Why set up your own business?
Why set up your own business?
Good question. Here’s some food for thought.
Are the rich really different?
Thomas J. Stanley and William Danko wrote a book called The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. In interviews, the questions and answers were surprising.
The main question was: Do you sincerely want to be rich? If your answer is “yes,” then heed Mr. Stanley and Danko’s advice. They tell of the who the rich really are and the way the rich really live.
Take this quick test:
# Do you spend more than you earn?
# Buy a new car every few years?
# Live in a ritzy neighborhood you can barely afford?
# Pay a lot to Uncle Sam?
If you answered “yes” to most of these questions, then compared to you, the rich are very different. Believe it or not, many of America’s rich didn’t inherit their wealth; they earned it – in entrepreunurial businesses, perhaps similar to yours. In fact, a large majority of the truly wealthy don’t live on Park Avenue; most millionaires live in average neighborhoods.
The authors gleaned their information from more than 20 years of research on people with a net worth of more than $1 million.
Stanley was asked to give some insight into the book and share ideas on how the “ordinary guy” can imitate the patterns of the rich.
Anyone can pick out a millionaire – they’re the ones in the new foreign cars, living in big houses in ritzy neighborhoods. No one like that lives next door to me, so shouldn’t your book be titled: The Millionaire Next Door to Someone Else?
Not really. There are about 100,000 neighborhoods in the United States, and more than half of them have at least one millionaire living there. Most millionaires drive American cars. Out of the top 30 or 40 makes and models, Ford is number one, with about 10 percent of the market share. There are lots of things about millionaires that make them pretty ordinary, but what’s NOT ordinary is their ability to accumulate wealth, how hard they work and what they do for a living.”
Millionairs are risk-takers, and they don’t become millionaires until they’re 40 or 50. It’s a slower process than a lot of people think.
They say no one gets rich working for somebody else. Your book seems to support that theory. Why is this the case”?
Let me give you some numbers. You’ve got nearly 100 million households in the U.S., and about 4 million of those include millionaires. Twenty percent of those people are retired; out of the group that’s left, about two-thirds are business owners.
If you’re self-employed, you have nobody else to rely on. It’s the journey and the difficulty that self-employed people encounter that make them more concerned about money. The wealthy are more interested in pension and investment planning, more interested in putting money back into their businesses, and more interested in minimizing their realized income, maximizing their unrelealized income and building wealth without immediately paying taxes on it. You’ve got a more astute group of people who are driven toward becoming independent, and to do that, you have to be prudent with money.
In your book, you mention an example of two people, both with very high incomes, one who pays a lot of taxes and one who doesn’t. the one who pays less in taxes fares better., While that’s no surprise, how can we become more efficient in the way we make money?
Tax laws in this country are very favorable toward business ownership: If you’re building a business and have equity in it, you can grow it in appreciated value without paying immediate capital gains taxes. Because you’re not selling your business, you’re not realizing income.
The problem you have today is people try to maximize their realized or spendable income. What they’re saying is, “Yeah, I make $150,000, and I could put money into a pension plan, but I can’t afford that because I have a summer home, a ranch, and this and that.” So, they’re on a treadmill, constantly maximizing income to pay taxes and to pay for other things as well.
Describe the typical millionaire. What kind of neighborhood does s/he live in?
Overall, you’ll find people with a net worth of $1 to $25 million living in homes valued at between $150,000 and $450,000. The typical millionaire lives in a house valued at $278,000. they own their own businesses and the businesses are low tech – scrap metal, garbage, exterminating services – things that people who go to college never think about doing.
In studies I did during the 1980s, I looked at people in terms of country origins and recent immigration. At the time, there was a large influx of Korean immigrants. These people were 300 times more likely to have an income of $100,000 than the average American household. Why? Because before they ever showed up in this country, they had some idea about what the profitable businesses were.
If you go into the finest colleges in the U.S., including MBA schools, and ask what the 10 most profitable businesses are in the country, I’ll guarantee there aren’t two students out of 100 that can tell you as the industries are too mundane. But the guy from Korea who may never even have gone to high school says “dry cleaning.” Twenty years ago, there weren’t any Korean dry cleaners. In fact, now there are so many Korean dry cleaners, they publish the trade publication in English and Korean.
For many years, Italian Americans dominated the retail and wholesale fruit and vegetable market. It’s interesting to me how many of them without high school diplomas sent their kids to law school, MBA programs, etc. And what did they say? “I want you to have a better life; go to college so you won’t have to work as hard as I did.”
Meanwhile the kids are working harder than the parents ever worked, and for somebody else, and they think they have to live in a $500,000 house, drive the highest priced cars, and buy the best of everything. We put such a price on status that we’ve spoiled our children who now don’t want to go into businesses that may be low tech but can generate a lot of profit, put a lot of people to work, and make a lot of people financially independent.
It seems there are more and more women entrepreneurs.
I’m glad to see that. I think the more women who figure out that business ownership is the way to become wealthy and independent, the better off we’ll be as a country.
Who wears the wallet in millionaire households, and how is wealth passed to the children?
With most millionaire couples, the male is the dominant partner. I don’t want to get into value judgments, but in this country, children who are the least productive get the bulk of the parents’ wealth because they can’t or don’t support themselves.
What businesses should potential wannabees consider?
I’m hesitant to talk about specifics. It’s really the heart of th entrepreneur. If you believe in what you’re doing, if you’re enthusiastic and can’t wait to get to work in the morning, then you are a winner. Most people don’t come up with ideas in a vacuum. They have worked in a lot of different places in different jobs. They often say, “I stumbled across this opportunity.”
My friend Richard, who always liked trucks worked for a company that repaired trucks. One day, someone called to get a truck taken to the junkyard. Richard pulled the engine and got more money for the used engine than it cost for the truck. He quit his job and now he sells used truck parts. It is worth about $10 million.
What you’ll find in life is that you will have two or three major opportunities. Pay attention! I always contrast this with the idea of “I want my son to be a lawyer.” In the phone book, there are 54 pages of lawyers….and just one listing for used truck parts.
So the idea is to find something you love and do it?
It’s the feeling that “this is what I should be doing,” not just the money. When it gets to the long hours, there has to be something else. If you don’t get emotionally excited, if your heartbeat doesn’t accelerate, it’s not going to work. The heart of the entrepreneur is the emotional part and the tenacity.
Why isn’t everyone an entrepreneur?
Somebody told working-class people they would never be rich because or if they didn’t go to college. That’s ridiculous. Anybody with just reasonable income can become financially independent in a lifetime.
Meditec staff: Thank you both. We couldn’t agree more. Here are some great opportunities for your own business. Small investment, big dividend.