Guerrilla Billionaire™

The New Think & Grow Rich for the 21st Century

2009-11-03T13:50:20-08:00

The New Think & Grow Rich for Hard-nosed Realists

Being the adventurous type, I will occasionally pick up a book that I normally wouldn't read as a matter of course. It all hinges on whether or not I trust the party making the recommendation. This happened recently when an associate suggested a book that I hadn't heard of as a quality read for a business flight. To be honest, I was resistant and not expecting all that much despite being familiar with one of the co-authors. Long story short, the book turned out to be an amazing discovery. It's the Think & Grow Rich for hard-nosed realists.

I read Napoleon Hill's Think & Grow Rich long ago in my twenties. My reaction to it was basically, "Well, that was nice, think positive, ho-hum, but what next?" That's the original's failing. It doesn't give you any direction after telling you to just "think positive." Since then I have met many people who swear by Napoleon Hill's advice to think positive, but have little to show for it. Over the same period I have also met many who didn't have a positive or negative attitude. Basically, they had a neutral attitude on average. Some days it was positive; some days it was negative. Over the long run it was simply neutral because they were focusing on action instead of on their thoughts. Based on all the tens of thousands of data points I have collected over the decades, if you want to succeed focus on what needs to be done next and then do it immediately, instead of wasting time monitoring and trying to control your thoughts. The great thing about action is that you can make something happen even when you're in a crappy mood.

The new Think & Grow Rich does that. It focuses on the critical importance of taking action. However, it also addresses the reasons behind why most people prefer to try to think positively over taking action. The reason is fear. Yes, the great taboo topic that no one wants to admit to. Everyone has it but few are willing to admit it. The new Think & Grow Rich deals will fear very effectively and shows you how to move past it into the action phase.

So, what is the Think & Grow Rich for the 21st century? It's Robert Greene's collaboration with Gangsta rapper 50 Cent, The 50th Law. You may recognize Robert Greene's name from his other books, The 48 Laws of Power and The 33 Strategies of War.

An Amazon-UK reviewer sums the book up well:

The most interesting thing about the book is the radical new model of power. Traditionally, power is about material assets. However, 50 Cent and Greene present power as a mindset. For an image, think of a martial artist using the weight of the opponent to advantage. This is in contrast to people in positions of authority and riches who are dependent on those assets. Of course, material riches tend to accrue to those who master Greene's fluid power.

How Perceptions Trump Reality: Life lessons from an ad man

2009-10-16T12:58:40-07:00

Warning: if you can''t laugh out loud at work, bookmark this for later viewing at home.

I stumbled across this short talk on the power of perceptions by accident and couldn't stop watching. The speaker is a very funny man who packs a great deal of insight into 16 minutes which fly by. If you hate advertising this won't make you a convert but at least you will appreciate why businesses spend so much money on it globally.

Rory Sutherland: Life lessons from an ad man

Advertising adds value to a product by changing our perception, rather than the product itself. Rory Sutherland makes the daring assertion that a change in perceived value can be just as satisfying as what we consider “real” value -- and his conclusion has interesting consequences for how we look at life.

About Rory Sutherland

Rory Sutherland stands at the center of an advertising revolution in brand identities, designing cutting-edge, interactive campaigns that blur the line between ad and entertainment.

Why is this being included on a blog promoting a course on how to buy and sell businesses? Well, a significant portion of the course focuses on value creation after the acquisition. Value creation enables you to then flip the business to a another buyer for a higher price. Rory introduces a new method for value creation: rather than improving the product or service, you improve the customer's perception of it.

How to Become a Billionaire: The Russian Oligarchs

2009-10-09T21:36:37-07:00

How the Russian Billionaires Became Billionaires: A Loving Portrait of Larceny

Being the history buff that I am, I couldn't help but order this history of the Russian Oligarchs as soon as I saw it. As it will be a week or so before it arrives, I will quote the Amazon product description that sold me on it below. The reviews are also glowing. Since the Russian oligarchs ("billionaires") comprise a Rogue's Gallery of fast thinking opportunists, this should be as fun to read as any bank heist caper or Wall Street investment banking history.

The Oligarchs: Wealth And Power In The New Russia by David Hoffman.

Hailed as "the most dramatic and comprehensive account" of the early years of Russian capitalism (New York Times Book Review)

David Hoffman, former Moscow bureau chief for the Washington Post, sheds light onto the hidden lives of Russia's most feared power brokers: the oligarchs. Focusing on six of these cunning and ruthless men--Alexander Smolensky, Yuri Luzhkov, Anatoly Chubais, Mikhail Khodorkovsky, Boris Berezovsky, and Vladimir Gusinsky--Hoffman reveals how a few players rose to the pinnacle of Russia's new capitalism.

The oligarchs started small. Before perestroika, they lived the lives of Soviet citizens, stuck in a dead-end system, cramped apartments, and long bread lines. But as Communism loosened, they found gaps in the economy and reaped their first fortunes by getting their hands on fast money. As the government weakened and their businesses flourished, they grew greedier. The state auctioned off its own assets, and they grabbed the biggest oil companies, mines, and factories. They went on wild borrowing sprees, taking billions of dollars from gullible western lenders. When the ruble collapsed, the tycoons saved themselves by hiding their assets and running for cover. This is a saga of brilliant triumphs and magnificent failures, the untold story of how a rapacious, unruly capitalism was born out of the ashes of Soviet communism.

About the Author
David Hoffman joined the Washington Post in 1982, and covered the Reagan and Bush presidencies as a White House correspondent. After serving as diplomatic correspondent and Jerusalem correspondent, he moved to Russia to head the Post's Moscow bureau for almost six years, and is currently Foreign Editor of the Washington Post. Get more information.

Secrets Of The Self-Made: Billionaires Share Their Secrets

2009-10-03T16:14:26-07:00

The 400 Richest Americans

Secrets Of The Self-Made 2009

Ever wonder what the most successful entrepreneurs think about the stock market, public policy and the keys to amassing serious wealth? Look no further.
We asked eight of the wealthiest self-made members of the Forbes 400 to weigh in on 22 topics ranging from universal health care to the right amount of vacation. If you think you've had a rough year, consider that five of the eight lost a combined $2.65 billion in the last 12 months; only two increased their net worth. Clearly, these guys have a lot on their minds--and, for the most part, they were willing to share.
Business tips are a penny a dozen. A billionaire's playbook for success: priceless.

Go read the article.

It was a pleasant surprise to discover John Paul DeJoria on the list. I first heard of him in an Inc. magazine article in the mid 1980s. In his youth he was a member of an LA street-gang. Later on he had been a homeless person. In 1980 he launched his hair-care products company, John Paul Mitchell Systems with a $700 loan. Here's more on this impressive man.

How to Build an Empire: Glock's Secret Path to Profits

2009-09-27T01:01:48-07:00

A fascinating look inside the Glock empire and how it grew from Businessweek:

Glock's Secret Path to Profits
It's the largest supplier of handguns to law enforcement in the U.S. But behind its success lies a troubling tale of business intrigue.
Gaston Glock, an Austrian manufacturer of shovels and knives, had an improbable dream: He would make a fortune selling handguns in America. In the early 1980s, Glock, a self-taught firearm designer, produced an innovative pistol for the Austrian military. He then devised a plan for promoting his invention in the U.S., the world's richest gun market. First, he'd persuade American police they needed a lightweight weapon with more ammunition than traditional revolvers. Then he'd use his law enforcement bona fides to win over private gun buyers.

The strategy succeeded spectacularly.

Read the article here.

Billionaire Strategies: Art of the Long View

2009-09-26T13:01:26-07:00

Art of the Long View

Join communication professor Jonathan Taplin for a conversation with leading media architects Peter Chernin and Gordon Crawford about the long view of the evolving role of the media conglomerate in the next ten years. Chernin, former president and COO of News Corp, oversaw Fox's film, television and new media business both in the U.S. and internationally. He currently heads his own film and television company which is financed by News Corp. Crawford is the managing director of The Capital Group, which owns the giant American Funds Mutual Fund company, and was recently called the "media world's savviest investor" by Business Week. This conversation will attempt to understand the long term effects of technological change on the American communications business.

There Will Be Blood: French Internet Entrepreneur Takes on the Big 3

2009-09-19T11:39:03-07:00

Since this blog is dedicated to the swashbucklers who dare to shake things up, I'm adding this story.

Iliad's warrior

From The Economist print edition

The rise of Xavier Niel, a controversial internet entrepreneur, says a lot about French business
“IF I commit suicide, or if I die in a car accident in the next three months or so, you will know the threats were serious, because I am not feeling at all suicidal and I drive very slowly.” Xavier Niel, the founder of Iliad, a young broadband firm which has upended France’s internet-access market and wants to do the same for mobile telephony, says he is prepared for any attempts at intimidation. In 2004 an executive from TF1, a French television firm which was withholding its programming from Iliad’s multimedia packages, reportedly told one of Mr Niel’s colleagues: “I am going to nail you down on the wall in blood.”

He may be a bit paranoid, but Mr Niel plans to wreak financial violence on France’s dominant telecoms firms. After years of deliberation and fierce opposition from the big three—Orange, owned by the former monopoly, France Telecom; SFR, part of Vivendi, a media giant; and Bouygues Telecom, part of a conglomerate which also part-owns TF1—the government invited bids for a fourth mobile licence on August 1st. If Iliad wins, as is expected, it aims to launch a service under its brand, Free, by 2012

Read the rest about Xavier Niel and his company Iliad here.

How to Buy a Business: Creative Financing Using an Earnout

2009-09-18T11:47:27-07:00

On So-called Creative Financing

There's two basic types of creative financing. The type that works and that type that doesn't. If you keep your eyes and ears open, you will continue to be astonished by new discoveries. I recently completed a 100 page lesson on creative financing that works in contrast to the kind that doesn't. The lesson consists of the proven financing techniques, I have seen used over 20 years.

Then last night I come across something quite audacious. There was a conversation about how earn-outs work. Several people tried to explain the tactic. Then one gentleman, Mark Makuta, stepped in and gave two personal examples of how he used earn-outs to buy two businesses.

Here is his account in full:

Ron: I structured a few "earn outs" in my prior business and all is subject to negotiation. All of my earn outs were 100%, meaning there was no cash down payment. I was taking over retiring peoples list of clients and business, which was just to risky to warrant any amount of cash upfront. Two examples:

Earn Out "A": Existing business was valued at $300,000.00. Earn out structured as 10% of GROSS paid monthly on a "Net 30", no caps and a 10 year term. So, if after 10 years, I only paid out $250,000.00 that was the end of the deal. Result: After 4 years, all of the persons clients whose business I took over ended up moving to other firms and were restricted as to who they can give business to. Therefore, all revenues dried up and I only ended up paying out I think around $75,000.00. Glad I did not put any cash up front.

Earn out "B" : Existing business was valued at $900,000.00 and I really wanted this business. I knew of the clients and their business I was going to possibly be assuming and I cut a deal with the seller where the base value was to be $1,000,000.00 ( So he was to receive another $100,000 as an incentive to do this deal with me ). Unlike "A", earn out was structured as 20% of NET Income paid monthly on a Net 30 basis with a yearly cap of $200,000.00. So if by October, we reached $200,000.00, no further payment was due until January of the following year. Bottom line: The gentleman received his million in a little over 7 years and I also thru in paying his health benefit premiums for the 1st five years of the deal which had a value of approximately $45,000.00 for him. This was a sweet heart deal. It worked very well for the retiree and it worked extremely well for me because my firm ended up continuing relationships with this guys clients list for quite a few years after the deal ended.

Again, everything is negotiable from monthly caps to yearly caps to final terms, etc.

Hope this helps,

Mark

~end

Earn-outs are typically used to postpone, possibly forever, 5 to maybe 30% of the selling price. Seeing them used to pushback 100% is something new even to myself.

Hats off to Mr. Makuta.

Find out more ways to buy businesses using creative tactics.

How to Buy a Business: Business Acquisition Financing - SBA Policy Changes Effective Oct 1, 2009

2009-09-15T20:06:00-07:00

By way of KeyBank.

SBA Business Acquisition Financing - SBA Policy Changes
Effective Oct 1, 2009

Intangibles Policy: - Change of ownership loans that include purchase of intangible assets are allowed.

Intangible Asset Definition: - SBA Now defines “Intangible Assets” as including, but not limited to, goodwill, client/customer lists, patents, copyrights, trademarks and agreements not to compete.

Purchase Price of Intangibles over $500,000: - If purchase price includes intangible assets in excess of $500,000 then, Borrower and/or seller must provide an equity injection of at least 25% of the purchase price of the business.

Purchase Price of Intangible less than $500,000: - If purchase price of business includes less than $500,000 for intangibles, the 25% equity requirement does not apply.

Seller Equity: - Seller Equity = Seller-take back financing that is on full stand-by (no payments of principal or interest) for at least 2 years. Borrower and seller will agree how much equity each will provide Ex: borrower may provide 10%; seller may provide 15% total must equal at least 25%.

Buyer’s Down Payment: - Cash that is borrowed; SBA considers funds borrowed through the use of personal credit for injection (Ex: Home Equity Loans) into the business as additional debt, not equity, with one exception. If the Small Business Applicant can demonstrate repayment of this personal loan from sources other than the cash flow of the business, the cash injection may be considered equity.

Business Valuations: - If the amount being financed (including any 7(a), 504, seller, or other financing minus the appraised value of real estate and/or equipment being financed is $250,000 or less, the lender may perform its own valuation of the business being sold. If the amount being financed minus the appraised value of real estate and/or equipment is greater than $250,000 or if there is a close relationship between the buyer and seller, the lender must obtain an independent business valuation from a qualified source.

Loan Terms: Business acquisitions with no real estate remain at a 10 year term. Real estate acquisitions remain at a 25 year term. Historically, loans that included both business and real estate were blended. Lender’s now have the option of providing a blended maturity or a maturity based on the maximum maturity allowed for the asset comprising the largest portion of the use of loan proceeds. For example, if the majority of loan proceeds are financing real estate, a maximum term of 25 years is allowed. Verify with the lender what method will be used to determine the maturity.

Collateral: SBA no longer allows lenders to provide a value to accounts receivable and inventory when determining collateral coverage, even if those assets are required as collateral on term loans.

How to Buy a Business: James Ling "The Merger King"

2009-09-11T12:59:57-07:00

James Ling "The Merger King"

"James J. Ling collected companies the way boys do baseball cards."

When I was about 9 or 10, I read this article in Newsweek or Businessweek about the great conglomerate builders of the 50s and 60s. This was probably around '69 or '70. Chief among them was James Ling, "The Merger King." Words fail me when it comes to describing just how excited I got over this way of making money. Yes, I was an odd sort of child. To this day, I still recall that article and the editorial cartoon that went with it.

Unfortunately, within a very short time, I became distracted by the members of the opposite sex and all the troubles that go with adolescence. However, my interest in business never waned. I even became a business broker eventually and got a chance to see some real wheeler-dealers in action.

Anyways, I just want to pay tribute to a financial genius who started with nothing and built a great empire.

http://www.nytimes.com/2004/12/26/business/26ling.html?_r=1

http://en.wikipedia.org/wiki/James_Ling

James Ling is partly the inspiration for this blog and course on how to buy businesses.

Learn how he and others did it by joining our list for free.