We’ve all heard stories and read articles about young people who founded successful corporations before their 30th birthday. Some of them even made their fortunes before they graduated college. Successful entrepreneurs all share some common characteristics: a singular focus, preternatural financial savvy, and the drive and ability to aggressively pursue project funding.
Without a doubt, these young people are all adept at identifying problems and creating solutions, but they’re also ambitious and are not afraid to take a few risks.
While not everyone should expect to earn their first seven figures before they have their diploma, it is possible to build and grow your wealth from a very early age. The business and financial leaders of tomorrow constantly seek ways to improve upon products and systems already in place and improve their financial acumen.
What are the best ways to build wealth from an early age?
How to Create Long-Term Wealth
No two paths to long-term wealth look exactly alike. Richard Branson, the founder of Virgin Group, got his start when he opened a record shop in London, while Mark Zuckerberg, the founder and CEO of Facebook, took up computer programming as a hobby in middle school.
Neither of these men may have initially imagined that their pursuits would lead to billions of dollars in wealth, but both found ways to fill a niche in their field and invest their money wisely. While it’s impossible to say exactly what your path to long-term wealth might look like, there’s no doubt it’s going to involve some combination of entrepreneurship, innovation, and investing.
Starting your own business not only provides you with a great sense of accomplishment, it also allows you to take control of your financial future. You control how much money you make and how quickly your business grows depending largely on the merit of your idea and the amount of time and energy you invest.
If you want to be an entrepreneur, first ask yourself what you’re most passionate about. The most successful entrepreneurs aren’t the ones who simply want to make money in order to “keep their own hours” and “be their own boss” – they’re the ones who turn an existing passion (and often existing expertise) into a career.
After you’ve identified your passion, develop a solid business plan to present to investors. This should include market research and analysis, identifying your prospective competition, vulnerabilities, and opportunities to forge new ground. By including the following information in your business plan, it should also spell out very specifically how you intend to take your business from funded concept to successful venture:
- Mission Statement: A mission statement communicates the ultimate purpose of your business idea and details how you intend to operate and grow.
- Development of Resources: What resources do you currently have at your disposal (skill set, home office, marketing channels) and what resources do you have to acquire and further develop. What do you expect the cost in time and money to be?
- Profit and Loss Forecast: Create a monthly picture of your expected income and expenses over the first 12 to 24 months of your venture. The sooner you feel you can reach profitability, the better. But don’t sugarcoat your projections at all; An honest assessment is critical at this stage.
- Proposed Product/Service Development: How do you intend to go from the idea phase to a finished product or service? You need a concrete plan for how you’re going to develop your product or service, how much it will take to get there, and who will aid in the effort.
- Marketing Strategy: How do you intend to reach customers? Thanks to the Internet, social media marketing is an excellent tool. Create pages on Facebook, Twitter, Instagram, and additional platforms. Reach customers by engaging them on your competitors’ pages. Start a blog and optimize your use of keywords to draw attention to your business. You have to be relentless in your efforts to create a client base.
Unless you’re independently wealthy, you’re going to need start-up capital to get your business off the ground. That means you’re going to need investors who believe in your business, and also in you. If you’ve ever watched the show “Shark Tank,” where entrepreneurs pitch their ideas to would-be investors, you’ve probably seen that the money always flows to the people who are most passionate about their business, not to those who simply have a good idea. A good idea can take you a long way, but it can’t take you all the way to the top.
Becoming an entrepreneur is hard work, and at some point, you may find yourself working 80-hour weeks to get your company off the ground. Of course, this path isn’t for everyone. Before endeavoring into it, it’s important to take a step back and examine your habits, focus, ability, and drive to determine if you have the stamina. If you’re unsure, move forward, but do so without investing undue amounts of money or time that could derail a full-time job or career. For some extra motivation, think about it from the perspective of where you’d like to be in 20 years. If one day you want to be independent and working for yourself, then that’s exactly how you have to start out.
Innovators are the inventors and re-inventors of the world. Just a few decades ago, no one could have imagined the power of computers, and just a few decades before that, the concept of the telephone would have seemed like science fiction.
Are you the kind of person who frequently thinks of ways to improve upon the existing processes and products around you? To many people, the form and function of the products we all use are flawless and the processes in our work and technology are above reproach, but if you believe there’s something that could be streamlined or changed to better integrate into modern life, you may be an innovator at heart.
When Lance Matthews suffered a broken foot, he became frustrated with traditional uncomfortable and cumbersome crutches. He put pen to paper, worked out a prototype for something better, and founded iWalkFree in 1999, the makers of the first ever hands-free crutch, the iWalk 2.0. Matthew’s story illustrates that you don’t have to re-invent the wheel to be an innovator, you just need to find a small way to improve upon the existing one.
Innovation is certainly one of the best ways build long-term wealth, but it’s also something that can’t be rushed or forced. You may find you have a lot of decent ideas throughout your career, but very few that have what it takes to catch on. After identifying an idea that stokes your passions, take some steps to test its viability in the marketplace.
Here’s how to take your innovative ideas to the next level:
- Competitive Analysis: Start by researching the web, reading articles, and signing-up for industry association mailing lists which may be able to offer trends, surveys, statistics, and so on. You should also sign-up for notifications from your competitors to see what they offer, how much they charge, and how they operate.
- Market Research: Your next step should be to set up a landing page of your own online. Essentially this is a teaser for your forthcoming business. Create a Goodle AdWords campaign to ensure your page gets in front of the right clientele and include an option for visitors to sign-up for updates and information. By measuring your ratio of clicks to sign-ups you can gauge – albeit, subjectively – whether or not your idea has some life in the marketplace.
- Customer Testing: Take this a step further and reach out to set up interviews with potential clients who either signed up on your landing page or whom you’re able to identify through research or your personal network. Ask these folks if a service or product like the one you plan to offer could be beneficial to them and what feedback they may be able to offer in advance. You can get a great sense of potential demand this way.
- Practicality: Next, you have to ask yourself how practical your concept is. A few things to consider include: whether production will be logistically feasible and affordable, where the product will be manufactured, how expensive and accessible are materials, and will you need staff. However, these are only a few considerations of the myriad that should be taken into account before launching your venture. A familiarity with the industry, its resources, and your competitors will help you determine if bringing your idea to market makes sense.
Investing involves using your best resources – including money, energy, and effort – to create a profit. Wise investors must continually exercise discipline, commitment, and patience. They must also be open to hearing bad news and sometimes harsh advice from trusted advisors. They don’t let their emotions get the better of them, have their ego firmly under control, and make a point of learning from, and not repeating, their mistakes.
Generally speaking, there are two types of capital when it comes to investing: money and time. If you have both, you can make a fortune. But you must start out investing with at least one.
People with little money, but plenty of time (as in years to be invested) can put the power of compounding interest to work for them. If, for example, you invested $1,000 at 10% interest, you’d only earn $100 if you took your money out of the investment at the end of the year. If, however, you let that $1,000 grow over 20 years and re-invested the interest earned, you’d end up with $6,727.50. Better yet, if you invested $1,000 every year for 20 years, at 10%, the investment would grow to almost $60,000. The sooner you start investing and the longer you let your investments grow, the more likely you are to gain and control long-term wealth.
Investors with more money but less time, have options beyond compounding interest. These people should research and even be heavily involved in the companies they invest in and look to turn a significant profit in generally less than 10 years.
These investors may incorporate a direct approach (buying a fledgling business) or getting an equity share (as an angel investor perhaps) that they expect to rise significantly in value within a short period of time, such as five years. They can also incorporate making money via passive investing by buying index funds.
Granted, multi-billion dollar wealth and multi-national companies may not be in your future, but they’re certainly not required to build long-term wealth that can sustain you and your family for years to come. All investors should start out by identifying the kind of assets they currently possess. Do you have plenty of time to work with? Do you have a nice inheritance or other funds that you want to start working for you? An understanding of what you have to start with is essential in order to leverage those resources for long-term wealth.
UK entrepreneur Jamie Wells started Glasses Direct while he was still in college. He had trouble finding affordable eyeglasses, and used his student loan as start-up capital. His risk paid off: In its first year, Glasses Direct generated over $2 million in revenue.
John Paul DeJoria, who created Paul Mitchell hair care products, got his start selling merchandise door-to-door from the trunk of his car. Today, his company, John Paul Mitchell Systems, brings in more than $900 million per year in revenue.
Innovators like Steve Jobs, founder of Apple, and Pierre Omidyar, founder of eBay, built their fortunes by developing new uses for technology. Jobs became a household name by integrating digital technology into everyday life with the iMac, iPod, and iPhone. Omidyar got his start when he began a small online auction website from his home, initially known as “Auction Web.” Today, eBay has a market cap of nearly $36 billion dollars.
Although these men were certainly innovators, did Steve Jobs invent handheld electronics? No. Was Pierre Omidyar the first to open an e-commerce website? No. They simply looked at the marketplace around them, saw a niche that needed to be filled, and let their innovative minds take it from there.
On the investing end, billionaire Warren Buffett, whose net worth is estimated at nearly $70 billion today by Marketwatch, began investing at the age of 11. By the time he was 14, he was able to purchase a 40-acre farm in Nebraska, and had saved $5,000 delivering newspapers (more than $50,000 in 2016). Investor and businessman Carl Icahn began working on Wall Street when he was just 23, and at age 32, formed Icahn & Co. securities firm. Today, his net worth is estimated to be $17 billion, according to Forbes.
All of the above entrepreneurs had very different paths to success. They were all willing to take risks and put themselves out there. None knew that success was guaranteed, but all had passion and drive – key ingredients in anyone’s entrepreneurial stew.
If at first you don’t succeed, try, try again. Famous movie director Stephen Spielberg was rejected from film school three times. Huffington Post founder Arianna Huffington’s second book, “After Reason,” was rejected by 36 publishers, according to Success.com. And, Thomas Edison is rumored to have tried 10,000 versions of the light bulb before he got it right. They didn’t give up, and neither should you.
But remember that money can’t always buy happiness. Your friends, family, and career are all just as real as cold, hard cash, and just as necessary to living a full life. Becoming financially wealthy is a great goal, but it’s not the only goal. In the pursuit of it, make sure you’re not overlooking or risking wealth you already have.
What other qualities are important for building long-term wealth?