Table of Contents
Introduction
Many of us, while growing up, sometimes wonder how to make a lot of money !! Sometimes we dream or aspire of having tremendous wealth or owning expensive things, maybe a luxury car, a beach house in a dream city, where we can live a financially free life with abundance and luxury.
But these are dreams only and become dreams forever and someday in later part of life when we grow up, we stop dreaming. For most of us these dreams become unreachable.
Some of us have become the victim of “what society tells us to do” and make us feel like our dreams are just “dreams or jokes” and a total wastage of time.
Society around us points us to “grow up” as if they are grown up, where most of the people who belong to that so-called “ intellectual part of society” are a big failure.
They point to us and try to take us down because they want to hide their failures.
It is absolutely alright to chase your dreams.Chasing your dreams like a baby doesn’t make you
Look immature. These are your dreams and you have every right to fulfill them.
But why do we always get held back by our family? I think it’s more important for a child when he/she is growing up to develop their own “belief system” rather than fulfilling the expectations of others.
I want to become a doctor because I understand the reason behind being one, as I can provide treatments and save lives, not just because my parents asked me to, the same way I want to become an astronaut because I like to understand space and love rockets, not because my family is forcing me to study that.
Is it really very difficult to become rich ?
Most of us get excited by looking at the wealth created by others. When we see a successful Billionaire Businessman, Soccer player, NBA basketball player, film actor and maybe a Wall street broker and their wealth, we get motivated.
Only a few of us actually react and actually try to think towards that direction of getting rich and make decisions in life.
Sometimes our society tells us if we want to become successful and rich like those people, we need to follow some dumb rules e.g we have to maintain a very high grades at school or we need to learn certain things ?
Is that really true? If they already know the answer then why are they not successful already ? What made them control our thought process and give us lectures ?
Lets understand some fundamentals of Economics
We often hear the term “economics” or “economy”. The economy of such a country is this or that. There will be an “economic collapse” or “financial meltdowns” or lets say “unemployment”.
Why are these words important and why do they play an important role ( if at all they play any ) ?
In the following paragraphs I will discuss a couple of very basic terms related to economics with simple examples.
Suppose I am a young person who wants to start his own business/ shop. I am the one who doesn’t want to work in a 10 – 5 job. That makes me really sick.
Every morning waking up at 8 AM, getting ready and going to the office by 9 AM is just not my thing. I don’t want to see the face of my BOSS / manager who uses scare tactics to make me work like a donkey.
I can’t take this anymore. The stress is killing me. Right ? My hair is falling. I am not the kind of person who takes orders. Every night I kill my manager in a dream. I don’t like to get insulted by him in front of my colleagues.
The basic question that comes to my mind is: How can I be financially free ? So that I don’t have to depend on my job.So that i don’t have to see my manager’s face again that makes me shrink. I can wake up with a new fresh smile everyday with no anxiety and panic.
Everyday will be a day to enjoy. No delay on Paying the bills. I can travel anywhere in the world, pursue my dreams, and at the same time I can earn enough money to survive and be happy.
Is that really possible ? If so then How ?
Let’s say I want to start my own business, a shop or a store. Let’s say I want to open a clothing store where I am planning to sell clothes.It’s a garment shop for ladies.
What are the basic things I need to look for?
- I need to have a physical location for my store. ( let’s assume $10,000)
- I need to build the store. This will involve some labour cost and cost to purchase some raw materials. (let’s assume $ 5000 )
- I need to buy garments which I can resell to my buyers at a higher price and thereby i make profit ( let’s assume $10,000)
- I may need to hire one employee to help me.
The total initial investment cost came out to be : $10,000 + $5000 + $10,000 = $25,000
Now before making my final decision I checked my savings, whether I have savings or enough cash to invest. I realised that I have a total of $5000 in my savings account which I can invest. I am $20,000 short in cash.
At this moment I have two options in my hand
- I can look for people whom i know and who can trust me e.g. My parents, sisters,brother etc or my friends who have money and who will be ready to invest to help me to start the business
- I can apply for a loan from a private bank or a Govt Bank.
The benefit of taking money from relatives or friends is they won’t put any financial restrictions or deadlines on when to return the money.
Just because they know me so they will wait and I can return the money whenever and however I want.
Let’s assume I have very good friends who are ready to invest into my business.
Just for the simplicity of understanding, let’s assume that I am able to convince 4 of my best friends and each of them wants to invest $5000. Lets say their names are John, Kevin, Nancy and Roger.
So four of my very best friends invested total $5000 * 4 = $20,000
And the rest $5000 I am giving from my own pocket.
So can you tell me ? What percentage of the total investment I am putting on the table ?
It’s obviously ( my investment / total investment) * 100 % = ($5000 / $25,000) * 100 = 20%
Similarly each of my best friends ( John, Kevin, Nancy and Roger ) will also make 20% of the total investments.
In other words I can say at this moment if the total valuation of my business is $25,000 ( which is 100%), then each of us owns 20% of the total business.
Each of us owns a 20% share of the entire business.
Now can you relate to, what do we mean by company share in terms of investments ?
It’s the percentage or slice of the entire company that a person has invested money into and he is also an owner of that portion of the company.
But why am I telling you all these ?
Now imagine I worked really hard for the next two years. I invested the money buying land, building the shop, decorations, buying raw materials, and hiring a person who could help me.
I built a reputation as a great seller for quality clothes for ladies. There is a monthly revenue of $5000 / month from my Shop. Around 500 new customers every month.
So what do you think the valuation of my company will be after 2 years of dedicated hard work with passion ? Will it just be the same as $25,000 ? Or will it be different ? More? or Less ?
Obviously it will be much much more ? But Why ?
It’s a running business that’s making revenues per month. I have a customer base who are ready to buy clothes from me. I have a “BRAND” now.
If somebody wants to buy this shop from me, he is not only getting a complete set up but along with he/ she will get the brand value and customer base. That’s the main asset of any company today which rewrites its valuation.
Let’s say the new valuation of my shop is $100,000 ( 4 times than the original valuation ).
If I plan to sell my entire business / shop to a buyer who is ready to pay that amount, what will be my return ? It will be 20% of the total valuation which is obviously ( $100,000 * 20 ) / 100 = $20,000.
So I invested $5000 and after 2 years of struggle and hard work I got a return of $20,000 , making a profit of $15,000. John, Nancy, Kevin and Roger, each of them will get 20% of their shares back but without moving their butts even one inch. How cool is that ?
That’s the beauty of investments provided the company / business is doing well and its valuation is going up and not down. In reality every business doesn’t always do well.
So most of the time people lose money. Sometimes all of it.
Demand and Supply, Capitalism, Socialism
The best example to understand these terms is the “ COVID” outbreak. But COVID has become such a humongous and complex topic, I will give you an example of a comparatively simpler scenario but similar to covid.
Let’s assume a Pandemic Outbreak happened but limited to within a city.
The city has a population of 500 people. And there are two medical shops in that city. One of them actually has the vaccines for that pandemic which can cure this disease completely.
Now that medical shop owner has a total of 200 vaccines in his shop. Let’s say the selling price of each vaccine is $25
In this situation what is the demand ?
The demand is always the “Need of Vaccines for affected people“ which can cure.
The supply is the “ Vaccines”.
So according to the rules of Economics , when demand exceeds supply, the price of items tends to go up. Meaning if there is a higher need for vaccines and the availability of vaccines is less, then vaccines can be sold at higher price and people will buy them for the sake of life.
It’s a natural human tendency to take advantage of this situation and the owner of this shop is no different. If he is thinking of making some extra cash, he can easily increase the price to $200 and make an extra $175 per bottle than the normal price.
In this situation his business mind is over-influencing his humanitarian thought process.
Imagine if the economy of the whole world starts working in this manner ? For any goods available in the market , only rich people who always have money can buy in the first place, if there are limited resources for very very important things, it is not an ideal situation.
The rich will always be benefitted and the middle class and poor will always suffer.
This is an example of “CAPITALISM”. Capital means “Money”. So if a business is established with private investments, then the owner has more power to make business decisions e.g altering Prices of goods / items ( in this case vaccines ) and making it completely favourable for his business.
Now imagine that, for the Medical shop, the Govt has put some restrictions or regulations in a way that the owner of that shop can not make decisions of changing the price of the Vaccine bottles.
The price will be fixed and irrespective of the financial status ,it will be served to everyone. Everyone will be treated equally. And if the owner tries to sell vaccines at a higher price to only rich people then necessary actions will be taken against him and his shop will be closed.
This is an example of “ SOCIALISM”. Where there are Govt regulations on goods and services and the business owner can not make business decisions based on their personal business interest ( e.g in this case altering the price of vaccines to make some extra profit).
If you have understood the concept, I have discussed above, then you have probably understood the basics of economics. Economics is also called the foundation of investments. If you want to make a career in finance or investments, you need to be thorough with the fundamentals of economics.
You need to understand how the economy of a country works. Where is the trend going and demand is getting created so that your investment will always have a return.
Actually “CAPITALISM” is not bad. It will make people literate about how to make Wealth.
I personally believe in having my own personal wealth rather than depending on the Government and let them control our lives.
By the way, personally, I am in favour of CAPITALISM.
What can we possibly sell ?
From the above discussions we can understand that understanding the fundamentals of Economics is a very important thing to make decisions about what I should sell and why we will be able to sell. What are the factors that influence a product or service to get sold.
Now the next important thing is “ How to sell “ ?
This is one of the most important things before you even decide to start your business. Before we understand “How to sell “, we must know “ Why would someone want to buy from you ?”
And even before that “ What we can actually sell ? “
We can sell a “product” or a “service”. If you do some basic research, you will realize that in this whole world you can sell either a “product” or a “service” or both.
Whatever is out there for sale whether it’s pizza, shoe or a head massage, they all come under either of the two categories, either its a physical or digital product or a service.
You can say I can earn money without selling anything. Because I work for a company. So I am an employee and I get my salary !!
Have you ever thought about why the company pays you ?
Let’s say you are a Marketing Intern at some company and they pay you $3500 / month. Basically you are getting paid in exchange for your service. If you are not good enough to provide your service they will probably not gonna pay you and you may lose your job.
So in other ways a job is also a service.
Now you can ask me exactly what kind of products or services can we try to sell ?
This is completely up to you and your interest and passion about that product / service. If you believe in that product or service then your effort will be sustainable for a longer period of time. If you are trying to sell something just for the sake of money then you may not sustain for a long time.
But if you ask me which product or service I should try to sell so that I can make money ?
My answer will be to sell something that currently has a demand !! the kind of service / product that sets up a trend.
There are several online resources which can tell you what’s the current trends in the market.
What is Marketing ?
Marketing is “ To promote a service or product so that it reaches the maximum number of target audience“.
The amount of sale you make when you try to sell a product or service is directly proportional to the number of target audiences. It means, the more you make the product / service available to people , the chances of it getting sold will increase.
But marketing is important in how you make it available to the people and more precisely in what form.
Let’s say e.g. A big budget blockbuster hollywood action movie is made with all the top actors, but no trailer has been made. The movie came directly to the Theatre. The chances are very less for that movie to meet an opening day sales target.
Because we don’t even know that the movie is out there in the theatre.
On the other hand, there is more possibility for a movie with less budget and less popular actors, to make significant sales, which has launched its trailer already, at least one month before the release date of the movie.
What is the importance of a trailer here ?
A 2 mins trailer makes an impact on the viewer’s mind to make a buying decision. A trailer plays with your psychology and helps to make you decide whether you want to watch the movie or not. The actual physical sale comes later.
If you have decided to buy or spend money for something, the latter part ( i.e actually paying for the service / product with cash/ card) is obvious.
A secret of successful marketing is not the actual sales, it’s the power by which you play with the person’s psychology and help him to decide whether he/ she wants to buy the product / service or not. To create a feeling of comfort and give them a guarantee that they are going to make the best investments of their lives and they will be happy and not regret after buying.
A feeling of trust. That’s called marketing. Successful marketers always understand buyers’ psychology. If you are planning to start your business and want to have a degree in marketing, make sure you have already done a course on “Human Psychology”.
I can not complete this article without mentioning the following items when it comes to marketing. Following are the most important hacks when you are trying to sell a product or a service.
When we are planning to sell any product / service we need to talk to our potential client / customer or prospective buyer. While in the conversation, whether it is physical or through some web page, we need to mention the following point. It is a MUST.
Product / Service : We need to describe in detail about the product or the service I am planning to sell and what it does at best.
Benefits / Outcomes from the product / service : What does it do ? What are the outcomes, advantages or benefits using this product / service, along with some real testimonials.
Actual Price : What the Price of the product/ service normally
Offers : What is the offer that you are making if he/ she buys today.
The above conversation will make the person feel special and happy. This will make him relaxed and make him feel lucky. You are basically facilitating him to make a buying decision.
Conclusion
Starting a business and making money is not something impossible. But you have to understand the following topics. These are basic fundamentals. They are interrelated to make any business successful. Without the knowledge of these subjects becoming successful in any business will be very difficult. The quality of the product / service matters but it’s also important to decide which product / service and how to sell them in the market.
- Fundamentals of Economics
- Fundamentals of Finance and Investments, Investment strategies
- Human Psychology
- Marketing Strategies