to email 5,500 newsletter subscribers at the touch of a button, and automatically manage email bounce-backs. Further, you can record how many of the people who received the newsletter actually went to the website to check out the information posted there.
Another good example is a business that sells empty lots of real estate (sections). A website allows a person selling a section to list it for sale for a one off fee.
Technology allows the seller to enter their own information, take their own photos, upload the photos to the website and then pay for the service using their credit card. Because the business basically runs itself, the costs are extremely low. Email allows staff to communicate quickly and efficiently with clients, and if required a client can call on the free call number. Technology allows buyers from all over the world to view properties online and contact the seller directly via email. This type of business could not exist before email and the internet.A further example is a domain name business I started in 2003. The business buys and sells domain names. How I started this business is a good example of putting yourself in the right place at the right time.
I was looking for a domain name, and I found that a company owned it already. I went to their website and found it was a company that had registered hundreds of domain names in order to re-sell them. On the corner of the website was a note saying the business was for sale. I emailed one of the directors and we started discussing a purchase. As part of our discussions the director emailed me all of the domain names the company owned and the day each one expired. This was important because domain names cost around $13 each per year to hold and I needed to work out the cashflows.
Unfortunately for the company they wanted a huge price for the whole business and they were not willing to let me purchase the selection of names I particularly wanted. Another problem they had was there were three directors, and they could not agree on a price or a sales strategy. After a few weeks I realized the purchase was going nowhere and I pulled out. I expected someone else to buy the business, but I kept my eye on their domains just in case. I was surprised and delighted to find that instead of selling the best names or even re-registering them, the company allowed them all to expire. So I took my list of their domains and on the day each one expired, I registered it for $13. I registered the best 100 names which cost me $1,300. Soon after I sold seven of the names for a combined value of $4,950!
I told a friend about my success and he found and registered a new name for $13 and sold it three weeks later for $700 – I couldn’t believe it!
One of the main advantages of this business is the costs are low, as for most internet businesses. The second advantage is it takes almost no time at all, perhaps an hour a week. The third advantage is the margins are huge!
Lie 5 You need a lot of Capital to start a business.
Truth 5 To set up an internet business you need a PC and a phone.
The Lie is this:
You need at least tens of thousands of dollars to set up your own business because you need premises, machinery, equipment, an advertising budget and so on.
The Truth is this:
Some of the most successful small businesses in the last ten years started either from home or a small cheap office and required less than $5,000 in start-up money.
When I first started my recruitment business I rented a lounge from someone I knew for $40 a week. I had a phone, a horrible fax someone gave me because their parents were throwing it out, a computer, and a very good website designer. I also worked two days a week for my previous employer so my young family had at least a bit of money coming in until the business became profitable. My advertising budget was pathetic and allowed me to put two or three line ads in newspapers when most of my competitors were running two and three column ads in full color! In hindsight it was a great experience because I had to think carefully about every dollar I spent, and I didn’t have the luxury of doing what my competitor’s did. This forced me to think about inexpensive and clever ways I could reach candidates and clients. Since then I have watched some of my competitors waste thousands of dollars while I kept a lean but sharp business running.
Lie 6 You need to diversify your portfolio.
Truth 6 You should concentrate on just a few investments or businesses.
The Lie is this:
In order to increase your wealth and your passive income and therefore improve your lifestyle you need to spread your investments across a number of different
investment classes. This is to protect you from a downturn in a particular sector, and also to allow you to participate in any large gains in another sector.
The Truth is this:
Spectacular increases in wealth are made when you concentrate on and really understand one or two types of investments or businesses Having a diversified portfolio only makes sense for people at or close to retirement age where slow and steady gains are the aim. The only other situation where it works is if you have an amount of money to invest but no time to put energy into managing it because you are earning an exceptional income elsewhere. If you are not in one of these two categories, don’t buy the lie that you should spread your precious money around lots of different investments.
The reason is simple; by investing some time and energy learning about a particular type of investment you will be able to increase your wealth much faster, than by playing safe across the field.
Let’s have a look at the two wealthiest people on the planet:
Bill Gates was successful because he concentrated solely on developing software for PCs. In his first few years of business do you think he had bonds, equities, or commercial property investments? He didn’t. He invested all of his time and money and attention into his business.
Warren Buffett states publicly that his investment company, Berkshire Hathaway concentrates on relatively few investments. He and his company research everything they can about a target company, management and the market, and then they buy a significant shareholding in the company. In many cases they ask for a seat on the board of directors of the target company so they can help to manage it.
Most successful investors and successful companies take this approach. For this reason companies often state publicly that they are concentrating on core business rather than looking at businesses and investment where they have no knowledge or expertise.
My advice is to research all of the business and investment opportunities open to you and choose one or two you are particularly attracted to. Once you have decided, find out everything possible about those investments. Make sure you understand them as well as you can before you invest. But remember you will do 90% of your learning by doing. So no matter how much you learn by reading books and researching, you will learn far more in your first year of actually doing the investing, or running your business.
As you will have gathered by now, the two areas I have concentrated on are real estate and online businesses. Twenty years after I bought my first rental property and twelve years after I started my first online business, these are still the two main areas I focus on. For this reason I am in a far better position than the average person to significantly increase my wealth by investing in these areas. I have also made a lot of mistakes and learned from them, so I now save myself a lot of money and hassle by not investing in some opportunities.
Critical Principle 12: Sometimes the best investment decision you make is not to invest.
A good example of concentrating on one or two investment types is when I was three years out of university, working for a meager salary, but working hard to build a residential property portfolio. It was 1997, and my wife and I had a combined income of $75,000. We owned a 1984 Honda CRX worth $700, a dining table that cost $60, a TV that cost $50, and a range of other second hand furnishings.
However we owned four properties with a combined value of $1.2 million. Of course we had mortgages on these properties, but the rents paid the mortgages. The great thing was that properties in the late nineties went up between 10% and 20% per year. This meant that even in a bad year our capital gains were $120,000 tax free!
This was more than double our after tax income from working our butts off 40-50 hours a week.
How did we get so much property? We only concentrated on property. I found investments that were undervalued so six months after I bought them I could get a property valuation stating we had $50,000 new equity in the property. The bank was happy to loan us more money for the next property, and so on. We rode a wonderful property boom, and in four years we made half a million dollars in increased property values. In that time we had no stocks, we had no bonds, we had no businesses, and we had no cash. We just concentrated on one thing – residential investment property.
Conclusion
For me there are three key requirements for businesses I own:
• They do not take up much of my valuable time;
• They give me freedom to be where I want to be at any time of the work day; and
• They only relate to pursuits I am passionate about.Because all of my business and investment decisions are filtered through these three requirements, I ensure my businesses meet my lifestyle goals. Your lifestyle goals and aspirations will be different to mine, but you must make sure that whatever you decide to spend your time doing, it is consistent with your overall goals for the life you want to live in the future.
It is easy to fall for sugar-coated lies, especially if they resonate with the way we have been brought up, what we learned at school, or what our peers believe. It is sometimes more comfortable to believe a lie if the truth would force us to get up and take some action to make things happen. But this is exactly what you must do if you want to avoid a mediocre life where you achieve nothing but boredom and rut- digging – stand up and take some action. Do it now!