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Wednesday, February 18, 2015

On the Importance of being a Specialist Opportunist: Knowing Business, Finance, & Investing

On Tuesday, February 3rd, 2015, I introduced my newsletter: Bold-in-america-how-to-create-financial-opportunities and also introduced the term, "Generalist Opportunist."  If you didn't get to read this post, I suggest you go back to it before reading today's second installment.  Things will make more sense.  I want to share something with you again, just like I did yesterday with, On-creating-your-personal-brand.  Telling you what to do in order to help you build your own personal brand or online business is not as powerful as actually showing you.  Here is my revelation:  My so called, "newsletter," is actually a book in the making.  That's right, another asset I can make money on.  I'm pitching it to you as a newsletter, but later on I'll end-up cleaning it all up (editing), adding case studies from my personal life (anecdotes), organizing it (table of contents), and formatting it into a book.  

So I'm really killing three birds with one stone!  1) I'm blogging to keep my blog up, 2) I'm writing a newsletter from what I have come to learn from my personal successful experiences, and entertaining my email list subscribers, and 3) I'm slowly, but surely writing entries that will one day comprise chapters in a book I can sell!  If I can do this, so can you!     

On the Importance of being a Specialist Opportunist: Knowing Business, Finance, & Investing:

Whereas a Generalist Opportunist (GO) knows a little about many things and will seize whatever financial opportunity comes their way before someone else does, a Specialist Opportunist or “SO,” is darn good at three things in particular: 1) Business 2) Finance 3) Investing AND is particular (decisive) about each one.
 
Let’s be real, we live in a capitalistic society.  Knowing how to make (Business), get or lend (Finance), and grow (Investing) money is equivalent to knowing how to drive.  Having a car (opportunity) alone will not get you anywhere if you can’t get behind the wheel, turn on the engine, and GO, GO, GO!

I have dealt and worked with many wealthy people in my life.  Aside from great personal habits, do you want to know what they were best at doing?  You got it.  They were great at running their multiple businesses, getting funding from their investor network, and growing their profits by investing, i.e., lending their own money out for an acceptable return on invested capital.
 
Now let’s think about the average American.  The average American is horrible at business, perhaps barely profitably running their own brick-and-mortar set-up, or consulting job, etc.  They work over forty hours a week just to pay the bills and have a little on the side left over for retirement savings.  Scaling their business into a franchise?  Ha!  What is that, right?

The above-average American may be competent in business, but not so in the other two areas, Finance and Investing.  When they need additional working capital, they go to the bank.  The bank asks for the books and what do you know, the business is bleeding cash.  Being denied a loan, these business owners start soliciting money from their loved ones, convincing them that the business is thriving.  If only these people could track how the money was flowing from start to finish, find the leaks, and plug them.  Have you seen the popular CNBC show, The Profit?  The star of the show is business turn-around expert, Marcus Lemonis.  On the show, Mr. Lemonis profiles individual businesses with great potential that have been run aground by deteriorating business owners.  At some point in time these people ran a successful business, but something they did severely crippled growth.  The worst part is that they don’t know what it is!  That’s where Mr. Lemonis comes in.  He is able to optimize space, resources, and people power, all from the numbers he is given.  When he suspects the financials don’t add up, he doesn’t go through with a deal (buying 51% of the business usually and becoming the boss) he hires a strictly #2 (Finance) specialist to do a forensic analysis of the business’s books.  Marcus Lemonis is an example of a Specialist Opportunist.

The Sharks on the hit TV show, Shark Tank, are also clear examples of Specialist Opportunists.  Mark Cuban became a millionaire by starting and selling a tech company during the dot com era.  But he became a billionaire by not being confined to his niche.  He is a great investor as evidenced by his purchase of an NBA franchise that was struggling (the Dallas Mavericks after the era of Jason Kidd, Jamal Mashburn, and Jim Jackson, aka, the Three J’s) at the start of the century from of all people, billionaire H. Ross Perot, Jr.  His cost for the Mavs?  $285 million.  Today, Forbes magazine ranks the Mavs as the NBA’s tenth most expensive franchise worth well over $1 billion!  What’s impressive to me about Mark Cuban is that the man is also adept at investing in securities, i.e., stocks and bonds.  Like his Shark Tank counterparts, Kevin O’Leary, Barbara Corcoran, and Daymond John, Cuban has been a guest numerous times on CNBC’s stock and bond market show, Squawk on the Street.  Aside from having made billions, what do these extremely wealthy and successful people all have in common?  Why are they called, Sharks? It’s no mystery; they know business, finance, and investing like the back of their hands.  The lowly entrepreneur that comes on the show on the other hand sometimes doesn’t even know their own business!  Getting schooled on national television is absolutely embarrassing.

The biggest mistake entrepreneurs make is being specialists at starting businesses.  Why do they repeatedly fail and become serial entrepreneurs until they are finally successful?  Because they are learning business, finance, and investing on the fly!  Some of these poor saps come up with ridiculous figures on the show, irresponsibly valuing their company using the wrong metrics.  Invariably one of the Sharks, usually Kevin O’Leary, aka, Mr. Wonderful, gets to the bottom line: the numbers.  What were your sales last year?  What did you actually keep?  Did you pay yourself?  Why are you valuing your company at $1 million (asking for $100K giving 10% equity) when neither your sales nor your earnings justify your valuation?  How much of your own money have you put in?  These are all types of questions Mr. O’Leary often asks.


The entrepreneurs that don’t get deals for the most part are the ones who can’t genuinely and accurately answer the above questions.  They go home knowing their business plan, if they had one, was just shot to hell.  Ouch!  If only they had realized the importance of being an SO….


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3 comments:

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