In the last newsletter (December 2017), I talked about starting your adventure toward fame and fortune, achieving a net worth of over $25M or thereabouts. In this post, I will outline first steps on that path.
First, there are some relatively common underlying qualities, skills, and values that appear among many newly successful UHNW people. These individuals have an ability and “nose” for optimizing their human capital, clearly understanding their skills and abilities and building their marketable wealth building skills in an organized and disciplined way. This generally involves developing a model of the skills they need to run a business and consciously moving to positions that will develop and refine those skills. For those interested in pursuing this approach, “CEO Mastering the Corporate Pyramid” (John Decker) is a comprehensive guide. Remember, growth and comfort are mutually exclusive.
The other common characteristic is a relentless drive to create value – identifying and meeting customer needs, building a powerful team, and maximizing RANPVOFCF (Risk Adjusted Net Present Value of Future Cash Flow). The best guide here is “Value” by Tim Koller et al.
UHNW people are very willing to take calculated risks, to bet on their own abilities, and to bet their business in anticipation of significant rewards. They are often more mobile in their careers. One of the most successful UHNW individuals I know always sought out and tackled the almost impossible assignments in his climb toward the top of GE. He built his risk-taking skills, confidence in himself, and recognition among top GE executives, and was rewarded with a senior executive position.
So what are the paths people take to achieve UHNW status? The first and most visible path is entrepreneurial. It is also one of the most risky and difficult. You have all read about the most successful entrepreneurs, those who started a business and quickly grew it into a public company or sold it for millions, or billions to a Fortune 500 giant, the “unicorns”, 200 or so startups with a market capitalization of $1B or more. The folks who tried but didn’t succeed are much less likely to make the news. 20% of startups fail in their first year, 50% by their fifth year, and 80% in ten years.
How do you increase your chances of entrepreneurial success? First, build your domain expertise. Become an expert on the products, services, technology and markets of interest. You’re probably doing that right now without really thinking about it. Think about the future state of your areas of expertise – you would like to be riding the horse in the direction it’s going. Second, focus now on building your small business skills – join or advise smaller companies, start a side business, learn to manage a P & L by moving toward a general management position as quickly as possible, and learn how to build and lead teams. Build your network of advisors and potential investors.
Identify a highly successful business. You are unlikely to invent a totally new concept so pick something that has succeeded and one you find exciting. Ask their customers what the business could do better, build the proverbial better mousetrap, refine it until the market is sending you actual orders, arrange more financing than you think you need, launch, and be ready to change your plan when the market tells you what it really wants and will pay a premium for. One individual wanted to start a business importing tea from Brazil. He put an assortment of teas in a wooden box and went around to investors. None were interested in the tea, but one said he would like to import the boxes which were made from sustainably grown wood. Always retain more than 50% ownership, guard and defend your ownership position.
A variation of this theme is to become a serial entrepreneur. Here the process involves starting/joining a venture that becomes moderately successful (sometimes after you have had two or three tries). You build a nest egg cushion that allows you to take on more risky ventures and use your newfound wisdom and resources to make them successful.
You don’t, by the way, need to be the lead dog in the venture. Early employees who receive stock, work extremely hard, and ride a successful startup train can join the UHNW cohort. For more insight, read “Think Bigger and 39 Other Winning Strategies from Successful Entrepreneurs” by Michael Sonnenfeldt, founder of Tiger 21, an organization for UHNW individuals.
Speaking of Tiger 21, I would like to thank James Cornell for his insights and editorial review. James is leader of the Tiger 21 organization in Boston and Founder and Managing Partner of Fiduciary Wealth Partners, a private investment advisory and consulting firm for a select group of UHNW families with family businesses and family offices.
In the next newsletter, I will outline a number of other paths you (or your children) could take to achieve UHNW status.