a lender.
b) If you only have people, you are a contractor.
c) If you only have a deal, you are a bird dog or a wholesaler.
d)
If you can put all three together, you are an entrepreneur and will reap the highest rewards.
3)
The most valuable piece in the game is the Deal. The better the deal, the easier it is to find the money. If you are incompetent or don’t want to do the Deal, you can always sell to another investor for a fee. Selling deals as a wholesaler or a bird dog can be very lucrative, and I recommend it every day of the week. The money you can make selling deals is fantastic when measured against your effort.
4)
The least valuable piece in the game is the Money. This is because everyone has access to it. Money earns virtually nothing on its own and gets robbed by inflation. Since money is constantly depreciating, it must move to be valuable. Money can come from literally any source
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for almost any price. Cash investors will line up for a good deal and will compete for a great deal if they know it’s a winner.
5)
People are interchangeable and so is the entrepreneur running the business. Entrepreneurs are part of the people team and must build a good team and management style to run the business effectively. Entrepreneurs who develop a brand over time can become nearly impossible to replace.
6)
The deal drives the whole game and is the king of the three pieces. The deal is the piece you should seek first (in my opinion). You can always sell it to another investor if you can’t pull it off. I love buying deals from investors who want to pass or cannot close.
Too many novice investors try to raise money without a team or a proper deal. In my opinion, this is absolutely the wrong approach.
The easiest way to play the game of Money, People, Deal is to:
1)
Find a deal first, get it under contract with an escape clause, and allow yourself a due diligence period (or another condition) to delay your contract.
2)
While the deal is tied up, begin assembling the team required to execute the deal.
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3)
Once you have the deal under control and the people under control, begin shopping investors for money. Always have a professional business plan/loan proposal prepared.
Show your investors:
1.
The best-case scenario—In this scenario, the deal performs better than anticipated; everyone wins, and everyone is happy.
2.
The realistic case scenario—In this scenario, the deal performs as expected, slightly better or slightly worse. This is generally what investors expect.
3.
The worst-case scenario—The deal performs worse than expected. In this scenario, there generally are no profits and the investors are lucky to recover their cash.
4.
The nightmare scenario—The deal becomes illiquid; it cannot be sold for nearly the value that you have invested. The investors will have to wait to get their money out or sell at a loss. This is even worse than the worst-case scenario.
It’s important to show your investors these scenarios and make sure they’re OK with losing all of their money or recovering from a nightmare scenario.
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Once you have two different investors interested in funding you, you have enough interest to negotiate and get one investor to commit. I like to split all of my deals fifty-fifty with my money partners because I don’t like to haggle and “bite the hand that feeds.” I prefer to overpay and reward my partners for investing in me. When I call my investors in the future, they will be delighted to do more deals with me and have a check ready for me within twenty-four hours. I have proven I can make a profit for my repeat deal partners, and they are happy to get a call from me because they know they’re going to make money.
Why does “The Money” love the
Money, People, Deal process?
Although “The Money” only accounts for one third of the resources, they get to take half of the deal. Where in life can you bring one third of the resources and walk away with half? The answer is marriage. Many marriage partners come together with unequal resources, yet if there is a split of resources through a divorce, each party gets half. I like to overpay my money partners and give them half of the deal to create loyalty and excitement.
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After your first raise,
begin building a track record,
document every deal
into a track record,
then rinse and repeat!
You can repeat the Money, People, Deal process an unlimited number of times, and you will never run out of capital. By using this process, you will be tapping into the infinite amount of cash that is looking for profitable deals every day. Eventually, you will have more money waiting in your pipeline than deals, and then you will want to find people to bring you deals to keep your machine running. This is a great position to be in, and one that I frequently enjoy. This means the time has come to expand into a greater volume of deals or into larger opportunities.
Raising money is the ultimate skill of the entrepreneur and one that everyone should learn to perfect. I learned this skill early in life, and it has fueled my success so far. As long as I continue to create profit for my investors, capital will always be available for me. “Give a man a fish and he’s fed for a day, teach a man to fish and he’s fed for life.”
Action Step: Think about the last time you attempted to raise money and ask yourself: Which of the three pieces did I have before raising capital? Was I prepared with an adequate business plan? Was I successful or unsuccessful? What went wrong, and what could have gone smoother?
