Written by: Geoff Hudson-Searle | Freedom After the Sharks
Becoming a billionaire seems like a great goal, but unfortunately it’s only a dream for most of us. The thing is, many billionaires didn’t start out as such. Some certainly had economic and educational advantages, but even without those, their smart decisions and business choices, plus a few characteristics that can’t be overlooked, led them from Point A to Point B.
So, what can we learn about our own real-life options for becoming billionaires?
First things first: find a way to make money. Four of the most oft-methods of money making in the world of billionaires are inventing, investing, innovating and being an entrepreneur, but remember that how you pursue your billions is just as important as what you do to get them.
Many people in the startup space and business in general are in a rush. A rush to get to market, a rush to sell enough units or services, a rush to avoid their funding running out.
A recent article by McKinsey showed from their research, analysing the life cycles of about 3,000 software and online-services companies from around the globe, that software and online services are in a period of dizzying growth. Year-old companies are turning down billion-dollar buyouts in the hopes of multibillions in a few months. But we have seen similar industry phases before, and they have often ended with growth and valuations fizzling out. The industry’s booms and busts make growth, an essential ingredient in value creation, difficult to understand. To date, little empirical work has been done on the importance of revenue growth for software and Internet-services companies or how to find new sources of growth when old ones run out.
Growth trumps all.
Three pieces of evidence attest to the paramount importance of growth. First, growth yields greater returns. High-growth companies offer a return to shareholders five times greater than medium-growth companies. Second, growth predicts long-term success. ‘Supergrowers’ companies whose growth was greater than 60 percent when they reached $100 million in revenues were eight times more likely to reach $1 billion in revenues than those growing less than 20 percent. Additionally, growth matters more than margin or cost structure. Increases in revenue growth rates drive twice as much market-capitalization gain as margin improvements for companies with less than $4 billion in revenues. Further, we observed no correlation between cost structure and growth rates.
Sustaining growth is really hard. Two facts emerged from the research. Companies have only a small probability of making it big. Just 28 percent of the software and Internet-services companies in our database reached $100 million in revenue, and 3 percent reached $1 billion. Of the approximately 3,000 companies we analysed, only 17 achieved $4 billion in revenue as independent companies. Moreover, success is fleeting. Approximately 85 percent of supergrowers were unable to maintain their growth rates, and once lost, less than a quarter were able to recapture them. Those companies that did regain their historical growth rate had market capitalizations 53 percent lower than those that maintained supergrowth throughout.
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There is a recipe for sustained growth.
While every company’s circumstances are unique, the research found four principles that are essential to sustaining growth and from which every company can benefit.
First, growth happens in phases: from start-up to billion-dollar giant, growth stories typically unfold as a prelude, act one, and act two. In act one, there are five critical enablers of growth: market, monetization model, rapid adoption, stealth, and incentives. A third principle is that the drivers for growth in act two are different. Successful strategies in act two include expanding the act-one offer to new geographies or channels, extending the act-one success to a new product market, or transforming the act-one offer into a platform. Finally, successful companies master the transition from one act to the next. Pitfalls include transitioning at the wrong time and selecting the wrong strategy for the next act.
One of the greatest story’s of adversity was Colonel Saunders, at age 5 his Father died. At age 16 he quit school. At age 17 he had already lost four jobs. At age 18 he got married. He joined the army and washed out there. At age 20 his wife left him and took their baby. He became a cook in a small cafe and convinced his wife to return home. At age 65 he retired. He felt like a failure & decided to commit suicide. He sat writing his will, but instead, he wrote what he would have accomplished with his life & thought about how good of a cook he was. So he borrowed $87 fried up some chicken using his recipe, went door to door to sell. At age 88 Colonel Sanders, founder of Kentucky Fried Chicken (KFC) Empire was a billionaire.
What one believes or dreams inside becomes their outside reality. Many books and documentaries point to this, even my book ‘Freedom after the Sharks’ You don’t need to be in a rush if you plan properly. I will say, on the contrary, that some pressure and a sense of urgency is helpful and shouldn’t be completely avoided. There is, however; a line between a bad rush and a good rush.
Inventing is a tough road to take, but if you’ve got the smarts to successfully create, patent, produce and market a product that people need, you can build your future billionaire life on it. Successful inventions are not necessarily complicated or high-tech items.
Innovation is the fine art of considering a current mainstream market and finding a creative way to improve the current offering. Successful innovators will identify the real needs behind customer demands, and will meet them with a smarter, better, more efficient product, or with a service that provides more than its competitors, or with a business that works in a way just different enough to stand out from the rest.
Finally, the moment you think you have nothing left to learn is the moment you kill your potential for becoming a billionaire. Especially if you’re interested in building your wealth through inventing or innovating, you have to be curious, open-minded and always learning. Those qualities allow you to look at old things in a new way, to see the potential for change and profit where others see only what already had been done.
A great quote by Harriet Tubman: