Years ago, my core business was synonymous with my net worth. As business cycles ebbed and flowed, so would my net worth and working capital. It was very nerve racking. After talking with some friends and colleagues, it became apparent that I needed to diversify my time, investments and businesses if I wanted to take control of the volatility I was experiencing.
Once I had that realization, I changed my “all eggs in one basket” mindset and started to actively search for business opportunities and investments. After wading through some of the oil drilling and triple your money in three months deals, it was amazing how many good opportunities began to show up.
I took a conservative approach and as stated let the risky opportunities lie and took full advantage of the others. These included things like purchasing a long term care pharmacy, starting up a mini storage facility and joining a group to develop an old historic building into a premier condo project. These deals soon started to spawn more deals.
I’m often asked “How did you do all that and still run a successful business?” Reflecting back, here are 6 principles that were fundamental to my success.
1) Make the Decision to Do It
From the day I made the decision to use the profit from my main business to invest in and start others, my mindset changed and opportunities began to present themselves. If I hadn’t been looking, I wouldn’t have seen what was right in front of me.
2) Network Constantly
Networking within professional organizations and with friends and family provided a wealth of opportunities. I would find myself listening to a friend or colleague talk about an interesting idea and ask “how can we work together to make money at that.”
3) Come from a Place of Service
I actively started to let others know I had available capital if they were working on a business idea or needed capital in their business. How could I help move their dreams forward? Just keeping an open ear and coming from a “How can I help” perspective turned up many opportunities. I knew that the financial returns would come as long as I invested in passionate people with a solid business idea that needed my contribution.
4) Evaluate the Opportunity
This may be the most important part of my diversification strategy. I was able to evaluate many of the deals myself but also used my attorneys and accountants where I felt I needed a deeper analysis. I chose not to stick my neck out too far and went for the more conservative or “no brainer” deals. If I could determine the worst case scenario was that I would only make a little money, I would typically invest. Conservation of capital with a lot of middle of the road wins allowed me to stay in the game and get a few big wins along the way.
5) Free Up Time
Within my core business, I added key management personnel to reduce the time I was spending on day-to-day operations. That decision created the space for me to pursue my other investments, while still hitting my goals in the core business. I used this time for networking and I opened up more investment channels. I also created a lot more time to spend with friends and family. Adopting these principles, I have allowed myself to dream bigger and consider many more factors than I did when I was concentrating all my effort and energy on my core business. Now I am scanning the entire horizon for profitable ventures.
6) The Importance of Leverage
There are two types of leverage I used in my investment strategy: time leverage and financial leverage.I already mentioned how I freed up time from operating my core business to create time leverage. I also used financial leverage by not only investing directly from the profits in my core business, but also establishing lines of credit with my banks based on my core business and other acquired assets that I could use to execute quickly on a good opportunity. Leverage is fundamental to large increases in net worth, and I considered it key in formulating my net worth creation plan.
Looking back I am very pleased I was able to make the jump from 100% focus on one single business venture to spreading my time and energy over a wide range of business, investments and partnerships. This has proven to be very rewarding both financially and personally. The network of relationships that has grown from this approach is sure to provide dividends for years to come.