Where are you on the Entrepreneur Ladder? Part 5

Last week I discussed the benefits of ascending the Entrepreneur Ladder from level two manager to level three owner. At this level one begins to enjoy the fruit of climbing the e-ladder. This is the level where the business functions well without you, the owner, having to be there on a day to day basis. You are no longer generating income from a wage, but from the profits of your business. You have obtained a lifestyle to which many aspire, but few obtain -- passive income with time pursue other ventures or adventures. It's your choice.

Rung levels of the Entrepreneur Ladder

Entrepreneur: Five

Investor: Four

Owner: Three

Manager: Two

Self Employed: One

Employee: Zero

The flywheel effect

Climbing the Entrepreneur Ladder is similar to the dynamics of a large flywheel. In the beginning it takes an extraordinary amount of effort just to get it to move and rotate even once. However, if you continue applying extraordinary effort to rotating that flywheel you find that, with each rotation, you are gaining a little more speed. Then suddenly you notice that you have achieved a state of momentum where it takes little effort to keep the flywheel rotating. It is at this point, where you have finally mustered enough momentum in your favor that you can accomplish more orders of magnitude. Call this momentum, leverage, or critical mass. Welcome to level four investor.

Putting your money to work

Now that you have a business that will work without you, and harder than you, it's time to position your money to work harder than you. By now you might be thinking, "What does it take to move up the e-ladder to level four investor?" The first tactic is to build capital while at level three. Accumulate capital to invest in other businesses. This is vital if you want to become financially independent. Set for yourself new business and personal goals. Think about the potential for duplicating what you've accomplished in your first business. Because of what you've learned, the second time will be easier.

To succeed at level four, learn about investing -- making money with money to create wealth. You used to make money with time. Now you make it with other people's time and your money. The name of the game is to find a company that is not performing near its true potential. Buy it at rock bottom price. Build it up quickly using all the knowledge, skills and systems you have learned and developed, then sell it for a premium.

The rule of zeros

Find good people with whom to build these companies. The higher up the e-ladder you climb the more fun it becomes. You won't be working harder, just playing for bigger stakes. Level four investors think according to the rule of zeros, which is: "What is your comfort level of zeros?" With how many zeros are you willing to play?

People who invest in property get wealthy faster because they are playing with more zeros. As an investor, you make money by building and selling businesses. The immediate goal is the creation of wealth through buying and selling businesses. This leverages your knowledge. You are in control. Then use some of your profits to buy investment property or stocks for portfolio diversification.

Help distressed businesses

Many people want to buy businesses that are successful. Your goal is to help them by getting a good deal on a distressed business, making it successful, then selling it at a profit to those want to buy a successful business. Think of how much good you are doing for the employees of the business, those who are looking to buy a successful business and the local economy.

Think big

How we think has to change. Our thinking determines our reality. We have to think big before we can achieve big results. Forget aiming for a 15 percent return on investment, aim for 200 percent instead. Realize that at this point, you are among the best in business. Because of that you will come across many interesting propositions you would not have noticed before.

The economy is like the seasons

Understanding the cycles of the economy is vital to success at level four investor. The general economic cycles can be viewed as the seasons of the year. You are a farmer. In spring you plant (the economy is coming out of a downturn). In summer you water, fertilize and prune for more growth. In late summer and early autumn you harvest and store up for winter. In winter, which represents the bottom of a downturn in the economy, (we are currently in the beginning of a severe winter) you use the assets from your harvest to position yourself for an even greater planting in the spring.

Fortunes are made in winter by those savvy investors who understand the cycle of the economy and have positioned themselves to acquire additional income producing assets at a fraction of what they were during summer. Those who have shed debt and have liquidity welcome winter.

Tune in next week as we take the final step on the Entrepreneur Ladder and enjoy the incredible vista from the vantage point of level five entrepreneur.

MAD

Speaking of the next step, I am hosting a Massive Action Day for all business owners at Arvest Bank, downtown Norman, Thursday. The objective of this workshop is to leave with a 90 day plan for accelerating your business. Contact me for additional information.

Rob Garibay is a local business owner and business coach with 30 plus years of business experience. Forward your business questions to 573-6537 or e-mail robgaribay@actioncoach.com.