Building a Business within a Business…
MILLIONAIRES BECOME MILLIONAIRES BECAUSE THEY FIND MULTIPLE WAYS TO MAKE MONEY DOING WHAT THEY ARE ALREADY DOING.
This knowledge was passed on to me from one of my mentors, Chad A Wade, who unfortunately passed away a few years ago. But his wisdom still lives on.
And what better way to pay respect to Chad, than to pass on his wisdom and knowledge to you, so that’s what today’s post is about.
It was a hot day back in summer 2009 in Washington DC and I was blessed to be hanging out with Chad Wade, checking out the monuments and talking about our dreams, goals, and our vision for business in the future.
Chad said, “Chris, millionaires become millionaires because they find multiple ways to make money doing what they are currently doing.”
At first this advice might seem simplistic, but let’s think about this for a minute.
What Chad went on to explain was that our time is limited. If you always see yourself trading time for money, then you will run out of hours, and will run out of the ability to make more money.
So in order to create wealth, you want to find more ways to earn income during that same 24 hours in a day that we all have. And the more that income is based on you trading time, the harder it will be to amass wealth.
It was a HUGE PARADIGM SHIFT for me.
You see, when you think of a regular job, like back when I used to be a food server at a restaurant, it took every bit of energy for me to work those hours. How could I possibly be earning more money in those same hours?
But, when you look at the owner of that restaurant, he owned multiple restaurants, earning money from all of them, while he wasn’t even there.
And this was just the beginning of the paradigm. To truly understand this concept, let’s talk about something I like to call the “Inception Effect”.
THE INCEPTION EFFECT
Building a Business, within a Business, within a Business…
Let me ask you a few questions.
Is McDonalds is in the Hamburger business, or the Real Estate business?
Are Movie Theaters are in the Movie business, or the Concessions business.
Is Dr. Dre is in the rap business, or the business of producing rappers?
The answer to all 3 of these questions is BOTH.
But then, does it go even deeper…
Take Dr. Dre for example:
1) He is a rapper, where he trades time and skills for money to build his personal brand.
2) He is a producer, where he leverages his time for more income from overrides on the time and skills of other rappers.
3) He is an investor, where he leverages his money and branding into BIG business opportunities to amass wealth far beyond what he could trade his time for.
Dr. Dre is well on the way to becoming the first billionaire rapper, but does that money really come from his rapping?
You see, Dr. Dre found multiple ways to make money doing what he was already doing.
He was already in the rap game. But he had a business mindset. So rather than just trade time for money as a rapper, he decided to start producing other rappers, and he became more of a talent scout. He was building a “team” that he could override. Similar to many business models you might be aware of.
He had to review thousands of potential artists, just to find the handful that would be hits. He had to take risks on people, many of which didn’t pay off. He had to gamble away his time, with the chance that he wouldn’t find any talented artists at all.
But, his calculated risks paid off. He found artists like Snoop Dogg and Eminem, which he produced and earned a massive residual override from. This is similar to finding a top sales rep under you in business that you get started, and then get a cut from all their sales. Sometimes, you can override more on a deal like that then you could ever make yourself trading time for money.
Then, he was smart enough to leverage his business mindset even further, by getting his branding involved in commercial product endorsements where he would get a piece of the company if it ever took off.
Now, he is on his way to become the first billionaire after positioning himself in deals like Beats by Dre, and others.
REAL PROFITS AREN’T ALWAYS WHERE THEY SEEM
Let’s go back to the movie theatre example. How much profit do you think they make on the sale of an actual movie ticket? Not much when you consider that the actors have to get paid as well, so do the producers, and the investors that put up the ad dollars to get people to go to the theater. And so much more.
The movie business would be a tough business to be in. If it weren’t for the business within a business.
Think about it. How much profits is made on a bucket of popcorn? How much profit do you think is made on a cup of soda? A TON right?
It’s basically just sugar water, which is very cheap. As well as ice, which is essentially free. The most expensive part is probably the cup itself, which is super cheap as well.
Once you are inside the movie theater, you have zero options. You are not allowed to bring in your own food or drink. And you don’t want to sit through a movie without any right? So they have effectively driven you to the concession stand to buy their marked up products that have huge profits.
They make so much profit on concessions, that it’s worth LOSING MONEY to get you into the theater, because they would still be profitable.
They rely on the movie production companies to spend the money to drive people to the theaters, and that’s why they give up so much of the money on ticket sales.
But their real business only begins AFTER you have bought your ticket and you are inside.
And in the McDonalds example, if you research their history you will actually find that Ray Croc was STRUGGLING to be profitable until one of his employees, named Harry Sonneborn, actually convinced Ray Croc that the REAL money in their business was in Real Estate, not hamburgers!
It’s a true story.
Sonneborn came up with the idea to take out mortgages to buy the land and the building for each franchise, and then LEASE them back to the franchise owners at a 40% increased premium!
What’s even crazier is that the better the franchisee did with their business, the more they would have to pay in lease fees!
Based on this model, McDonalds went on to become of the largest real estate investment companies in the world, under the corporate name: Franchise Realty Corp.
WHERE IS THE “REAL” MONEY?
I began looking for opportunities to find businesses within businesses so that I could really open my mind and expand the possibilities I could have in my personal life.
Sure enough, examples were everywhere.
For instance, I love golf. It’s one of my passions. So I started looking at Tiger Woods. Sure enough, it became clear as day.
Everyone knows Tiger Woods as one of the best golfers in the history of the game. And he wins MILLIONS for each tournament he takes 1st place in.
But then you start to see the REAL wealth and where it comes from.
Tiger Woods Made $83 Million Last Year, And He Has Now Earned $1.3 Billion In His Career. Golf Digest reports $71 million came from off course endorsements, and the rest was from his tour winnings.
Did you catch that?
So, he made $12 million last year from his tournament winnings, and $71 million from his “other” business. And what business is that?
Sponsorships and Endorsements.
Wow, think about it. Are golfers in the “golf business” or in the “endorsement business”? Both. But where is the “REAL” wealth generated? Endorsements!
How much does a Nascar winner receive if they take 1st place in a race? But how much more do they receive from sponsors if they wear their logo on their clothing, or put their logo on their car? The answer is MUCH MORE!
You might think that Shaquille O’ Neal is a rich basketball player, and perhaps one of the best. But did you know that he owns 40 24-Hour Fitness clubs, 155 Five Guys restaurants, a jewelry and clothing line, nightclubs, and more!
And there are hundreds of examples that I could continue to put in this post.
How can YOU find more ways to make money doing what you are already doing?
How can YOU find ways to leverage your time, your skills, your money, your resources, and everything else in order to multiply your wealth rather than just add to it?
My main point I am hoping to drive home today is that wealthy people tend to find multiple ways to make money, doing what they are already doing, and that my good friend Chad Wade made an impact when he shared that information with me.
I hope that even one person is impacted by this post, and that it helps steer you towards a more efficient path for wealth creation and abundance in your life.
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