Unless they inherited the money, billionaires started out as millionaires by building their businesses, working for someone else, or making investments. With more resources, the opportunities to make big bets and bold moves were easier to grab, eventually skyrocketing their net worth to a billion dollars or more.
Not every millionaire ends up a billionaire. Those who do get certain things right, which we discuss in this post through examples of those who made it big and the advice they’ve shared publicly.
Want to make your first billion? Here’s what might work in your favor.
By offering something of value
Billionaires find ways to create highly valuable products. Some invent new products; others improve upon existing ones. Whatever approach you take, a good value proposition is critical to product success and your net worth.
Consumers perceive four types of value:
- Functional value, which is how a product solves a problem or need. For example, a mobile phone case provides practical value as a protective cover for mobile phones, preventing them against damage due to falls.
- Monetary value is the amount consumers are willing to pay and the trade-offs they’re okay with when buying a product.
- Psychological value, which is how a product makes customers feel. For example, buying an organic product over its mass-market counterpart may make consumers feel good about treating the environment and their health.
- Social value is how buying and being associated with a product enables customers to connect with others.
People don’t regard the four types of values equally. Depending on the product or service you have in mind, determine the type(s) of tangible and intangible values it can provide.
By identifying a high-growth industry OR opportunity
Entering an industry that’s hot or expected to become one in the future is a smart move. You want to be where the action is and capture a slice of the pie. Take the artificial intelligence (AI) market, which is expected to grow at a rate of 37.3% annually from 2023 to 2030. There are numerous use cases for AI applications in industries ranging from healthcare, consumer products, and fintech to retail, entertainment, and energy.
Billionaires, investors, and multinationals examine opportunities within industries. To cite an example, senior care, an established industry in the US, is offering several business opportunities to healthcare technology and in-home care companies owing to the country’s rapidly aging population. By 2030, all Baby Boomers will be older than 65.
Demand for smart home devices, telehealth, and home care services has spiked. Investors are betting big on teletherapy and senior care devices that enable older adults to receive in-home care and age in place in a safe, dignified way. Tech companies are already on their way – two years ago, Amazon added features to Alexa that allowed family members to keep an eye on senior family members with permission.
Billionaires are guided by research, which any entrepreneur can conduct to pinpoint industries poised for growth. Follow reliable news sources to learn about the macro factors – entire industries or economies – and identify the winds of change. Use what you’ve learned to put together a proof of concept and test your business idea. Once you’ve confirmed you’re on to something that will sustain in the long-term, invest your effort and time into building your product/service.
By focusing on one business idea at a time
Steve Jobs said he was as proud of the things Apple hadn’t done as the things they’d done. He was explaining the importance of focusing on doing what you do best, which would also mean rejecting other ideas that are great too.
Focusing on multiple business ideas can be a handful. Think about whether you can handle the cognitive overload, even with a team and knowledge support. Also, consider the impact of the diluted focus that tends to result from diversifying too much and jumping between many businesses at once. You could end up with an ordinary product that doesn’t quite make the impression you wanted.
By selling up
A business is worth a multiple of its profits. Selling up is a common strategy entrepreneurs use to multiply their wealth. It’s often the model serial entrepreneurs use, but in the Amazon world, buying and selling businesses has become even more accessible to the regular entrepreneur. There are buyout firms with their sights on the best Amazon sellers, purchasing a few businesses every week and investing their considerable resources into growing those brands and making them more profitable.
There aren’t examples of billionaires that have grown rich this way, but it’s an idea worth pursuing if you sell on Amazon or other online marketplaces. You could make your first couple of millions this way and have the capital to take your brand bigger and turn it into a multi-million dollar business or set out on your own after a few years, with more capital, experience, and contacts for your new venture.
Dollar Shave Club is an example of a business that, while not selling on Amazon, took cues from the Fulfilled by Amazon model to become wildly popular (some snazzy marketing helped, too) and scale quickly. After just five years in business, Dollar Shave Club was acquired by Unilever for $1 billion. Going back to our point about providing value, DSC did this in two ways – by providing a convenient way to groom through shaving kit subscriptions (functional value) and at a low price (monetary value).
By investing in other businesses
You can be hands-on with one business and make it great or make external strategic investments after you’ve amassed a few million. The latter strategy may be more appealing if other businesses interest or intrigue you and you’re confident of taking on new challenges.
Investing in other businesses is an old money-making strategy. Warren Buffet may come to mind but don’t forget Oracle’s Larry Ellison, who, since 2005, has spent at least $1 billion on 15 occasions, apart from buying scores of companies in a short span of time. This isn’t any swashbuckling from Ellison but a clever M&A strategy involving making inroads into new, high-potential markets. Savvy CEOs and investors make what may appear to be risky moves only after rigorous analysis. It’s worth understanding their approach to building your own investment strategy after careful consideration.
Buffet, for example, has famously advised against investing in something you don’t understand. As a legendary value investor, he warns against paying too much for a business and checking whether companies have long-term potential. Here are some more to remember:
- Define your own investment goals and principles. Assess investment opportunities against them to determine what’s a yes and what’s a no.
- Calculate the downside risk. Avoid businesses where you bear most of the risk and the founders come out unscathed in the event that the company goes bust.
- Never invest money you cannot afford to lose. Reiterating Buffet’s tip, avoid paying for a company more than what it’s worth no matter how attractive its long-term potential might be.
- Investing in other businesses gives you the opportunity to pursue more opportunities than if you were a founder. Still, it’s better to not have your finger in too many pies, which will demand more of your time and energy.
Through real estate or crypto investing
Real estate is a popular conventional investment asset for a number of reasons: long-term appreciation, passive income, and tax benefits. There’s money to be made in real estate, but making a billion will take time. You’ll need to have a solid funding plan, be willing to wait it out, and of course, make smart investments.
If you want to go the real estate route, pay attention to the market for industrial assets, which have risen in prices or warehouses, which have turned more valuable in the online shopping age. Explore funding options and understand the time involved in finding a great deal. You’ll have to raise equity for the deal to buy a commercial property and finance the rest with a commercial loan. You’ll also find yourself going through 50-100 deals before the right one reveals itself. And throughout, you’ll be making offers. Due diligence, inspection, and asset management will also enter the picture. The legwork and planning are taxing but will pay off so long as you make all the right moves.
Investing in cryptocurrencies is advised only if you’re willing to delve into the industry and understand its minutiae. You should know crypto prices rise and fall drastically, enough to keep you up at night. If you’re a risk-averse investor, crypto is not for you. On the other hand, if you have the money you can afford to lose and the inclination to build a crypto trading strategy, you should give it a go. Be sure to keep a close eye on the market and step in swiftly to buy the dip.
By applying their professional experience
Lawyers, doctors, and other professionals are also in the billionaires’ league. If you’re a thriving professional, consider the prospect of turning your expertise into a billion-dollar product. A case in point is orthopedic and spinal surgeon Gary Michelson of Michelson Devices fame, who in 2005, sold his spine-related patents for $1.3 billion, entering the Forbes 400 list.
The role of courage of conviction and networking
When multi-billionaire Ralph Lauren was an up-and-comer in the fashion industry, he convinced his employer to let him start his own line. He called it Polo to invoke an English feel, which became a huge hit and set the foundation for his retail empire. The takeaway is if you don’t believe in your dream, you won’t be able to convince investors, mentors, and ecosystem partners about your vision.
You cannot do everything on your own. You’ll need to lean on people to find opportunities, plan, get funding, and execute. Networking isn’t about making friends with the rich and powerful; it’s about helping others so they’re there for you when you need them. It means building long-term relationships in which you feel secure enough to call in favors and approach your contacts with offers for partnerships. Being genuine in your relationships is as important as being outgoing and growing your network.
Act fast
You can’t get rich by waiting. Act now and keep at your goal. If you fail, try new ways to get to your goal. Think it’s a no go? Learn from your mistakes and move in a different direction. Keep your flame burning bright, and don’t let failure pull you down.