Identifying Bargains in Apartments
There are two types of bargains in rental real estate. There is the obvious bargain, which people snap up right away. And there is what is called the "sleeper." The sleeper requires three things in order to increase its value. First, it requires some creative upgrading. It requires some cosmetic alterations, paint, carpet, landscaping and so on so that it looks better and more attractive.
Second, the sleeper requires changes in use. For example, sometimes you can put offices or retail stores downstairs on the ground floor in apartments and dramatically increase the rent that you can charge for the space.
The third thing that a sleeper requires, and most important, is better management techniques. These are techniques that enable you to reduce expenses and increase the rents. Everything you can do that makes you a better manager, that enables you to increase rents or reduce expenses dramatically, increases your return on your investment.
Cash Is King
In any business, cash is king. It is not the only thing. It is everything. Always think in terms of safeguarding your cash. Think in terms of parting with it slowly, carefully, cautiously and not at all, if possible.
Make every offer to purchase income-producing properties subject to verification of all revenues and expenses. Especially ask for bank deposit books to get an accurate account of income.
If the seller of the property will not freely give you all the financial information you require, walk away from the deal as fast as you can go.
Whenever a seller of property is reluctant to give you previous financial results from the building, it means that there is something wrong with it.
Approach the Seller Prepared
Always find out why the owner is selling. Get all the information possible about the seller's situation before you make an offer.
When bargaining with the seller, use all the buildings shortcomings and defects to justify a low offer. Always be polite, courteous and low-key.
Don't reveal your strategy to anyone, not even the real estate agent. Keep it to yourself, confidential, and insist on meeting the seller of the property personally. Don't ever buy a property with a real estate agent in between you and the seller. There is too much opportunity for miscommunication.
Have an engineer check all the main plumbing, boilers, furnaces and wiring before you finalize the deal. Have a builder check the structure for soundness. Have an exterminator check for termites or pests of any kind.
Assume the worst and never leave anything to chance. Potential Problems in Rental Real Estate
Here are some pitfalls to avoid, and problems to deal with in owning rental properties.
1. Bad Tenants
As I mentioned earlier, the number one, biggest single problem in owning rental properties is bad tenants. Your investment is only as sound as the willingness and ability of your tenants to pay rent. If you don't pay close attention to this, this is where you will make your biggest mistakes in owning rental property. Every bad tenant who defaults on their rent costs you net income because the expenses go on regardless.
2. High Vacancy Rates
High vacancy rates or seasonal fluctuations can really hurt your income. They can even cause you to lose the building. If you've done all the research and analysis that I talked about earlier, you won't get caught. But you must be careful.
A good friend of mine, an experienced real estate investor, visited Phoenix from the Northeast one winter. He was charmed by the climate and decided to purchase an apartment building that seemed to be very reasonably priced based on his experience.
Then the spring came. In March and April, 70% of the tenants moved out and back to the cold climates. When he came back, he was astounded to find that he was losing an enormous amount of money. He discovered that all the apartments had been rented on six-month leases to people from the north that came down to Phoenix in the wintertime.
Because of the seasonal fluctuation, he suddenly had an empty apartment building. And he wasn't the only one. A lot of property owners were stuck with empty apartment buildings. He almost lost his entire investment.
3. Poor Management
Unless you are going to live in or personally manage your apartment building, you will eventually need to hire a manager. This person will be responsible for renting out your apartments, collecting and depositing rents, maintaining the property, and dealing with the needs and complaints of the tenants.
Your choice of a manager is critical to the success of your investment. Interview carefully, check references, monitor activities, and stay on top of the business. A good manager can be a blessing. A poor manager can cost you a fortune. Leave nothing to chance.
Your Future in Real Estate
In this brief discussion on real estate investing, I have deliberately not talked about such things as equity build-up, depreciation or amortization, the impact of taxes, or discounted cash flow rates. What I've explained in this chapter are the basics that you need to know to get started. There are countless books, courses and seminars on the subject and I recommend that you read the books, attend the courses and learn everything you can before you take the plunge.
As in any business, real estate investment requires an enormous amount of time, energy, dedication, courage and persistence. Not only that, you must really enjoy the ownership and trading of real estate if you are going to succeed at it. You must be willing to put your head down for several years, work hard, wrestle with unruly bankers and sellers, negotiate, grind, compromise continually and fight with difficult tenants who feel that all landlords are fair game.
However, if you persevere in spite of these challenges, one day you could wake up with a substantial portfolio of income producing properties, a healthy cash flow and financial independence for life.
Ibid: Commercial real estate and real estate development follow along the same lines of analysis. Just remember that you are buying the long-term future earning power of a piece of property and you must analyze each piece of property carefully by asking these questions. First, how much does it cost me? Second, how much do I get back? Third, when will I get my return on my money? Fourth, how certain is it that this return will materialize? Here is the final question, "What else can I do with the same money?"
Chapter Eleven : Investment Strategies
If you are really serious about getting rich your own way, the time to start doing something about it is now. Financial planning is the tool that you use to get from where you are to the financial independence that you desire.
In this chapter you will learn about various investment strategies and concepts that you must know if you are going to build an estate and retire wealthy.
The Financial Planning Stool
The three legs of the financial planning stool are savings, insurance and investment. Let us begin with savings and insurance. How much do you need? The basic rule with regard to savings is that you should put aside 10%-20% of your income until you have enough to cover 3-6 months of your expenses stored away in some form of liquid investment. A liquid investment is one that you can turn into cash quickly, such as savings accounts, certificates of deposit or even some mutual funds.
Insure Properly
You need sufficient life insurance to protect your loved ones should something happen to you. You should calculate how much your family would require to maintain their standard of living if you died unexpectedly.
You then purchase enough life insurance so that the interest from the life insurance proceeds would be sufficient for your family to live on.
For example, if your family requires $50,000 per year, and you can earn a return of 10% per annum on the invested proceeds, then you would purchase a $500,000 life insurance policy payable, owned by an irrevocable trust, with your spouse and families as your beneficiaries.
In your 20’s and 30’s, the best value in life insurance is term insurance. Term insurance is issued on an annual basis, and because it has no cash-build up value, it is relatively inexpensive if you are in good health.
As you move into your 40’s and 50’s, you need permanent insurance. Permanent insurance is more expensive, but it has a cash value that builds up, and the policy can never be canceled once issued, as long as you keep up with the payments. With permanent insurance, your estate will receive the face value of the policy in full if ever something were to happen to you.
You should speak to an insurance agent to become fully aware of what you need and the various options that are available to you. But you must be fully insured as a basic part of your financial life.
The Importance of Investing
The third leg of the financial planning stool is investments. The three variable factors in any investments are safety, liquidity and growth. There is always a trade off among these three factors.
If the investment has a high degree of safety, it usually has a low potential for growth. If the investment is highly liquid, such as a savings account, it usually pays low rates of interest.
If the investment has a high possibility of growth, it is usually a considerably less safe then a savings account or money market fund, and it is almost invariably not as liquid. You cannot sell out of it into cash very fast.
The investments with the greatest potential for safe, long-term, upside increase in value are usually highly non-liquid investments, such as income producing real estate. This type of investment usually takes a longer time to buy and often a long time to sell.
Each person must choose a combination of investments that he feels comfortable with, considering the amount of risk involved. This is something you have to decide for yourself. Financial experts often call this your "risk-quotient," and it changes as you get older and as your financial situation changes over time.
Invest the Way the Wealthy Invest
The affluent in American, including self-made millionaires, have most of their money in the following five places :
1.Your Own Business
First, because most wealthy people and self made millionaires achieve their financial success as a result of staring and building your own businesses, most of the affluent have their money tied up in their own companies. In addition, most senior executives of Americas largest corporations have most of their net worth tied up in the stock of the companies that they manage.
In a study conducted a few years ago, a cross section of people were asked what they thought would be the very best place to invest $100,000 that you had saved up over the course of your business or career. This survey covered business people, professors, journalists, philosophers and executives. Surprisingly enough, the answer that they came back with was, "the very best place to invest $100,000 would be back into yourself, getting even better at what you had done to earn that money in the first place."
In every consideration of how you deploy your financial resources, your key concerns should be the level of risk and the certainty of return. If you have less then $100,000 to invest, in many cases, the very best place for you to invest your money is back into developing your skills, into getting better at what you are doing already. If you have earned the money in your business, the best place to invest it is probably back into the business or industry where you already have high levels of familiarity and expertise.
2. Income Producing Real Estate
The second major investment vehicle for the affluent in America is commercial real estate. This includes income producing office buildings, apartment buildings, industrial parks, shopping centers and other properties that can be rented out to produce a steady income stream.
Thousands of Americans have made their fortunes by starting and building their own successful businesses, and then kept their fortunes by careful and systematic investments in commercial real estate. When you take the time to select commercial real estate carefully, and purchase it on
the right terms, it can be perhaps the very best long-term investment, as I explained in the previous chapters.
3. Land Held For Development
The third place that the affluent store their money is in raw land held for development. They buy land on the outskirts of growing cities that have many of the positive economic dynamics that I mentioned earlier. As the city grows and expands, this land increases in value until finally it is purchased for development.
Water Is Essential
There are several factors to consider in purchasing raw land. The first, and most important, is to ask, "Where will the water come from?" Land can only be developed if it has an adequate water supply.
How Will People Get There?
The second consideration in purchasing raw land is transportation. How easy is it to get to the land? Many areas grow rapidly in value after freeways and highways are built that open them up and make them accessible to larger populations. Many people have made fortunes by buying land several years in advance of its development. Then the land can increase in value by 10 and 20 times when the need for homes, schools and shopping centers reaches that area.
Nearby Population Centers
The third consideration in buying raw land has to do with the nearby population centers. For the land to be valuable, it must be capable of providing a service to people of some kind. Where are these people going to come from?
Raw land only appreciates in value as the population of the area increases. Some land will never increase in value because it is lacking in either water, transportation access or population pressures.
4. Liquid Investments
The fourth place that the affluent keep their money is in certificates of deposit, money market accounts and other interest-paying liquid investments. Serious money in general is not speculative money. It is careful, conservative money. It is money that has been earned very carefully and is guarded very thoughtfully.
5. Stocks and Bonds
The fifth investment used by the affluent is good quality stocks and bonds usually purchased for the long term. Serious investors in the stock market are what are called "value investors." They carefully research a stock and then purchase that stock based on the underlying fundamental values. They then hold the stock for the long term, ignoring the day-to-day fluctuations of the stock market. Warren Buffet is a prime example of this type of investor.
Investment Alternatives Available to You
Let us assume that you are sufficiently insured and that you have enough savings put aside to cover your expenses for 3-6 months. With your foundation solidly in place, you can now look at some of the places where you can invest your money as you accumulate it.
1. Money Market Accounts
There are three places where you can park your savings that will give you high degrees of safety and liquidity. The first is a money market account. This is available at your bank and pays a higher rate of interest than a savings account or passport account. Money market accounts require a minimum balance. They are also quite competitive, so you should shop around and look at what different banks will offer. As soon as your savings account balance exceeds $2,000-$3,000, move that money into a money market account at a higher rate of interest.
2. Certificates of Deposit
The second savings instrument that you may consider is a certificate of deposit, often referred to as a 'CD.' These are issued by banks, savings and loans, and other financial institutions for periods of time ranging from 30 days up to 10 years. The longer you lock up your money in a CD, the higher the interest rates you will receive.
The weaknesses with CD's, if you need your money back before the date of maturity, there are often serious penalties. You should find out what they are before you purchase a CD in the first place.
CD's pay higher interest rates then money market accounts, and are safe places to put your savings. Nonetheless, they are not as flexible as the third option, which is government savings bond.
3. Government Savings Bonds
Government savings bonds are the most conservative of investments. There are safe, secure and they pay reasonable rates of interest. They are easily negotiable into cash if you need the money back at any time. They're backed by the full credit of the issuing government. In other words, you cannot lose money on a government savings bond unless the entire country goes broke.
The three investments described above are perfect places for you to invest your 3-6 months of savings. You will get the highest return possible with absolute security and safety of principle.
Investing In The Stock Market
When you begin to earn and save amounts of money in excess of your needs for short-term expenses and insurance, the next place you will want to explore is the stock market. There are three major stock markets in the United States; The New York Stock Exchange, The American Stock Exchange, and the NASDAQ. These stock exchanges are run by executives and boards of directors who come primarily from the investment firms and brokerages that trade on these exchanges.
Stock brokerage firms are companies that come together in the respective exchanges to make a market for publicly traded stocks and bonds.
You can buy and sell more then 14,000 different stocks, plus hundreds of mutual funds, through a stock brokerage firm, either live, with offices, like Merrill Lynch or on-line like Ameritrade and Schwab.
1. Common Stock
Most of the trading that you hear or read about in the stock market is in what is called "common stock." A share of common stock in a company represents a percentage of ownership of that company. Ownership of the stock entitles you to share in the risks, rewards and profitability of that company, both the upside and the downside.
Your ownership of a company is proportional to the number of shares that you own relative to the number of shares that the company has issued.
For example, if the company has one million shares issued, and you own one share, then you are entitled to 1/1,000,000 of the profits or losses of the company. When you purchase a stock, you actually become an owner of that company for as long as you own the stock.
Betting Against the Experts
There are several important factors for you to consider if you are thinking about trading in the stock market. First of all, for you to buy a share of stock, someone else has to be willing to sell that share of stock.
Every time a trade takes place, the seller of the stock is betting that the stock will not go up. The purchaser is betting against the seller, believing that the stock will increase in value. In this sense, stock market trading is a zero sum game. Each purchaser or seller is betting his or her knowledge against the other.
Unless your knowledge of the stock in particular, and the stock market in general, is superior to that of the people whose whole lives are spent working in the market, it is dangerous for you to believe that you can out guess them. The experts simply have too much time and experience for
you to outthink them. You will probably be better off in a mutual fund of some kind.
Index Funds
Some of the most popular and largest mutual funds today are called 'index funds.' These are stocks that purchase a cross section of stocks in the Standard & Poor's 500, or in a particular industry. These index funds almost invariably match the overall market in growth or decline. In 80% of cases, an index fund will out perform the smartest and most experienced investment managers of stock brokerages or mutual fund companies.
Expectations Move the Market
Stock prices are largely determined by the expectations that the purchasers in the market have for the future profitability of the company issuing the stock. Since expectations are volatile and constantly fluctuating with every new piece of information, stock prices can change dramatically, up or down, in a matter of days, or even hours.
It is important for you to know that the very best financial minds in the world spend 40-60 hours each week studying the stock market and making investment recommendations. In spite of this single-minded focus on stock market values, more then 50% of the recommendations of the stock market experts turn out to be wrong. The very best you can say is that advice from financial experts is merely a series of 'educated guesses.'
Stock Market Investing Takes Time
Just to avoid making mistakes, much less to pick stocks correctly, you must spend an enormous amount of time and energy studying the market.
You must study the individual industry within the market and study the individual company in that industry that you are considering investing in.
Contrarian Theory
There are two popular ideas in the stock market that you will hear about. The first is called 'Contrarian Theory.' Contrarian Theory says that the best time to buy a stock is when nobody else wants the stock, or when everyone else is selling. This approach is both partially true, and partially false. Sometimes, when everyone else is selling the stock, there is a very good reason for it and you should be selling too.
Nonetheless, Contrarian Theory is a valuable tool to have at hand when thinking about where and when you invest in the stock market.
Sometimes investors pick up real bargains in what are called 'Out-of-Favor Stocks,' but you must do your homework.
Buy Stocks at a Discount
Warren Buffet, probably the most successful stock market investor in history, and one of the richest men in the world, says that people look for discounts in every area except in stock market investing. He has made his fortune by continually looking for 'discounts,' in that the stock is trading well below its intrinsic value. His ability to find these stocks and then move into them and take large stakes has made him and many thousands of other people extremely rich.
The Greater Fool Theory
The second concept that you will hear about is called the 'Greater Fool Theory.' The Greater Fool Theory eventually takes hold in a stock market boom. This theory says that no matter how much you pay for the stock, you don't have to worry because a greater fool will come along and pay you even more. The problem with the Greater Fool Theory is that eventually the market runs out of fools. At that point people being to sell, and the market turns around and goes in the other direction. As more and more people rush to sell, a semi-panic can set in and the entire market could collapse.
In the high-tech and dot-com boom of the 90’s, the Greater Fool Theory took over and people began buying stocks at prices which in retrospect were completely ridiculous. Brand new companies that had never produced or sold anything, would make an initial public offering (IPO) and people following the Greater Fool Theory would run the stock up several hundred percent in a single day. Even highly intelligent, sophisticated, conservative, experienced business people and investors got swept up in the Greater Fool Theory and lost enormous amounts of money. Don't let this happen to you.
The Greater Fool Theory is also applicable to real estate. If you hear someone say that the only direction that something can go is up, either don't buy it, or sell it as fast as you can. There is no such thing as a perfectly secure investment that has high potential returns but no downside risk.
Financial Representatives
Here is an important point. Sales people who work for stock brokerage firms are paid on the basis of straight commission. They sell exactly what they are told to sell by their superiors. The person you speak to on the phone usually knows little or nothing about the stock he or she is recommending. Their jobs are to make up to 200 calls per day, and to sell whatever their management has told them to sell on that particular day.
Most registered representatives are not a source of investment advice. If you take their advice, you must know that you are throwing dice with your eyes closed. You are gambling with your money.
Check the Experience of Others
A good friend of mine is a multi-millionaire who earned every penny himself through hard work, savings and investments. He is often contacted by investment advisors recommended that he put his money into something that they are selling. In each case, he invites the investment advisor to come and visit him personally.
During this personal visit, he asks the investment advisor about his own net worth. He says that he does not believe that taking advice from people who are worth less than he is. In addition, he wants to know how familiar they are with what they are recommending.
His experience with investment advisors has been consistent over the years. In every case, he finds that they know very little about what they are selling, and that they have not bought any of it themselves. He has never found a financially successful investment advisor, or at least not one who is as successful as he is.
At the end of the conversations, most of these investment advisors confess that he would be unwise to invest with them. They go away and seldom contact him again.
Who Makes the Money?
There is a moral to this story that is important to you. Almost all the money that is made in the stock market, with few exceptions, is made by the people buying and selling stocks on commission. Very little is made by the actual investors.
In one 22-year study tracking the careers of 1,500 men and women, 83 of whom became millionaires, the researcher found not a single person in the study became wealthy investing in the stock market. In fact, one of the main reasons why most of the people in the study were still struggling financially after 22 years of work was because they has lost so much money investing their savings in stocks recommended by financial advisors.
Another point to remember is when the stock market turns down, or the financial market declines, the same people who are giving investment advice are often thrown out of work by the thousands. They often find themselves unemployed and unemployable, or going to work in other fields.
This is not to say that they are not many fine, honorable men and women in the field of financial planning and investment counseling. It is just to say that there are also enormous numbers of people in those fields from whom it would be dangerous to accept advice.
Remember, the only thing easy about money is losing it. However, if you are interested in investing in the stock market successfully, there is a lot of good advice available.
Investment Strategies of a Multi-Millionaire
One of the most successful stock market speculators in history was a man named Bernard Baruch. Bernard Baruch started his career as a runner on Wall Street and ended up as one of the richest and most respected men in America, and advisor to four presidents.
In his book, My Own Story, he gives some timeless advise for evaluating a company's stock before investing in it. Here it is :
1. Examine the Real Assets
Examine the real assets of the company, the cash in excess of its indebtedness, and the value of its physical properties. Learn how to read a financial statement so that you can clearly understand the assets and liabilities of the company. Remember that you are thinking about paying a certain amount of money for a share in that company. You need to know exactly what it is that you are buying.
2. What Does the Company Do?
Be sure to ask, 'Does this company or perform a service that people want, or must have?' The most important time period in considering an investment in a company is the future. The future of any company is determined by how good they are today, and how much in demand their products and service are and will be in the future. McDonald's, for example, has been a good stock over the years because what it is selling has been in continual and usually increasing demand.
3. Study the Management
Another way of evaluating a company's stock is to assess the quality of its management. This is especially important in evaluating whether the company is going to grow in the future. Today, Venture Capitalists, those specialists who invest in new companies, look to the quality of management as the most important single factor in determining investment success. If the right people are in charge, they will find a way to make the company successful in most cases.
Ten Rules for Investment Success
Here are Bernard Baruch's ten rules for investment success. Failure to follow these rules has been the reason for losing money for every person who ever violated them in the stock market.
Rule One : Don't speculate unless you make it a full time job. Remember, every decision you make is a bet against the decision of someone else who is studying the stock market 40, 50 and 60 hours a week.
Rule Two : Beware of anyone offering inside information or tips. The number one way to lose money in the stock market is to act on tips from people who really don't know what they are talking about, like taxi drivers, bartenders, barbers, and even your close friends at work.
Rule Three : Before you buy a stock, find out everything about the company. Find out about its management, its competitors, its earnings and its possibilities for growth. Be patient, disciplined, objective and unemotional. Take the time to investigate before you invest.
Rule Four : Don't try to buy at the bottom and sell at the top. This cannot be done, except by liars. When you buy a stock, decided at what price you will sell it, and when it hits that price, don't be greedy. With program and computer trading today, you can set a 'sale' price on a stock
that will be triggered automatically when it hits that price. The fact is that you will never go broke taking a profit.
Rule Five : Learn how to take your losses quickly and cleanly. Don't expect to be right all the time. If you have made a mistake, and you see that the stock is going down, cut your losses as quickly as possible. The very best technique for cutting your losses in the stock market is what is called a 'stop loss.' With the stop loss technique, you put in an order to sell your stock at 8%-10% below the highest price at which you have owned that stock. For example, if you buy a stock at $25 per share, you would put a stock loss for $23 on that stock or approximately 8% below your purchase price. If the stock goes up to $30, you would move the stock loss up to $27.50, slightly over 8% below the highest price at which you have owned the stock. The use of the stock loss technique can minimize your losses if you have the discipline to stay with it.
Rule Six : Don't buy too many securities. It is better to only have a few investments that can be watched carefully than to have too many. Diversification spreads your risks, but it also eliminates any chance that you might have for major gains if one of your stocks were to increase rapidly in value.
Rule Seven : Make a periodic appraisal of your investments to determine whether changes in conditions have altered their prospects. Use zero-based thinking. Always ask, with new information, 'If I had not purchase this stock, knowing what I now know, would I purchase it again today?' If the answer is 'No', that is your cue to sell.
Rule Eight : Study your tax position carefully to know when you can sell to your greatest advantage. Be aware of the capital gains taxes that are applicable to your transactions. Remember that the only thing that counts is the amount that you have left after taxes. The timing of stock market purchases and sales, to create capital gains and capital losses, is an area with which you should be thoroughly familiar.
Rule Nine : Always keep a good part of your capital in a cash reserve. Never invest all of your funds. If you keep a cash cushion at all times, you will always be in a position to take advantage of unexpected opportunities that come along. You will always have an emergency reserve to act as a buffer no matter what happens in the market place.
Rule Ten : Don't try to be a 'jack-of-all-investments.' Stick to the field that you know best. Usually the most successful investors are those who pick one particular industry and concentrate their time on becoming knowledgeable on the companies in that industry. Pick an industry that interests you so that you will enjoy keeping current with it.
Lessons From Successful Investors
Many thousands of successful investors have been interviewed over the years in an attempt to discover their so-called 'secrets of success.' Here are some of their recommendations :
First, if you are not a bit worried about your speculations or your investments, then you are not risking enough. You should have enough money invested so that it is a real concern to you. You are far more likely to make the right decision when you are emotionally involved because of the
size of your investment. You are also more likely to watch that investment more carefully.
Second, always take your profit too soon. 'Conquer greed', just as Bernard Baruch says. There is a saying in the stock market that 'bulls make money and bears make money, but pigs never do.'
Third, distrust anyone who claims to predict the future, since all financial outcomes are loaded with uncertainty. This means that every investment is a gamble of some kind. No one can tell you with exact accuracy what is going to happen in the future with regard to any stock or investment. Everyone is guessing the very best way they know how.
Fourth, when the ship starts to sink, don't pray, jump. In other words, accept the small losses cheerfully as a fact of investing life. At the very best, fully 50% of investments will go wrong.
They will actually decline in value. They will fail to realize your hopes and expectations for them. But you can still succeed in investing if you minimize your losses on the downside so that you can maximize your profits on the up side.
Fifth, luck is the most powerful single factor in investment success. Because there are no predictable patterns in investing in the stock market, for you to be successful, you need a lot of luck. A good question for you to ask is, 'How much of my financial future am I willing to entrust to luck?'
Sixth, never fall in love with an investment. Never become emotionally involved with anything that you purchase with the intention of making a profit. This rule also includes real estate, especially your home. Many people fall in love with their investments and are reluctant to admit
they have made a mistake. As a result, they ride them all the way down into the cellar, and often end up setting themselves back by several years.
Seventh, never confuse a hunch with a hope. Many people hope that a particular stock or investment is a good one. They then say that they have a very good hunch that it's going to go up. Consciously separate your hunches from your hopes and don't confuse the two.
Eighth, optimism means expecting the best, but confidence comes from knowing how you will handle the worst. To put it another way, confidence springs from the constructive use of pessimism. The method that I recommend is for you always to ask, 'What is the worst possible thing that can happen in this situation?' Always be willing to face the worst possible outcome. John Paul Getty, at one time the richest man in the world, said that his secret for success in investing was to objectively asses the worst possible outcome of any business deal, and then to make very sure that it didn't happen.
Ninth, disregard the majority opinion. Think through every decision for yourself. Don't allow your investment decisions to be influenced by anyone else. Take the time to think them through personally, and then take full responsibility for each choice that you make.
Tenth, if it doesn't pay the first time, forget it. If, based on the information you have, you decide to invest in a stock and it doesn't work out, sell the stock and go on to something else. Keep your ego completely out of the equation. A very wealthy man once told me that, 'Investment opportunities are like buses; there will always be another one along.'
The above advice is practiced by many of the most successful people who have ever invested in stocks. Remember, the stock market is highly speculative. It is dominated and controlled by people who are making their livings by buying and selling stock for others. And these people make mistakes every single day.
There are no full proof ways for making money in the stock market. If you are going to invest in stocks, be careful. Do your homework and watch your investments all of the time.
Mutual Fund Investing
There is one way to invest in the stock market with minimal risk, and that is through a mutual fund. A mutual fund is a pool of money made up of the investments of thousands of individuals like yourself. This money is used to purchase a diversified portfolio of stocks. A mutual fund is run by professional money managers, people who make informed investment decisions. These are people who spend their full time in the stock market.
Mutual funds are sold directly by the mutual fund companies themselves, and also through stock brokerage firms, investment advisors, banks, saving and loans and other outlets. There are thousands of mutual funds available, and they have records of performance that are all over the map. Some of them actually lose money when the stock market is booming and others will make money when the stock market is declining. Once again this is an area where you must investigate before you invest.
Load Versus No-Load Funds
There are two types of mutual funds with regards to cost. The first is called a commission or a load fund. In a commission fund you pay up to 8½% commission, which comes out of your investment when you invest your money in that mutual fund. Most of this commission goes to the person who sold you the mutual fund in the first place. This is how the fund companies compensate their salespeople.
With a commission-based fund, the balance of your investment is put into the portfolio stocks. The explanation for charging an 8 1/2% commission is that, if the fund is well managed, you will make it all back and more in a reasonable amount of time. Sometimes you do, and sometimes you don't.
There are also no-load mutual funds. These are mutual funds you can purchase thorough various intermediaries without paying a commission. 100% of your money will be invested for you. Countless comparisons have been made over the years between commission funds and no-load funds. The conclusion seems to be that there is very little difference in investment return between the load and the noload funds. They both seem to be well managed and perform very much the same. There is therefore no need for you to pay a commission when you buy a mutual fund. Your results will be no different in the long run, but you will lose a substantial part of your investment at the beginning if you pay a commission. It can take you a year or more just to get back to your original investment.
Key Considerations for Investing In Mutual Funds
There are several factors you should consider when you think investing in mutual funds. Bear these considerations in mind when you make your choices and decisions.
First, past performance is seldom any indicator of future performance, except in select cases. If your mutual fund is successful, it will usually attract an enormous amount of money. Soon it becomes so large that its funds cannot be invested to achieve the same rate of growth that made it famous in the first place. By the time you hear of a successful mutual fund, it is usually too late to get into it, and enjoy substantial increases in your investment.
Second, there are certain mutual fund management companies that have long-term, above-average records of success and growth. It is not unusual for the shares in a specific mutual fund to increase 10%, 20%, 30%, 40%, even 50% in a good year in the stock market. Often a large mutual fund can achieve above market returns for several years.
Third, irrespective of the pros and cons of mutual fund investing, the very best place for the average person to invest in the stock market is through a well-selected mutual fund. Because they hold a diversified portfolio of stocks, your downside is limited. Unfortunately, in most cases,
your upside is also limited. Most mutual funds move in tandem with the stock market as a whole. When the stock market goes up, the funds value goes up, and when the stock market declines, they decline at about the same percent.
Fourth, one of the advantages of a mutual fund is that they are highly liquid. If you need your money back, you can sell your shares, as you can with any stock, and get your cash quickly if you need it.
Fifth, and perhaps most important, mutual fund investing enable you to turn your attention to your career and your business. Once you have invested the money in a mutual fund, you can get on with the rest of your life and work activities and not think about your money again, at least in the short term.
Different Ways to Invest
There are other investments that people make, and which have different track records and histories.
1. Precious Metals
You can invest in gold, silver and precious metals. These are volatile and dangerous instruments, often sold by questionable people, as inflation hedges, based on questionable projections regarding their potential increases in value.
As a rule, be very careful when considering gold, silver and precious metals. Some of the smartest people in the world are trading in these metals every year. My advice to you would be to avoid gold, silver and precious metals completely.
2. Antiques and Collectibles
Another type of investment consists of antiques, Persian carpets, coins, stamps and other collectibles, such as baseball cards. While is it true that this type of investment occasionally goes up in value, it is even truer that investments in these collectibles go down as well, and much more often.
The people who make the most money trading in these areas are the ones that sell antiques, Persian carpets, coins, stamps and baseball cards to others. Unless you are an expert, this is not a place to invest.
3. Penny Stocks of All Kinds
Many people invest in oil and gases stocks, mining stocks, and penny stocks. While there are very solid operators in oil, gas and mining, there are also many questionable stock market hustlers in this type of investment.
With regard to penny stocks, fully 80%-90% of penny stocks never recover to the price at which they are initially sold. They are the greatest waste of investment capital in America. If someone calls you with a wonderful success story about penny stocks, hang up the phone.
4. Commodities
Another type of investment that you read about is commodities. Trading in the commodities market is one of the biggest of all gambles. Reputable stock brokerage firms require that you demonstrate to them that you have at least $25,000 to lose before they will take your account. And you can be sure of one thing. You are going to lose your $25,000!
Even the most sophisticated commodity traders in the world lose money every single day. Stay away from commodities unless you are willing to make it a full-time life commitment and you have a lot of money with which to learn the field.
Guard Your Money Carefully
Your primary rule for investments of all kinds must be, don't lose money. It is better to keep your hard earned money in an interest-bearing account then it is to lose it on foolish investments.
Study after study shows that, if you simply leave your money growing in a well chosen mutual fund, and let it compound over the course of your working lifetime, you will be further ahead then with almost any other investment except your own business.
The rich in America are almost always conservative. They maintain low levels of debt. They handle their money with care, and they continue to look for ways to increase it while minimizing risk.
Learn from the wealthy and do what they do. Follow the leaders, not the followers; remember that the first step to becoming wealthy is to earn the money. The second step is to hold onto it. It is not how much you earn, but how much you keep that counts. Be determined and be careful.
Chapter Twelve : Leading the Field
In the course of this book, I have focused on the ways that most people become wealthy in America. They provide a needed product or service of good quality at a fair price. They add value in some way and keep a part of that value. They continually seek better, faster, cheaper ways to do things for more people.
In this final chapter, I want to introduce you to three other pathways to affluence, to getting rich your own way. Each of them has been followed successfully by hundreds of thousands, and even millions of people to achieve financial independence.
1. Get A Good Job and Do It Well
The first pathway is simply getting a good job and working your way up in a successful company over the course of your career. Fully 10% of self-made millionaires in America have worked for other companies all their lives. They became wealthy by becoming very good at what they did, being paid very well for doing it, and by then holding onto the money in the form of savings, investments and stock options.
2. Become A Professional
The second way that people become wealthy in America is by entering a profession such as law, medicine, architecture or engineering, and then by dedicating themselves to move to the top of their field.
Fully 10% of self-made millionaires in America are professionals, defined as someone with an advanced degree, who have reached the top 10% of their fields. As a result, they are paid very well for what they do. They fall into the 20% in any occupational category who earn 80% of the money in that category.
3. Become A Top Salesperson
The third way you can become a self-made millionaire, accounting for fully 5% of self-made millionaires, is by becoming a top salesperson in your field.
In sales, the 80/20 Rule holds true as well. The top 20% of salespeople earn 80% of the money. What this means, when you calculate it on paper, is that the average income of salespeople in the top 20% is 16 times the average income of the people in the bottom 80%.
But it gets better. The top 20% of the top 20%, or the top 4% of people in selling, earn 80% of the money in the top 20%. This means that people in the top 4% of sales can be earning 25 times the average of the people in the bottom 80%.
Over the years, I have spoken at sales conferences arranged to celebrate the top people in a particular industry. At two of these meetings, the average income of the people in attendance was approximately $840,000 per year. The average income of the average salesperson in those same industries was $24,000 per year.
It turns out that there are two common denominators of the people at the top of their fields. First, every one of them started at the bottom. At one time, they knew nothing about that field. Everything they ever accomplished, they had to learn and do for themselves.
Second, at an early stage in their careers, they made the decision to 'be the best' at what they were doing. They started earlier, worked harder and stayed later. They dedicated themselves to relentless, ongoing, neverending personal and professional development. They resolved to 'pay the price', whatever it was, to achieve great success in their chosen fields.
In each of these three different ways of becoming a millionaire, the key to success is first, for you to become absolutely excellent at what you do through continuous personal and professional improvement. Second, your goal is to be paid the very most possible in your field. Third, you must then save and invest 10% to 20% of your income throughout your career. By doing these three things, your financial future will guaranteed.
The Secrets of Success and Long Life
Throughout the ages, and in this book, we have uncovered some of the keys to living and enjoying a wonderful life. Here are some of the rules and practices followed by the happiest, healthiest and most financially successful people living today. Each is possible for you.
1. Do What You Love To Do
The common denominator of successful people in every field is that they do what they love to do. They think through their natural talents and abilities, and then choose their careers and organize their lives so that they can focus single-mindedly on doing something that they really enjoy, and from which they get an enormous amount of satisfaction and pleasure.
2. Identify Your Core Competencies
Whatever your field, you must first identify your 'core competencies', those things that you do especially well, and then organize you life around doing more and more of them better and better. You must identify the area of specialization in your work where you can make the greatest and most valuable contribution doing what you do best.
3. Throw Your Heart Into What You Do
Live with passion! Once you have determined what it is that you can do really well, and what you most enjoy, you should throw your whole heart into doing whatever it is. Burn your bridges. Make a total commitment. As Emerson said, 'Nothing great was ever accomplished without enthusiasm'.
4. Commit to Excellence
There are no shortcuts to personal and professional excellence. The primary reason that people underachieve and 'live lives of quiet desperation' is that they are not continually getting better at what they do.
They fail to dedicate themselves to lifelong learning. They get a basic education, sometimes including a college degree, and then attempt to coast for the rest of their careers on their accumulated knowledge. This is a sure prescription for failure.
5. Become A Lifelong Student
To be the best, you must read in your field continually. You must listen to audio programs in your car rather than driving around listening to music (chewing gum for the ears). You must regularly attend every seminar and take every course that you can find that will help you to move ahead in your field. Sometimes one small idea or change in your approach, or way of doing things, can change the direction of your career, and lead you on to great success.
Top people in every field are not necessarily those who are smarter than others. They are rather those who have taken the time to learn what they need to know to be superior to their competition.
6. Earn Superior Rewards
If you want to have a superior life, you have to be better than the other people in your field. The market only pays extraordinary rewards for extraordinary performance. It pays ordinary rewards for ordinary performance and it pays below-average rewards, insecurity and unemployment for below-average performance.
7. Save Your Money
It is quite possible for you to become wealthy working for someone else. Many top professionals, senior executives and superstar sales people earn hundreds of thousands of dollars per year, and some earn much, much more. But even at an income of $50,000 per year, if you save 10% per year off the top, $5,000 per year, from the age of 25 to the age of 65, you will become a millionaire.
Even if you earn an average salary, if you put 10% or more of your income away over the course of your working lifetime, and never touch it, you can become a millionaire.
If you start earning $50,000, $60,000, $70,000 and more, and saving 10% off the top, your chances of becoming a millionaire or multi-millionaire are greatly enhanced.
8. Do A Great Job Right Where You Are
The fact is that not everyone can or should be an entrepreneur, starting and building their own business. Fully 90% of people working today are more ideally suited to work within the framework of a larger organization where they can use their specialized talents to their very best advantage. You may be perfectly suited to helping to build a corporation. You may be more comfortable within a company environment.
Peter Drucker said that, 'The purpose of an organization is to maximize strengths and make weaknesses irrelevant'. The reason that companies form is because the owners recognize that they need different people with specialized talents in order to accomplish their goals of producing products and services, and marketing them effectively.
If you have a specialized talent or competence, you can actually be more valuable working within a business than on your own. You can work in an area where your special talent or ability is highly valued and makes a maximum contribution to the results that the company has to achieve to survive and thrive.
9. Put Your Career On To The Fast Track
There are several strategies that you can implement to put your career onto the fast track, and to assure that you earn the very most possible in the shortest period of time.
A. Make Yourself Indispensable
First, and perhaps the most important, is for you to make yourself indispensable. The good news is that this idea has not occurred to very many people. When you begin thinking about becoming indispensable, you step on the accelerator of your own career.
The rule is this: you will always be paid in direct proportion to what you do, how well you do it, and the difficulty of replacing you. Your aim must be to focus on becoming so valuable and important to your company that the company cannot do with you. Your contribution should be so essential that even with market downturns and layoffs, you will be one of the last people that the company could do without.
Keep asking yourself, 'What does my company need from me?' And 'Of all the things that I can do, what are the few things that I do that contribute the most value to my company?'
In our Advanced Coaching Program for successful executives and entrepreneurs, we continually encourage people to ask the question, 'If I could only do one thing all day long, what one thing would that be?' The answer to this question is almost invariably the one task or activity where you contribute the greatest value to your company, and to the people around you.
B. Work Harder Than Anyone Else
Develop a reputation for hard, hard work. There is nothing that will put your career on to the fast track more rapidly than for you to develop the reputation of being one of the hardest working people in your organization.
Unfortunately, most people are lazy. Although they will never admit it, they start at the last possible minute, they take every possible lunch and coffee break, and they quit at the earliest possible time. They are always sick enough to take every day of sick leave available to them in a course of a year, and they are adamant about taking vacations, holiday's and 'personal days.' They unconsciously look upon work as a punishment. They seek every way to do as little work as possible, and to get away from the workplace as soon as they can.
But this mindset is not for you. Hard work will bring you to the attention of your superiors faster than any other single quality you can demonstrate. The rule is always, 'Start earlier, work harder and stay later.'
People who get to the top of any organization are invariably people who have worked much harder than the average on their way up. These people are alert and aware to others below them in the organization who are also hard workers. 'Birds of a feather flock together'. Top people are continually looking for others who can be promoted and pulled up to their levels. Hard workers find doors of opportunity opening for them wherever they go.
C. Work All the Time You Work
Perhaps the most important rule for success in your job is to, 'Work all the time you work!'
Work all the time you work. This simple rule enables you to leap ahead of your competition. When you arrive in the morning, go to work immediately. Don't drink coffee, read the newspaper, chat with your coworkers or check your email. Instead, start on your most important task, the task that your boss considers most valuable, and work on it singlemindedly until it is complete. Work on it as though there is a gun at your head.
If someone comes in and says, 'Do you have a moment to talk', you immediately say, 'Yes, but not now. Right now, I have to get back to work!'
Suggest that you get together and talk after work, but refuse to treat the workplace like a social club where you spend most of your time in idle chatter with your coworkers. This is the fastest road to failure and underachievement.
D. Invest the Extra Time
Opportunities for promotion, advancement, greater responsibility, greater training and education seem to go to the person who is willing to put in the extra time and the extra hours. Companies are always open to investing in people when they feel that that investment will pay off in increased productivity and performance. This is why training opportunities and greater responsibilities seem to gravitate toward the hard workers, like iron filings are attracted to a magnet.
The average executive workweek in America is approximately 60 hours. Virtually all of the highest paid people work more hours than the lower paid people. There are very few people on the fast track in any job or career who only work five days or 40-hours per week. All the top people work longer hours and they work all the time they work.
If you want to enjoy an executive lifestyle, it is simple. You have to be willing to put in the same number of hours that executives invest in their careers. Because of the Law of Sowing and Reaping, which is inviolable, you have to be willing to put in those hours for a long time. You must be prepared to work for months and even years before you begin to reap the rewards that go with the long hours.
E. Transform Your Career
Here is a simple strategy that can transform your career. Resolve from now on to start one hour earlier. This will require that you turn off the television at night, get up a little bit earlier and get into the office so that you can start one hour before anyone else. The rule is that one hour of uninterrupted work will give you the same amount of productivity as one hour of interrupted work when people are continually coming in and out.
The second step is for you to work through lunchtime. Because of childhood conditioning in school and earlier employment, many people think that the lunch hour is a sacrosanct period that must be honored, no matter what else is going on. This is completely false. From now on, resolve to work at lunchtime, when everyone else is away. This will give you another hour of almost completely uninterrupted time, during which you can catch up with your tasks and responsibilities and get ahead of your work.
Finally, resolve to work one hour longer than anyone else by staying later in the day. During this time, you can catch up with your work, plan the coming day, answer your correspondence, complete your proposals and reports and be on top of your job.
F. Expand Your Work Day
By starting one hour earlier, working through lunch and then staying one hour later, you will only slightly expand the size of your work day. By coming in earlier, you will avoid most of the traffic and by leaving later, you will be going home after the traffic.
If your normal workday is from 8:30 am until 5:00 pm, resolve from now on to start at 7:30 am and work until 6:00 pm. You will be absolutely astonished at the difference it makes in your career.
First of all, you will gain three extra hours of productive time each day. Since most of this time will be uninterrupted, you will be able to produce two or three times as much as anyone around you. You will feel more calm, confident and powerful. You will feel relaxed and in control of your work. And most of all, the people who can help you the most will notice your additional hours and how productive you are. This will open the doors of promotion to you faster than almost anything else you can do.
G. Accept 100% Responsibility
One of the best strategies for putting your career onto the fast track is for you to accept complete responsibility for the results of your job. Keep repeating the words to yourself, 'I am responsible!' Refuse to make excuses or to blame other people for delays or problems that crop up. Instead, accept complete responsibility and take charge of your work.
There is a direct relationship between the amount of responsibility that you are willing to accept for the results of your organization and the amount of power, influence, status, prestige and pay that you will achieve in that company.
Determine Your Priorities
There are two key areas of responsibility that you must dedicate yourself to fulfilling. First, be sure that you are crystal clear with your boss regarding the most important things that you do for the company. It does you no good to work hard and do an excellent job on something that your boss does not consider particularly important. But it can help you tremendously to start and complete tasks that your boss considers valuable.
Take Over Tasks From Your Boss
Second, take responsibility for those tasks that your boss does not like. Some years ago, when I was working for a senior executive, he gave me permission to review his correspondence each morning before he came in. I immediately found small problems that I could deal with quickly and efficiently, saving him the time and trouble of doing them himself.
As it happened, no one else who had ever worked for him had voluntarily taken over these little responsibilities. I was amazed to see how much he appreciated being freed from these petty details. The more of these small tasks I took away from him, the more he valued me, and eventually, the more he paid me. In the course of my career with that company, I later learned that he had paid me more than any other person who had ever worked for him in any capacity.
Never Be Satisfied
The third strategy with regard to responsibility is perhaps the most important. It is simply this: Ask for more. This approach can make your career.
Occasionally, I am invited to speak to groups of business students who will soon be graduating. The organizers will tell me that these young people are about to embark into the world of work. They are nervous and unsure. They do not know what it is that they need to do to be successful.
Could I organize my remarks to address these concerns?
My advice always consists of three parts. First, I tell them that their main job is to become absolutely clear about the output responsibilities of their position, and to do their jobs well. Set priorities on their time and always work on their highest value use of their time, as their boss defines it.
Second, once you are on top of your job, go to your boss and say, 'I want more responsibility.' From now on, and throughout your career, this will become your mantra, I want more responsibility'.
At first, your boss will thank you for offering and tell you that he will 'think about it.' But each time you meet with your boss, once you are on top of your job, tell him that you want to make a more valuable contribution to the company, and that you want 'more responsibility'.
A Lucky Discovery
I stumbled into this strategy some years ago when I started working for a large company. Because I started earlier, worked harder and stayed later, I was always on top of my job, if not well ahead. I had lots of energy and I wanted more work to do. So I began asking for more responsibility.
And eventually, I got it. This brings us to my third recommendation. Once your boss gives you an additional responsibility, grab it like a fumble in a Super Bowl game and run for yards. Throw your whole heart into fulfilling that responsibility quickly and well. Get a reputation for speed.
Whenever my boss gave me an additional responsibility, even if it was on a Friday afternoon, I would immediately plunge in and work non-stop until the job was done. Sometimes, I would end up working all weekend so that the proposal or report was complete by Monday morning. This always amazed my boss, because no one else in the company had the same sense of urgency.
You Can Never Tell
On more than one occasion, when I bent over backward to get a job done quickly, it turned out that the proposal or report was needed far sooner than my boss had originally estimated. But it was always ready. And my boss was delighted. As a result, he gave me more and more responsibility.
Each time you get a new responsibility, you get an opportunity to learn, grow and become more valuable. Each time you complete a new responsibility quickly, you enhance your reputation for being the go-to guy or girl. Soon, whenever your boss needs something important done quickly, you will be the first person who comes to mind. This strategy is so powerful and so effective that it can transform your entire future.
How to Get Ahead
In a survey of 104 Chief Executive Officers, they were asked what qualities would most help a young person in their organizations to move ahead more rapidly. 86% of them agreed on two qualities. First, they said, was the ability to set priorities. They looked for people who could separate the relevant from the irrelevant. They valued people who could work on those tasks that represented 80% of the value of the entire job.
The second quality they looked for was the ability to do the job quickly. They looked for a sense of urgency. It was not enough to be working on your most important task. What was required was that you got the job done quickly and well. These two qualities mark a person for rapid promotion, and they are both learnable through practice and repetition.
H. Develop a Niche Strategy
A powerful method for putting your career onto the fast track is called the Niche Strategy. This strategy requires that you work yourself into a job where the results of that job are critical to the success of the business or organization.
No matter what the size, cash flow is almost always the lifeblood of the company or organization. Any interruption of cash flow can threaten the survival of the company. The niche strategy requires that you identify the most important function in the company's operations as it affects cash flow, and then work yourself into a vital position in that area.
There are six areas of operations in most companies, any of which can be the essential activity that determines the cash flow to the business. Your job is to first, understand how your organization operates, where its revenues come from, and then for you to pinpoint that key area.
1. Marketing and Sales
For most companies, their primary source of cash flow is marketing and sales. Companies depend for their very survival on a continuous flow of sales and revenue generation. The success of the sales and marketing department is at the heart, or core of the organization.
If marketing and sales is the key area in your company, and you want to get ahead rapidly, you need to work yourself into a position in marketing and sales. You need to learn how to sell, which you can through study and practice. You then must commit yourself to doing your job in an excellent fashion, and become indispensable in that area.
2. Finance
The second area of importance in a company can be finance. Some companies depend for their survival on the ability to negotiate loans, and to raise money in the financial markets. The people in that company who are the most capable of raising money, dealing with financial intermediaries
such as banks and venture capitalists, become the most important people within that organization.
3. Production
The third area that determines cash flow has to do with the production of the product or service. In some cases, the people in charge of production are more important than anyone else in the business.
For example, an established brewery has a unique position in its market. Because of competition, market share for a particular beer is largely fixed. It does not fluctuate from month to month. However, if a particular brand of beer is not available for any reason, purchasers will not wait. They will simply buy a competing brand of beer, and often switch their beer buying loyalties permanently.
Therefore, the most important position in a brewery as it relates to cash flow is the chief maintenance engineer. Why is this? It is because the success or failure of the brewery depends upon consistent, dependable, steady production that keeps the shelves full. Any interruption to the production of beer at the brewery immediately causes the entire business to grind to a halt. Sales stop, revenues are cut off, the financial well-being of the brewery can be threatened.
What this means is that the chief maintenance engineer in a brewery is actually more important than the president. The president and other executives can come and go, but if the chief maintenance engineer is not able to assure that all the equipment is in working order, the activities of the brewery can grind to a halt.
Look around your company. Never assume that the critical core competency exists in a particular area. Sometimes, you can identify a job or position that is absolutely vital to the survival of the company. By working yourself into that key position, you can dramatically increase your value. You can actually become indispensable.
4. Distribution Channels
The fourth niche in some organizations is in the distribution channels for the product or service. The success of the distributors and the maintenance of the distribution channels can be more important than any other activity.
For example, automobile manufacturers require a dealership network in order to generate continuous cash flow. Virtually all manufactured products, for that matter, are totally dependent upon their distributors. The person who exerts the greatest influence over the distribution channels or the dealer networks is often the most important person in the company.
If distribution is the key to your organization's success, this could be the niche that you should work yourself into. By taking the time to work with the distribution channels, you can be vital to assuring the cash flow upon which your business depends.
5. Labor Relations
The fifth area where the niche strategy can be applied is in labor relations. Sometimes the success of an organization, especially a large unionized organization, is based entirely on its ability to keep its labor force working. If labor relations are a key part of your business, by becoming excellent in labor management activities, you can become indispensable to your business, and therefore paid at a higher level.
6. Government Relations
The sixth area where the niche strategy is applicable has to do with government relations. Some organizations are totally dependent upon their ability to get government approvals. They need to maintain high quality relationships with key government officials who determine and control the
activities of the business. If this is the case in your business, one of the most vital positions in your company will be the person who meets and interacts with government officials to assure that the company can continue developing and marketing its products.
For example, pharmaceutical companies today are totally dependent on FDA approvals to manufacture and distribute drugs. The process has become so complicated that it now takes 8 to 10 years and costs approximately one billion dollars, plus a moving van full of paper and reports to get approval for a single drug. The person in the company who negotiates this process is vital to the success of the organization, and highly paid.
Become Valuable and Then Indispensable
Whatever the niche is in your organization, one of the fastest ways to get ahead in your business is to work yourself into the area of operations that is vital for cash flow, and essential for the success of the business. Your job is to become first excellent and then indispensable in that area. You will be amazed at how much more rapidly you will be promoted and paid more money for your work.
I. Develop Specialized Knowledge
The fact is that knowledge is power. Specialized knowledge or skills in a vital area enhances your promotability. Control of vital information is power, as well.
Here is the rule: learn all you can in your chosen job, but never tell all you know. The more specialized information and knowledge that you have, the more valuable and irreplaceable you become. This does not mean that you hold back information. You share it generously with the people who need it to do their jobs well. The more of your specialized knowledge that you share, the more intelligent and valuable you appear.
Meanwhile, take the time to become extremely knowledgeable about your job, especially in the specialized area in which you work. Give and share the information when it is asked for. But if it is not asked for, keep the information to yourself.
The more proprietary information you have that is vital to the success of your company, the more important you become to the company. The more important you are to the company, the faster you will be promoted and the more you will be paid.
J. Develop a Sense of Urgency
Develop a sense of urgency. Move fast on opportunities. Get the job done quickly. Become known as the person who gets things done fast.
This reputation for speed, above almost anything else you can do, will move your career ahead. By doing things quickly, you will be given even more opportunities to take on more responsibilities. When you back these responsibilities with a sense of urgency, and fulfill them quickly and dependably, you will attract the very best attention to yourself.
K. Cast a Wide Net
Make a plan network continually with other people, both inside and outside of your organization. This can help you more than you can imagine, and result in all kinds of doors being opened for you. In a recent study comparing successful, rapidly promoted managers with managers whose careers seemed to be moving more slowly, they found that the habit of networking was the key distinguishing factor between the two groups.
The study concluded that effective managers were defined as managers who got the job done. But successful managers were defined as those who got promoted rapidly. In looking at the time usage of both groups, they found that effective managers, those who got the job done, spent about 14% of their time networking and interacting with people inside and outside of their own departments and companies.
However, successful managers, those who got promoted rapidly, spent 54% of their time networking. They had breakfast with people inside and outside of their industry. They had lunches with key people in their organization, and outside. They went to business meetings in the evenings.
They joined professional associations and attended the meetings and seminars put on by them. They fraternized and socialized with people within their business and in other organizations.
Know More People
As a result of this continuous networking, they became known to a great number of people. It turns out that, the more people you know, and who know you in a favorable way, the more successful you will be in your career.
People like to do business with people they know. People like to hire and promote people they know. People like to recommend and refer people they know. Sometimes, one referral or recommendation as the result of a contact you have made can change the entire direction of your career. This happens over and over to managers who network continually.
The Networking Strategy
To use the strategy of networking, the first thing you do is to join your professional association. Join your chamber of commerce. Join your local business association and get involved. Don't just pay your dues and attend meetings. Instead, volunteer to serve on a key committee. Look for a way to make a contribution to the organization.
Whenever you join an organization, you will get the organization booklet or organization chart. Look at the various committees and the people who sit on those committees. Ask yourself, Which individuals in this organization or association would it be most helpful for me to know?
Identify those people on the committees which they serve, and then join that committee and volunteer for responsibility. Whenever something needs to be done, raise your hand. By working with people in voluntary organizations, you bring yourself to the attention of key decision makers in a non-threatening environment. These are the very people who can help you, and open doors for you, in the future.
A Success Formula
Here is one of the best formulas for success that I have ever seen. It is simple. T x R = P. This formula means that Talents multiplied times Relationships equals Productivity. This formula predicts and determines the amount of money you will eventually be paid, and how high you will rise.
This simple formula explains the success of many people. When you multiply your talents times the relationships, or the number of people that you know, your productivity, performance, effectiveness, pay and promotions increase.
The more people you can meet, multiplied by the greater talents that you can develop, the more successful you are going to be. The more people who you meet and know, and who meet and know you, the greater will be the probability that you will meet and know the right person at the right time. This can save you years of hard work.
The quality and the quantity of the people you know, and who know you in a positive way, will largely determine your success in business and in life.
J. Learn To Speak On Your Feet
A great way to move ahead more rapidly in your career is to learn how to speak on your feet. This is one of the most valuable and respected skills in business. And the good news is that most people who can speak well today were at one time absolutely terrified of giving a presentation of
any kind.
Join Toastmasters
The best way to learn how to speak on your feet in front of groups is to join Toastmasters International. Toastmasters was formed by a businessman in 1923 who realized that there were a lot of other businesspeople who wanted and needed to learn how to speak competently and confidently in front of others.
He developed a simple process that psychologists call systematic desensitization. By this process, by repeating a behavior over and over again, you eventually become desensitized to the behavior. If you stand up and speak on your feet repeatedly, every week, you eventually lose your fear of public speaking. This is the basic method of Toastmasters International.
Toastmasters is a voluntary organization. This means that virtually anyone can join. Pick up your Yellow Pages, look for the name and number of a Toastmasters chapter close to you, and then phone and arrange to attend a meeting. If you enjoy the meeting and like the people, it is simple for you to join and begin attending meetings each week. At each meeting, you will have an opportunity to share some of your thoughts and ideas with other people. Eventually, you will reach the point where you are completely unafraid of speaking in front of groups. It can be life transforming.
Take a Dale Carnegie Course
Another way that you can learn to speak on your feet is to take a course from the Dale Carnegie organization. They have one of the finest crash courses in America on learning how to speak on your feet. In 12-14 weeks, they will help you to become more confident, competent and outgoing. You will learn how to design and give a speech quickly in front of your friends or strangers. Again, the Dale Carnegie organization is listed in any telephone book.
Get Serious About Learning
As you are learning to speak on your feet, read books about public speaking. Listen to audio programs on speaking effectively. Remember, public speaking is a learnable skill. The more that you do, the less fear you have, and the more competent you become.
There is an additional benefit of learning to speak publicly. It is that the more competent you are speaking to a group, the more confident and effective you are in one-on-one conversations. Being a competent public speaker dramatically increases your effectiveness with others, especially in sales. It can increase your income as well.
Don't Let Fear Hold You Back
If you are a bit shy or uneasy about meeting new people, make a
decision to overcome it. The more confidant you become, the wider will be your network of relationships. The more you meet and interact with different people, the faster you will move ahead in your life. The very act of learning how to speak confidently to groups can save you 10 or 20 years of hard work in achieving the same goals in your career.
What I have learned over the years is that if you can speak well on your feet, your listeners tend to think that you are smarter, more knowledgeable and more confident than a person who cannot. People think that you are better than you really are by the very fact that you can stand up and speak as opposed to sitting there paralyzed with fear.
K. Be the Best
Make a decision today, as I mentioned earlier, to commit to excellence. Make the decision to be the best at what you do. Make the decision to join the top 10% in your field. Here is a rule: if you don't like what you are doing enough to want to be the best at it, it may mean that you are in the wrong job or the wrong career.
People who are doing the right work for them are excited about the idea of getting better and better in that field. They are eager to read the books, listen to the audio programs and take the courses. They are excited about working harder so that they can move ahead faster. If you don't
experience this emotion in your current job, it does not mean that there is anything wrong with your job. It just means that there is a mismatch between your special talents and abilities and the requirements of your current position. It may mean that you are in the wrong job or the wrong career.
Identify Your Key Result Areas
In every job there are 'key result areas'. These are the results that you absolutely, positively have to get in order to do your job well. In sales, management and business, there are key result areas that are essential in each of those areas. Your first job is to determine the most important results that are required of you, and then to make a plan to become excellent in each
of those areas.
Here is an important discovery. Your weakest key skill sets the height of your performance and your income in your job. You can be excellent at six out of the seven key result areas of your work, but if you are weak or lacking in one, that will hold you back more than any other factor.
Your Slowest Kid
Sometimes I ask my audiences, 'If a group of children goes for a hike, which child sets the speed at which the entire group must walk?' Without much hesitation, people reply, 'The slowest kid'.
By the same token, your 'slowest kid' is your weakest skill. This is the skill that determines how fast you move ahead in your work. Ask yourself this key question regularly, 'What one skill, if I developed and did it consistently in an excellent fashion, would have the greatest positive impact on my career?'
Your answer to that question will almost invariably be your weakest skill. Bringing up your competence in this area will have a greater impact on your overall results than anything else you can do. Your job is to identify this one skill area, either by yourself, or in discussion with your boss, and then dedicate yourself wholeheartedly to learning and excelling in that particular area.
Mastery Is the Key
Here is an important point. Your weakest key skill area is usually something that you don't particularly like to do. You are not comfortable at it. Sometimes you dislike it or fear it. But remember this, the only reason that you are uncomfortable in a particular skill area is because you have not yet mastered that skill. You are not nervous or uneasy in any area where you feel competent and confident.
Here is the good news. All business skills are learnable. Whatever business skill you need to learn in order to move ahead more rapidly in your career, it is possible for you to acquire it. Set it as a goal, make a plan, and then work on becoming a little bit better in that area every single day. In a week, a month, or a year, you will look back and you will be astonished at how good you are at that task. By this time, your fears and uneasiness over this task area will have disappeared and your career will be on the fast track.
Here is a final point on becoming excellent. You could be only one skill away from doubling your productivity, performance, output and income. By learning one more key skill, added to your existing skill base, you may become capable of achieving at a vastly higher level than you ever have before. Don't let yourself be held back in your career because of a single learnable skill that you have not yet acquired.
L. Develop Good Work Habits
One of the most important things you can do to put yourself onto the fast track is to become a good time manager and to develop productive work habits.
In life, you will always be paid for the quality and quantity of your contribution. You will always and only be paid for the results that you get, not the hours that you put in.
The focus on contribution is the hallmark of personal effectiveness.
Continually ask yourself, 'Why am I on the payroll? What have I been hired to accomplish? What results are expected of me?'
You and Only You?
Here is the most important question, 'What can I, and only I do, that if done well will make a real difference to my company?' Your answer to this question, and your ability to discipline yourself to work on this answer, can move you ahead more rapidly than anything else you can do.
By asking and answering these questions, you will keep focused on your key result areas.
Most people in the world of work are poor time managers. According to Robert Half International, the average employee works at 50% or less of capacity. The average person spends 37% of their time in idle chatter with coworkers. They waste the other 13% of their time by coming in later, leaving earlier, taking extended coffee breaks and lunches, reading the newspaper, drinking coffee and surfing the Internet.
During the 50% of their time that they are actually doing something that has to do with their job, they work on low priority tasks which they often fail to complete. They procrastinate, delay and then complain about being overwhelmed with work.
A Shorter Work Week
According to recent studies, the average American workweek has dropped from 44 hours over the years down to about 32 hours today. By the time you take out lunch breaks, coffee breaks, personal days, sick days, tardiness and a variety of other factors, the average employee works about 32 hours per week. During those 32 hours, he or she wastes about 50% of the time. It is no wonder that people complain that their incomes are not increasing with the rate of inflation. It is because no one can afford to pay a person more for working less.
What is even worse is that most people waste not only their own time, but they waste the time of others. In fact, the people around you are the primary source of your own wasted time.
Don't Waste Time
To get on to the fast track in your career, don't waste time. Instead, imagine that you are receiving a specific quantity of money each hour to perform a specific quantity of work. Imagine that you are being watched all the time to make sure that you do the work for which you are being paid. Imagine that you have to earn your 'hourly rate' every single hour. Work all the time you work.
The best news is that, the more you work while you are at work, the more you will get done. The more you get done, the better you feel. The act of task completion releases endorphins in your brain, giving you a sense of happiness, elation and personal power. These endorphins stimulate and motivate you into doing more work of even greater importance. The biggest payoff of being a hard worker and completing important tasks is that you begin to feel genuinely happy about yourself, your work and your life.
M. Develop Personal Power
Begin today to build a power base in your company, and in your community. The more powerful you are perceived to be, the more doors will open for you, and the more opportunities you will be offered. There are three basic forms of power in any organization. These are variously referred to as ascribed power, expert power and position power. You develop each of them in order.
1. Ascribed Power
Ascribed Power refers to your ability to get along well with other people, to be popular and friendly, and to be liked by your coworkers. The more people who like and enjoy you because you make an effort to get along well with them, the more they will look up to you and value your ideas and your opinions. They will 'ascribe' to you additional characteristics of competence, capability and efficiency. Because they like you, people will, in effect, support you and want you to do well.
2. Expert Power
The second type of power is called 'Expert Power'. You develop expert power by specializing in your job, and doing your job in an excellent fashion. The more you are perceived to be an expert at a key part of the work that the company does, the more people will respect and admire you. The better you become at your job, the more you will come to the attention of the key people in your work who can promote you and pay you more. The development of expertise is absolutely essential if you want to become wealthy over the course of your working career. Money always follows excellence performance.
3. Position Power
The third type of power that you can develop is called 'Position Power'. Position power has to do with titles and rank. If you have a particular position in a company, this gives you the authority to hire and fire, to reward and punish, to make decisions and to determine the outcome of events. When you achieve position power and do your job in an excellent fashion, money, rewards and opportunities quickly follow.
The Process of Power Accumulation
Each of these forms of power are essential to your long-term success and to getting rich your own way. First, you develop ascribed power by being a team player. You work hard and you work well with others. You do and say the things necessary for people to like you and feel comfortable with you.
Meanwhile, you read, listen, study and take courses to become absolutely excellent at your job. By doing your job well, you develop expert power. As the result of ascribed power and expert power, you will almost automatically be given position power, which you can use to move more rapidly up the ranks in your organization.
The Law of Reciprocity
Perhaps the most powerful principle of human relations is called the 'Law of Reciprocity'. This law says that there is a deep subconscious desire in every person to reciprocate or repay other people for what they have done to or for them.
This Law of Reciprocity says that people will be willing to help you achieve your goals to the degree to which you help them achieve their goals.
This is why the best practice you can incorporate into your relationships is the 'Golden Rule: 'Do unto others as you would like to have them do into you.'
Combine the Law of Reciprocity and the Golden Rule in all your work activities. Continually look for ways to be of service to people who can help you, by helping them in advance. Everything that you do that helps other people to be successful in their work predisposes them to helping you to be successful in your work as well.
List the People Who Can Help You
Here is a simple technique. Make a list of all the people that it would be useful for you to know. Next to their names, write down what you think you could do to help each one of them in some way. What kind of favors could you do for them? How could you put them in your debt? Make a list of all the people who you feel can help you and then begin implementing your strategy of 'sowing and reaping.'
How could you sow favors, kindnesses, help, assistance in such a way that, should the time come, they would be predisposed to helping you? This is both a selfish and an unselfish strategy. It is unselfish in that you look for ways to help others in advance of them helping you. The rule is that, 'Whenever you do something nice for another person without expectation of return, rewards will come back to you in the most unexpected ways.'
Continually ask other people, 'Is there anything that I can do for you?' Continually look for ways to help people in their work and personal lives. Be willing to sow before you reap. Be willing to put in before you get out. Make a habit of sowing the seeds of appreciation so that, sooner or later, you will reap the harvest of gratitude.
N. Guard Your Integrity As a Sacred Thing
Perhaps the most thing you do to put yourself onto the fast track is to practice impeccable integrity in everything you do. As Emerson wrote, 'Guard your integrity as a sacred thing; nothing is at last sacred but the integrity of your own soul.'
Integrity is perhaps the most important quality for success and leadership, for several reasons. First, trust is the basis of all relationships.
Trust is the basis of your relationships with your coworkers and superiors at work. Trust is the basis of your relationships with your family. Trust is the basis of your relationships with your friends, with your bankers, suppliers, customers, subordinates and so on.
Trust is the glue that holds all relationships together, and trust is very fragile. It is based on absolute, dependable, consistent and predictable integrity on your part. People must know in their hearts that they can absolutely trust you and rely upon you to keep your word, and to do what you say you will do, when you say you will do it.
Trust Yourself
The key to developing trust with others is to trust yourself. The key to building trust is to be trustworthy. And the key to trusting yourself is to be true to yourself, in all things, large and small.
Shakespeare wrote, 'To thine own self be true, and then it must follow, as the night the day, thou canst not be false to any man.'
Being true to yourself means being true to the very best that is in you. It means to keep your word. Trust means to follow through on your promises. Trust means to do what you say you will do.
It is said that the strength of a man's word is measured when it costs him money to follow through on his promises. Talk is cheap. It is only when you have to back-up your words with actions and assets that you demonstrate to yourself, and to others, how much your word is really worth.
Practice the Universal Maxim
Live your life consistent with your innermost values and convictions. Practice the universal maximum of the philosopher Emanuel Kant: 'Live your life as though your every act were to become universal law.'
Virtually all the problems we have in relationships and society exist because people do not ask themselves this question. They habitually engage in behaviors which, if everyone engaged in those behaviors, society would collapse. Here are four questions that you can ask yourself to keep yourself on track throughout life:
1. Your World
First, ask yourself, 'What kind of a world would my world be, if everyone in it were just like me?' What kind of a world would this world be if everybody in it lived their lives the way you do? What kind of a world would it be if everyone treated other people, and their responsibilities to their work and families, exactly the way you do? If you are honest, you will probably come up with some areas in which you could improve.
2. Your Country
The second question you can ask yourself is, 'What kind of a country would my country be, if everyone in it was just like me?' If everyone in America behaved exactly the way you do with regard to civic and social responsibilities, working and investing, paying bills and even driving through traffic, would this be a better country, or not?
3. Your Company
The third question you ask yourself is, 'What kind of a company would my company be if everybody in it were just like me?' If everybody at your company came to work, did their jobs, and treated everyone else exactly the way you do every day, would your company be a better company or not? If you ask and answer this question honestly, you will probably come up with some ideas where improvements are possible.
4. Your Family
The fourth question you ask yourself is, 'What kind of a family would my family be if everyone in it was just like me?'
If everyone in your family treated everyone else exactly the way you do, would your family be a wonderful, warm, loving and uplifting place to live? Are there improvements that you could make in the way that you deal with your family members that would improve and enhance the quality of your family life?
If you ask these questions regularly, and set them as your standards for your behavior and conduct, you will find your entire life improving. You will not only move onto the fast track in your career, but you will begin to become an outstanding human being.
Honestly Is the Best Policy
All good leaders were once good followers. They became leaders because other people wanted them to be in leadership positions. And the primary quality we look for in our leaders is honesty, integrity and character. As you develop in character, by becoming a completely honest person, and in competence, by becoming excellent at what you do, every door will open for you.
O. Focus On The Future
One of the rules for success is, 'It doesn't matter where you are coming from; all that matters is where you are going.' Almost everyone has the uneasy feeling that they have wasted a good deal of their time and their potential in the past. If they had it to do over again, they would do it differently. Unfortunately, many people use these feelings of regret as brakes that they set on their own lives. Instead of rededicating themselves to the exciting months and years ahead, they allow themselves to be overwhelmed with the mistakes that they may have made in the past. Don't let this happen to you.
Instead, think about the future and where you are going. Think about what you can do right now to create the kind of future you imagine for yourself. Learn what you can from past mistakes and forget the rest. Your resolve to be future oriented will give you energy and enthusiasm. And your future is only limited by your imagination.
P. Work On Your Talents
In the parable of the talents in the Bible, there is a line that says, 'Oh good and faithful servant, ye have been faithful over small things, I will make you master over large things.'
There is a great life lesson in that parable. It says that if you are faithful over small things, you will become master over large things. If you do your job well, right where you are, you will very soon get opportunities to do bigger, better and more important jobs.
Every leader, every great success in business, was once a young follower who was faithful over small things. Every person who is at the top today started at the bottom. When he started at the bottom, he went to work on his talents, abilities, gifts and opportunities and developed them day-byday and month-by-month. Over time, as he became better and better, he rose gradually to a position of greater responsibility, and eventually, to a position of leadership. As a result, he was paid well and promoted faster. He became rich his own way.
Q. Start Where You Are
The fact is that you can become wealthy, just like millions of others. You can start right where you are, right now and go to work on yourself.
You can start saving 10% of your income, get your costs of living under control and pay off your debts. You can start putting your whole heart into what you are doing right now. You can commit yourself to becoming excellent in your chosen field. You can resolve to go the extra mile, and always do more than you are paid for. You can dedicate yourself to making any effort, any sacrifice to achieve your dreams.
You can become wealthy during the course of your working lifetime by studying what others have done to become wealthy. You can then commit yourself to doing the same things, over and over, until you get the same results.
If a mentally retarded boy saving $100 per month can become a millionaire repairing furniture in a group home, then surely you can do at least as well, if not much, much better. But you must get started.
R. Develop A Prosperity Consciousness
The starting point of all financial success is simply for you to develop a prosperity consciousness. Think of yourself as a wealthy person in training, as a work in progress.
Write and rewrite your goals over and over. Make detailed plans of action and work your plans one day at a time. Visualize yourself as the great success you will someday be. See yourself, feel yourself experiencing the joy and pleasure of great achievement. What you 'see' in your own mind is what you will eventually 'be' in your reality.
The very best thinking of the great minds of history has concluded that your life is merely the outward expression of your beliefs, your inner most thoughts. There are no real obstacles to success outside of you. All barriers to accomplishment exist only on the inside in the forms of fear and ignorance. Decide right now, today, this minute to do something wonderful with your life.
It is just as easy to achieve financial success, and to get rich your own way, as it is to struggle and remain poor. By working a little harder at the beginning, you will enjoy vastly greater rewards later on. When you begin practicing some of the ideas in this book, you will launch yourself toward financial independence. You will become one of most affluent people in your community. You will have the house, the car, the lifestyle, the bank account, the inner satisfaction, the pride and the self-esteem that go with great success. It's all up to you. You can do it. And I hope you do. Good luck!
