The Millionaire Fastlane
Page 30
To make matters worse, the other end of the equation is also limited: unit profit. What is the maximum unit profit on a sandwich and drink? Two bucks? Again, we are operating under a ceiling of low numbers. These numbers don’t transcend wealth; they limit wealth.
Now let me clarify before I’m hammered: I’m not suggesting that a local restaurant owner can’t get rich. In fact, I know a few restaurant owners who do well except they operate a different class of restaurant—upscale establishments, where scale and magnitude have more reach. If your average dinner bill is $300 and patrons come citywide, not just the local neighborhood, you operate on a different scale. Unit profit isn’t $2 per sandwich, but $80 per person, and with alcohol it climbs to $160.
Reach or Magnitude = Scale
To achieve scale, magnitude or reach must increase. Magnitude is naturally increased with price or cost. If you sell Lamborghinis over Hyundais, you have greater magnitude simply by the implicit price of Lamborghinis. You are near Effection (Lamborghini owners most likely exploit the Law of Effection). If you are a real estate agent for the rich and sell multimillion dollar estates, you achieve magnitude implicit by price. Higher prices and cost implicitly drive magnitude. If you successfully sell the most expensive apartment building in Manhattan, you have had an effect of magnitude and realize scale. If you are operating with magnitude, you are near or at Effection.
Reach, exclusive of magnitude, also achieves scale. Reach is massive numbers. The more people you reach, the greater scale potential. Who does your business serve? The local neighborhood? Or the world? The bigger your pool of play, the bigger your potential for wealth.
The guy stuck on Main Street selling sandwiches has no scale and no magnitude. Is there anything this guy can do to turn his $40,000-per-year profit into $400,000? Nope. He’s done before he even started. He didn’t buy a franchise; he bought a job. He will never get rich until he wakes up and realizes that scale is not reached selling one-buck-margin sandwiches to 100 people a day.
Scale Is Leverage!
The Commandment of Scale demands a business that maximizes the Fastlane wealth equation. Give the Law of Effection a chance! Give wealth a chance! How do you know if your business (or potential business) honors the Commandment of Scale? Ask:
✓Can the net income of this business scale limitlessly, say, from $2,000 per month to $200,000?
✓Can the asset value of this business scale into the millions?
✓Can this business impact millions? Or does it impact hundreds? Is its customer pool the world or a small community in the city?
✓Can this business be replicated and expanded beyond the local trading area by franchising, chaining, or additional units?
✓Best-case scenario, what is the units-sold potential? One hundred or one hundred million?
✓Best-case scenario, how pliable is unit profit? Does it have magnitude?
If you can’t affirm these questions, you might be stuck in a restrictive business where wealth creation is stifled.
Tiny habitats create tiny wealth. Scale is large numbers. Think big, nationally, and globally. Big numbers, or scale, is the inroad to The Law of Effection. To make millions, you must affect millions. That doesn’t happen in a small store on Main Street, but in hundreds of stores across the country.
Drive Effection’s Neighborhood
A “wealth-seeking” friend of mine asked if I thought buying a coffee franchise was a good idea. I said, “No.” My answer shocked him because he played the “be your own boss” drum. I didn’t like the idea because the Law of Effection was barricaded.
The problem?
His goal was financial freedom.
If this was his goal, owning a coffee franchise in the local community wasn’t going to do the trick. With a coffee shop, he has no access to the Law of Effection. Selling 100 lattes a day simply won’t make an impact in either scale or magnitude. And since he didn’t want to own 20 of these franchises, but just one, he was barricaded from the Law.
Road closed.
If you can’t access the Law of Effection, you won’t get rich. The conduit to all wealth is via the Law of Effection. For the Slowlaner, the LOE has to be hit by massive intrinsic value explosion: Sing in front of millions, entertain millions, play ball in front of millions. For the Fastlaner, the LOE is leveraged by scale or asset value explosion: Sell millions, help millions, serve millions, impact millions.
Law of Effection Barricades
There are three barricades that prevent entrepreneurs from realizing the Law of Effection: Scale, Magnitude, and Source.
Effection’s strongest barricade is scale. If you can’t serve millions, you won’t make millions. Returning to my friend’s coffee shop, his “units sold” variable within the Fastlane wealth equation is restricted because his cafe is confined to a local community. His sales are mathematically caged to a stiff number—scale is absent. He will never sell coffee to someone in New Zealand. A business that lacks scale acts like a car with a speed governor that prevents acceleration.
My friend’s only option to break scale would be to purchase more franchises in more locations. If he owned 29 franchises across the state, he suddenly would be serving 6,000 coffees per day. Scale becomes prevalent, and attached to scale is the Law of Effection. Of course, the optimum Fastlane strategy is not buying franchises, but selling them.
If my friend doesn’t want to own multiple franchises he can’t break the barricade of scale. Without scale (units sold) or magnitude (high unit profit) he drives a business that will produce a weak asset value. His wealth equation becomes retarded and the Law of Effection quarantined, remanding him to a middle-class work-life existence. With a middle-class income and a weak asset valuation, he defects to a wealth equation emblematic of the Slowlane.
The other barricade to Effection is Magnitude.
Because our coffee shop owner is restricted in scale, his other option is scale by magnitude. Unfortunately, the magnitude road is also closed. Unit profit cannot be manipulated. Every sale won’t generate a profit of greater than a few bucks and raising prices reduces units sold. A $100,000 profit on each coffee sold is impossible.
While direct access to the Law of Effection is a foolproof road to wealth, indirect access isn’t so clear, since Effection always trickles up to owners and producers, not down to employees or consumers.
For example, if you work as a doctor at a private-care facility, you could argue that you have magnitude and therefore, you should be rich. In fact, all doctors should be rich since they have magnitude, right? Not exactly. The fault in this presumption is that the Law of Effection honors only those in control.
That private health-care facility? The facility’s owner receives the full benefit of Effection, not the doctors he hired. The doctors on staff aren’t guaranteed access to Effection, because they don’t control the system. Can they be rich anyway? Sure, but that decision is left to intrinsic value evaluations made by the owner of the system.
Doctors who own practices and hire other doctors get full access to Effection and get rich. Effection always is biased toward the architect of the system.
How to Access the Law
If you want access to the Law of Effection, drive a road that can break through scale or magnitude while controlling its source. If you can’t be the source, serve the source.
Thankfully, you can easily determine which roads run parallel to the Law of Effection. Whatever your road, regardless of roadmap, can it directly scale to impact millions (scale)? Can it tremendously impact a few (magnitude)?
✓If you invent a gadget that millions can use, you have direct scale and the Law is accessible. Fast wealth is a possible.
✓If you are chosen as a finalist for The Voice, you have direct scale and the Law is accessible. Fast wealth is possible.
✓If you build a website that serves single moms, you have direct scale and the law is accessible. Fast wealth is possible.
✓If you are two management positions away
from a CFO position at a Fortune 100 Company, you have indirect scale and the law is accessible. Fast wealth is possible.
✓If you are an attorney and take cases that involve wrongful deaths, you have indirect magnitude and the law is accessible. Fast wealth is possible.
✓If you create a successful retail store and franchise it to 300 entrepreneurs around the country, you have both scale and magnitude and the law is accessible. Fast wealth is possible.
✓If you invent a machine that detects skin cancer, you have magnitude and scale and the law is accessible. Fast wealth is possible.
Think big, but think scale and/or magnitude.
Analyze your Fastlane equation and examine the variables. What are your maximum units sold and maximum profit per unit?
What is the size of your customer pool?
For example, as an author, I have scale, and with scale, the Law of Effection is accessible. Who is my audience? The whole English-speaking world, tens of millions of people! I’m reminded of scale any time this book is ordered from Australia or New Zealand. My upper limit is the world. My road has no speed limit and that grants access to the Law of Effection.
Chapter Summary: Fastlane Distinctions
➡Your total pool of customers determines your habitat. The larger the habitat, the greater the potential for wealth.
➡A business can be a singles or a home-run-based business. Its strength is determined by scale, which is derived by habitat.
➡The Fastlane wealth equation is disarmed when you violate the Commandment of Scale.
➡Scale is achieved in reach (units sold) and/or magnitude (unit profit).
➡The Law of Effection is the primary conduit to wealth, which can be road-blocked by scale, magnitude, or source.
➡Effection consequences trickle up to owners and producers. Breaking scale or magnitude indirectly in an uncontrolled entity is not a guarantee of wealth.
➡To gain access to Effection, you have to break the barrier of scale or magnitude in an entity you control.
➡Scale, magnitude, or source deficiencies create governors on the speed of wealth creation.
[35] - Rapid Wealth: The Interstates
You can’t live a perfect day without doing something for someone who will never be able to repay you.
~ John Wooden
The Crossroads
If you want to get across the country, drive the fastest roads, not the slowest. Seems logical, except when it comes to financial independence. Instead of driving the fastest roads, most people drive the slowest, and in some cases, a road that won’t even get them there.
Starting a business is a big decision. Treat it with cursory interest, and your business resembles a hobby. And businesses run like hobbies pay like hobbies.
Back in my mid-20s, I dabbled in a variety of businesses with no lasting success. It was the crossroads of my life and my latest job-flavor-of-the-month was driving limousines. Sure, I took the job because I had bills to pay, but I had other motives: infiltration.
I thought I wanted to own a limousine company.
Having never been involved in the limo business, I figured I’d get a job in the business and learn the ropes. After a year in the business, my opportunity—my crossroads—arrived. The owner of the limousine company put the company up for sale and offered it to me for no money down. Here was my opportunity—a chance to own a limousine service! Except there was one problem.
I was torn.
Just weeks earlier, I decided to move to Phoenix and was preparing to move.
Now this. Should I stay?
Also, after watching the current owner dredge the constant demands of the business for over a year, I realized something very potent: I didn’t enjoy it. The business was 24/7 with a lot of early mornings. Me? I’m one cranky bastard in the morning.
So I was faced with a choice that could be either treasonous or accelerative. Was this a road I wanted to take? Did I want to pass on this great “no money down” opportunity and forgo Phoenix?
What did I do?
I compiled my weighted average decision matrix (WADM) to give me clarity. Yes, I really use the stuff in this book! Obviously, Phoenix won and I didn’t buy the limousine company. But what was in that decision matrix that helped me identify the right road and the right course of action?
I knew the five Fastlane commandments and which roads of business had “Fastlane Purity” . . . and I knew the odds of implementation of both.
Fastlane Purity: Five Commandments
Thou shalt not invest in a needless business.
Thou shalt not trade time for money.
Thou shalt not operate on a limited scale.
Thou shalt not relinquish control.
Thou shalt not let a business startup be an event over process.
When I analyzed the limousine service as a potential business, it wasn’t a pure Fastlane. The operation had satisfied the control and entry criterion, but it didn’t have scale; it served the northwest suburbs of Chicago.
The operation didn’t have time detachment; I would have had to log long hours, and the margins weren’t thick enough to deploy human resources.
And it certainly didn’t solve an unmet need; in Chicago, limo companies were a dime a dozen.
To “Fastlane” the business, it would have required a lot of time, effort, and money.
Deep down, I knew that I wanted to be involved in a business that was pure Fastlane from the start, not one that needed sculpting.
The purest Fastlanes have the best wealth potential, and I knew it. When you grace the Law of Effection, money moves your way. What are the purest Fastlanes roads that possess super-fast speeds? Which roads can tap into the Law of Effection and start Fastlane?
The Three Fastlane Interstates
I call the most potent Fastlane roads “The Three I’s,” or “The Three Interstates,” because they possess the fastest upper speed limits and meet, or can meet, all five Fastlane commandments. The three Interstates are:
(1)Internet
(2)Innovation
(3)Intentional Iteration
Each interstate road is an umbrella for dozens of other roads. Put all three together and you have hundreds of roads available for your travel.
Potent Fastlane #1: The Internet
The most potent interstate is an Internet business. The Internet has made more millionaires in the last decade than any other medium out there. The Internet has, and is, destroying old hard-line industries such as travel agents, stockbrokers, newspapers, and magazines. The Internet is the Fastlane shark.
The Internet is where I found my fortune and it is one reason why I declined the limousine opportunity. The Internet is the best Fastlane available, because it immediately obeys the Five Fastlane Commandments, assuming a need-based premise. It naturally scales to a worldwide audience, it systematizes to automation via computer systems, it is a medium you can control (unfortunately, most don’t), and its barriers are still strong enough to prevent “everyone” from entry.
Internet business models (roads) fall into seven broad categories:
1) Subscription-based
Offer users access to data, information, or software (SAAS), and charge a monthly fee. Data can be leads, sales information, management services (social media dashboards) a proprietary database, or good old-fashioned pornography. When 10,000 people pay you $9.95 per month for your information, you’re balling the Fastlane!
When I owned my company, I paid for many web services, all subscription-based. From data analytics (who is visiting my site?) to affiliate management (who wants to offer my service?).
One particular company ran a web-site-monitoring service that kept track of website uptime. On its home page it advertised how many clients it monitored. At the time, it listed “20,000 clients served,” and I was paying $50 per month for service. Assuming my fee was average, 20,000 × $50 = $1,000,000 in gross revenue—PER MONTH. This is a perfect example of an Internet business system in which the busin
ess is the system. No products. No shipping. No headaches.
I’d speculate that this website enjoys margins of 75% and nets in the $750,000 range, per month. How quickly would you become a millionaire earning $750,000/month? Or, would you rather save $200/month from your $45K/year salary? The disparaging field of play is laughable.
Examples of subscription sites are Buffer.com, Adobe, and yes, even my own Fastlane Forum (which is FREE but has a subscription upgrade).
2) Content-based
Content-based models are online news magazines and blogs that disseminate information to a particular niche or industry. These services provide content for free consumption and sell advertising to parties who want to reach those eyeballs. My Fastlane Forum is partly a content-based revenue model. Succeeding at a content-based revenue model is difficult because entry barriers have significantly declined and they’re dependent on high traffic. Also, content systems heavily use affiliate programs, which is a hitchhiking structure.
3) Lead generation
Lead generation services often provide a service to consumers while simultaneously aggregating a non-homogeneous industry. This is what I did for the limousine industry. I pooled a highly fragmented industry into one centralized source, brought consumers into the mix, and sold that consumer information to limo companies. Lead generation is popular with fragmented industries, where the industry players consist of mostly small to medium-sized businesses. Lead generation in the airline business probably wouldn’t work while lead generation for plastic surgeons would. Lead generation solves two needs: 1) The consumer’s desire to save time and money and 2) The business owner’s need to find new customers inexpensively.