Nathan Latka wrote the book How to Be a Capitalist Without Any Capital, in which he explains the four rules of joining the new rich. In addition to the four rules, he also offers 8 secret techniques to become a capitalist even if you don’t currently have the capital.
In today’s post, we’re diving into these secrets.
1. Create Unfair Advantages With Persuasion and Negotiation
Persuasion and negotiation are two of the most powerful forces in business, valuable in virtually every situation.
One of the most important ways to persuade others is to have them do things that free up our time.
We should also use emotions to persuade. Emotions drive most purchases, and fear is the strongest. When we fear, we’ll pay anything to get rid of our worry.
Don’t try to use reason to persuade people. People today are less rational and more emotional than ever. Instead, tell a story that taps into fear.
This [pain point] could happen to you.
Then, sell the vitamin. After all, your product solves this pain point.
Seven fear principles for persuasion
There are seven fears that drive virtually every purchase you can think of.
- Fear of missing out
- Fear of the unknown
- Fear for your life
- Fear for your health
- Fear of losing freedom
- Fear of loneliness
- Fear of failure
From limited time only sales to dating apps, health care and fear of failure, most purchases occur for fear of something.
Catering your service or product offering to one (or more) of the fears above will increase your company’s chance of success.
Negotiate When You Don’t Have To
One of the reasons we might lose in a negotiation is that we fear we might lose. If possible, avoid this situation by negotiating when you don’t have to.
You can do this by creating doubt. For example, if you have money for a few months of rent, you can still go to your landlord and ask what support they can offer.
Try saying something like:
I’m going to have trouble hitting the rent payment this month. Is there anything you can do to help me.
Surprisingly many business people will try to accommodate your needs if you proactively address the problem.
Another way to negotiate when you don’t have to is when somebody comes to you with a suggestion. Rather than shutting them down immediately saying you don’t have time for any other work, hear them out instead.
Who knows? That opportunity could lead to a new opportunity for you. But to know for sure, you need to hear them out first.
2. Dream in Decades, Think in Years, Work in Weeks & Live in Days
This four-level model helps us approach long-term goals with our everyday actions. Following the process over time will help us set ambitious goals and ultimately get where we want to go.
Dream in Decades
In the first level of the model, we should be dreaming in decades. This is where we define our bold and ambitious goals for the next 10 years. This includes what our business, life, home and leisure will look like.
Start the process by getting a feel for what success really means to you. We’ll use the rest of the model to build towards this ideal.
Think in Years
After you know what your dreams are for the decade, start thinking in years and break your ambitious goals into systems.
In this step, list out all the systems you need to set up to reach your dreams. Once you’ve listed out all your systems, make sure none of your dreams are overlooked.
Next, it’s time to get to work.
Work in Weeks
Now, break your systems into projects. What do you need to build to create new systems. And what do you need to do to keep existing systems running?
We work in weeks, so figure out what you need to do over the next few weeks to build and maintain your systems.
You should finish this level of the model with a clear idea of the projects you need to manage over the upcoming weeks. Plan out your ideal week as a framework for which projects to work on over each period.
Live in Days
Finally, we live in days. At this point, we have a clear idea of the projects that will build and maintain our systems.
Make sure the work you do each day feeds into these projects. Focus on the most important tasks first, eliminate distractions and get things done.
Remember to automate your daily work wherever possible. We’re trying to reduce our input and maximise our output wherever possible.
This model is incredibly useful because we tend to overestimate what we can do in a day while underestimating what we can do in a year.
3. You Have More Money Than You Might Think
If you have a salary or hourly wage, you probably have access to more money that you think. Here are a few tricks to reducing costs and maximising profits that you can start right away.
First off, there are always ways to save money. Keep your expenses as low as possible by asking yourself what you can cut right now. Start by looking at your monthly bills – do you have a Netflix account you never use? Membership at a gym you never visit?
Next, simplify your wardrobe. Stop spending money on fast fashion. We can try saving money on clothing with the ideas of minimalism and decision fatigue. A great example of this involves wearing the same outfit every day. Steve Jobs, Mark Zuckerberg and Barack Obama are all known for this productivity technique.
We can also turn our liabilities into assets using the sharing economy. Whereas Robert Kiyosaki wrote that real estate was a liability in the 90’s, services like AirBnB today allow property owners to make money when they’re not home. A property manager can rent out your property on AirBnB while you’re away on holiday.
Finally, you can always ask for tips from your fans using services like Patreon. Get creative about the ways you raise money from fans. The right following will support your future work if they’re excited about it.
4. How to Buy a Business
With the goal of passive income, businesses that seem difficult to run are not worth your investment.
Invest in businesses any idiot could run, because someday one will. Peter Lynch
The only things you need to know to buy a company are its financials, its infrastructure, and its reach. How much money does it have coming in vs going out? How does the business create value? And how many customers does the business currently reach?
You want to pursue businesses that have a natural unfair advantage. For example, it’s easier to run a digital business with no employees and an already-established audience. At least easier than running a brick-and-mortar shop with dozens of employees and a small user base.
Ideally, you will want to have some sort of monopoly over a distribution channel. For example, if the company sells an app, you want the app to top the lists for its own category.
Finding ways to monopolise your distribution channel will increase your user base.
Buying a Business for Beginners
While it’s recommended to start your own business first to learn how to create value, it doesn’t take much experience to buy a business at a small scale.
Apps and browser extensions make good first purchases, especially when the owner isn’t making much money off the project.
Latka suggests a simple three-step process for buying your first business.
- First, buy a free digital property (such as an app or extension) that currently has a large user base.
- Hire a developer to put up a paywall that appears after someone uses the product a certain number of times.
- Reinvest revenue back into the company to multiply your returns.
You can find potential investments on App stores and the Chrome web store.
4 Steps to Buying a Business
- Start with an Inquiry. Get in touch with them and ask something along the lines of “Hey, are you interested in selling your company?”
- If they are interested, you can start the offer and negotiations. At this step, we go back and forth until we agree on a sale price.
- Once we’ve agreed on the price, we move onto the Letter of Intent (LOI). This is a legally-binding document that can be as simple as a quick email outlining the terms of your acquisition.
- The final step before acquiring the business is to perform your due diligence. Sign an NDA (non-disclosure agreement) to get access to their behind-the-scenes documents and operations.
Do Your Due Diligence
During due diligence, you’ll want to find out how they acquire and retain customers. You should also get an idea of how much time they spend managing the business. Remember, we’re trying to build passive income.
Finally, you want to be aware of any financial or legal liabilities they might have. For example, before buying one company Latka’s due diligence helped him realise the company was actually in $100K in debt. In the renegotiated deal, he actually made $15K on the deal to take over the debt!
Before putting any money on the line, you want to review their systems and finances to make sure the company is what you expect. If things aren’t as you expected, you should either renegotiate or walk away.
5. Optimise Your Business After Buying It
Oftentimes, businesses have run a certain way for a long time. As a serial entrepreneur, you can develop a few skills to maximise the value of each company you purchase.
For example, a quick change would involve doubling the price for new customers and figuring out ways to get existing customers to pay more.
Improving a site’s SEO will increase your traffic for free, while optimising your conversion rate might quickly double the value of your current traffic.
You may even consider launching an affiliate or partner program to increase your sales. These partners would take a commission for each sale they contributed. Affiliates are a great way to grow the size of your pie.
Investments off the Beaten Path
Find off-the-beaten-path investments by paying attention to the companies or entrepreneurs you encounter in your everyday life.
When a business looks like a potential investment and you have money to experiment, introduce yourself to the owner. Tell them you’re looking to invest and see what they say. It can never hurt to ask, while the potential upside is huge.
People or companies with extensive email lists or social media followings also make unconventional opportunities. In these cases, you’re paying for reach. Often, these people are great at building a following but aren’t sure how to monetise them.
Leverage their audience by selling to them and increasing their value.
6. Copy Your Competitors
The most successful people don’t have new ideas. They copy existing ideas from competitors and add their own unique angle. It’s never been easier to copy competitors than it is now in the digital age.
You can copy popular ideas from crowdfunding sites like Kickstarter.com, Indiegogo.com, Pozible.com, Ulule.com, and Fundable.com.
Social media groups on LinkedIn and Facebook offer similar data points on what people care about. You can even get new ideas by listening to podcasts. There are countless ways to figure out what’s successful in your industry.
What attributes tend to make a product in your niche successful? And where are the gaps in the market that you can serve?
Start by implementing your competitors’ ideas as a foundation. Then add your own take on what the market needs.
Four Steps to Copying Your Competitors
Follow the 4-step process for copying and improving on competitors’ offerings.
- First, find a hot industry.
- Next, figure out why leaders are leading.
- Build your own version.
- Then, attack their distribution channels.
We want to figure out what competitors are doing and why they’re leading. Then we imitate them and outrank them in the app store ratings – or wherever their distribution may be.
7. How to Sell a Business
Timing is the most important thing to consider when selling a business. Is the industry currently growing and is there a lot of buzz around the topic?
If a company is truly passive and making you money, you should always try to hold onto it. When it takes less than a few hours per month to manage and generates income, you should only give it up to have more time for more valuable investments.
If on the other hand, it takes all your time with no end in sight, or if numbers are flat or declining, sell it right away.
When you plan to sell, a general rule of thumb is that if the sale value would otherwise take 3+ years to earn, take the deal.
How to Find A Buyer
If you’re looking for potential buyers, there are a few routes to take. Either you can email competitors and say that you want to sell the business. If they’re interested, then you can negotiate after the initial offer.
Another method would be to use social media and tell your network that you’re looking to sell your business. This is usually best for sub-$10K monthly revenue businesses
Alternatively, you can even reach out to your top distributors and offer to sell them the whole company.
You can always say no to offers that come in below your expectations.
8. The Two Most Important Metrics
Regardless of their exact pursuits, the new rich should measure two core KPIs that indicate their success.
First, our bank account should be constantly growing. We should not need to work 40 hours to make a salary. We should be able to make money while we sleep. No matter your exact industry, your assets and bank account should constantly be growing in value.
The second, and arguably most important metric, is how good you feel. For example, we might make a great salary working 100 hours per week. But the whole point of becoming new rich is to find a good work-life balance.
There’s no point in making $100K per year if you spend every waking hour managing a business. That’s why passive income is the way to go.
If your bank account is growing and you feel good, you’re on the winning path.
Secrets of Becoming a Capitalist in a Nutshell
The secrets of becoming a capitalist come down to a few simple mindsets. If you’re planning to join the new rich, these are the things you need to consider.
First of all, good business comes from unfair advantages, which we can achieve with persuasion and negotiation techniques.
We can reach our reach our grandest goals by following a simple model to plan our lives. This model involves dreaming in decades, thinking in years, working in weeks and living in days.
While it might seem ethically questionable, copying your competitors is the only thing that makes business sense. There’s no point in trailblazing on a hunch. Instead, we should use data to figure out what the market currently needs.
You can also buy businesses that might be undervalued by its current owners and sell a business that takes too much time and effort to run.
At the end of the day, the new rich should always focus on their two most important metrics: their bank account and their happiness. If your bank account is growing and you feel good, you’re going in the right direction.
Learn the Secrets of Becoming a Capitalist with Nathan Latka and Mind & Practice today.