Entrepreneurship: How Entrepreneurs Get Rich
By MC Marshall
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About this ebook
Coming up with new ideas and trying to sell them is the riskiest form of entrepreneurship. The entrepreneur does not know if there are enough customers for the new product, if selling the product is profitable or if it will work logistically. Entrepreneurs should start selling products that already exist.
The wealthiest entrepreneurs start selling the big products of tomorrow today. Their business grows with the product. Non gasoline powered cars and artificial intelligence are examples of products that will be huge in the future. Smart entrepreneurs start selling these products now.
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Entrepreneurship - MC Marshall
PROFITS VS PAYCHECKS
The limit imposed on paychecks is because they are taken out of profits. A company sells a certain amount of a product, pays its employees, and then collects the profits. The less a company pays its employees, the more it profits. It is in the interest of the owners of a company to manage expenses. It is efficient management.
If a company is going to raise its profit margin, it is going to do so by getting employees to do more work for less pay. The interest of the owners is opposite the interests of the employees.
WEALTH CREATION
Wealth is created from creative destructive economics. Money flows through an economy from one person to another. The profits from obsolete technologies dry up, while new profits are created from new technologies. Wealth is always being created and destroyed.
The goal is to position oneself to collect the profits from new technologies. First, a person must start selling a new technology. Next, he must sell into a fragmented industry. This way, all companies seem the same. No company has an advantage. All advertisements have an equal chance of attracting customers.
This is how a person collects profits from new technologies. This is how wealth is created. It is happening every day.
ENTREPRENEURSHIP
The goal of starting a business is to sell the business. On average, it takes six to eight years. The majority of profits are dedicated to growth until the time of the sale. The sale is when an entrepreneur cashes out. The owner of the start-up can expect to make no money, other than a small salary, before selling the company.
Not every new business ends up as a successful sale. One out of ten businesses will make all the money (a home run). Four out of ten businesses will break even—be sold for a prize equal to what is invested. Five out of ten businesses will go out of business.
Binomial statistics can be used to determine how many companies must be started to guarantee a home run. One home run makes an entrepreneur a millionaire. All that must be done is take 0.9 to the xth power. To have a 95 percent chance of starting a home run, an entrepreneur must start twenty-eight companies (0.9 ^28 = 0.05). To have a 99 percent chance of starting a home run, an entrepreneur must start forty-two companies (0.9 ^42 = 0.01).
It is important to play the odds. In other words, an entrepreneur should start as many businesses as possible. Granted, there is a maximum number of businesses that can be managed. Within reason, an entrepreneur should start as many companies as possible to increase the chances of a home run.
How much a business is worth is largely determined before the business is started. The determining factor is the product. The goal is to sell the hottest products. The stock market tells an entrepreneur what products are the hottest. It does this through valuations.
The stock market is where shares in public companies are traded/valued. Consider there are two companies that both sold $100,000 products this past year. The price of the first company is $100,000; the price of the second company is $1,000,000. Obviously, investors think the company valued at $1,000,000 is going to grow quicker than the one valued at $100,000. Upon closer evaluation, the $1,000,000 company sells software, and the $100,000 company sells soda. A company that sells software is worth ten times more than a company that sells soda.
The product sold has the highest impact on how much a company is worth. A decision made before the company is even started has the greatest impact on the amount of money an entrepreneur can earn.
Once an entrepreneur decides what to sell, he must determine how to sell it. Other companies selling the same product have already figured out the mediums. Mediums are things such as radio advertisements, television commercials, internet ads, or direct sales (utilizing salespeople). Every product sells best through certain mediums. Copying mediums used by other companies selling the same product saves an entrepreneur time and money.
Mediums of public companies can be found in their annual statements, usually under the Marketing heading. Sometimes, public companies list their