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Primary Means of Wealth

By: Steve Johnson

3/26/2008 - 14 Comments

The primary means of creating wealth can be simplified down to a single statement; “Convince the people that have money to give it to you.”

Anyone that has more money than they need is always looking for a place to invest it. Their investments are how the rest of us get a hold of their money. In return, we work hard to produce something that generates more money than their original investment.

Here are some of the proven methods - because they mutually benefit both the investor and the producer - to transfer money from the people that have too much money to the people that don't.

1) Learn new skills. There are many ways to learn new skills including attending college or on the job training or self learning. Money is invested in companies that create new products and services that create more value than existing solutions, so that a profit can be produced, resulting in an increase in the investors money. In order to create new innovative products and services, companies need to hire people that are educated with new technologies, new skills and new ways of business that are relevant in the current business conditions and culture. Yesterdays skills are not good enough. Getting trained with new skills provides a mutually benefiting relationship between you and the investors.

2) Build a business that produces a product or service for other businesses that have invested money to spend. Established companies are always looking for new ways to increase their efficiency and reduce their costs. Once you reduce the cost of one business, their competitors will be forces to find a similar solution to reduce their costs as well, so you can sell your product or service to the entire category of competing businesses. Business-to-business products and services provide an indirect path for you to create a relationship with investors.

3) Create a business that produces a product or service for the general public. This is the most difficult, because whatever you produce, you will face steep competition by industry leaders with deep pocketed investors – who have the money to force you out of business. Most successful new businesses create products that target a whole new group of customers with built-in motivational factors that discourage established businesses from attacking them. For example, when market conditions change quickly, an existing business may not be able to attach a new startup that is stealing its smaller customers because they have to focus on serving their larger customers which are providing the majority of their revenue.

Established businesses have a hard time adjusting quickly to changing market conditions because they have spend years fighting competitors with process improvement efforts to reduce their costs while increasing their overhead and commitment to build the products they do. Because of this, new businesses have the best opportunity to build a new customer base during economic changes - when prices are changing customers have an incentive to look for alternatives.

The end game is to increase the value of the business and lower the perceived risk, by creating a large customer base with predictable revenue, so that the business becomes attractive to sell to investors.

Another option is to hold on to the business and grow it into an innovative business that attracts its own investment money for further product development. A private owned business can also be used to provide a means of family income and can be passed on to your children.

Whatever path you take, gaining wealth is no easy matter. The ideal path is to work hard during the middle years of life and become an investor in the later part of life, living off the profits of your wealth that you worked so hard to get.  The earlier you become an investor the earlier you can reduce your financial stress.

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