Strategic Thinking

7 Types of Investors: How to Invest And Build Up Your Ideal Portfolio

Are you wondering how many types of investors are there? Every day, there are people who fear losing money in an investment, while others never fear it. In any industry, investing has its own language. Many people are skeptical about where they invest their money because they don’t know how to build an ideal investment portfolio. 

When it comes to investment. Most people may think of their homes or cars, for example. Rather, i’m talking about different types of investors. Which i’ll be sharing with you shortly. 

Think of an investment portfolio as a safe to store your valuables. For example, real estate, stocks, bonds, mutual funds and so on. But an investment portfolio is more of a concept. Not a physical item. 

If you know how to invest and build your investment portfolio, you won’t fear changes in the stock market. You’re wise enough to know that you don’t need to make more money to be able to save it because saving isn’t the answer.

Saving your money may help with future debts but it isn’t going to get you to financial freedom. What you need to do to build your wealth is to invest it, and the amount you invest has nothing to do with income level. 

Rich people focus on investing. Poor people focus on saving. Click To Tweet

Instead, what you invest is an indication of your financial confidence: your knowledge and skills when making decisions about money. 

With that said, understanding what an investment portfolio is doesn’t tell you how to build one. First, you need to know the types of investors. And then you have to learn how to invest. Only then, you’ll be able to build your ideal portfolio. 

Watch this video about how to get started. 

Take Time to Learn The Types of Investors 

It’s important for entrepreneurs to take the time to learn the types of investors. Why? Because they are unique players in the growth process of a business. To determine a company’s success or failure is ultimately determined by the level and quality of an investor’s involvement. 

There are plenty of stories about people using their own savings to invest in a company. Many still deeply rely on investors. If you depend solely on your savings, you’re not likely to grow as big as you want it to be. Having an investor can play a big role in your success. As i said earlier, your growth process is determined by the level and quality of an investor’s involvement. 

Now, let’s get into the 7 types of investors.  

1. Banks 

A bank loan works the same as any other business investment. The entrepreneur is required to present a business plan, and then the bank will decide whether they should provide the funds. Also, you may need to provide some proof of collateral or a revenue stream before your loan is approved. 

According to Investopedia, if you want to fund the expansion of your small business. Consider a Small Business Administration (SBA) loan. However, if you have access to other financings with reasonable terms, then you are not eligible for this loan. This is a good loan to apply if you did not qualify for a traditional bank business loan. 

2. Angel Investors

An angel investor is a high-net-worth individual who provides financial aid to help the business get off the ground. They are often found among entrepreneurs’ friends and family. Typically, angel investors provide financial aid in exchange for ownership equity in the company. And this is usually a one-time investment to assist and support a company through its difficult early stage. 

Now, this type of investment is risky, because it doesn’t represent more than 10% in your investor’s portfolio. But since they focused on helping startups. Therefore, they are the opposite of venture capitalists. 

3. Venture Capitalists

So, what is a venture capitalist (VC)? A venture capitalist is an equity investor. They focus more on companies that exhibit higher growth potential in exchange for an equity stake. VC investors could be funding a startup that wishes to expand but doesn’t have access to equity markets. And usually, they do not. 

The difference between angel investors and venture capitalists is that. They are willing to take higher risks because they know they can earn a higher return on investments (ROI) if those companies gain success.

So, whether you’re seeking an investor or looking to be an investor. Understanding the types of investors is important in today’s world. 

Here’s the top 5 value of venture capital investment in the 3rd quarter of 2019. (by industry)

4. Peer-To-Peer Lenders

Embracing technology in today’s digital landscape is a must. Peer-to-peer (P2P) lenders consider businesses and projects that are listed online. There are 2 websites that specialize in peer-to-peer lending. There are,

This type of investor acts similarly to the Small Business Administration (SBA) Loan. Now, when it comes to peer-to-peer lenders, your credit history plays a part when engaging a P2P lender. So, check and improve your credit history before finding a P2P lender. Because, if you have a low credit score, they may not find you loan-worthy. 

On another note, make sure you understand the terms and conditions on your loan and make payments on time. Failure to do so will result in increased fees and most likely won’t get you another peer-to-peer loan. 

5. Personal Investors

This may sound the easiest of all types of investors. But think twice before heading in this direction. It is always a risk when mixing business with family. Not only do you risk your finances, but also your family and friends if the business goes downhill. 

When choosing this option, make sure your family ties are strong enough to withstand the pressure. You can either have each party sign a promissory note on repayment terms or sign a partnership agreement.  

6. Corporate Investors

As a corporate investor, investing in startups carries a variety of benefits. This includes supporting their own growth and diversifying assets. While some invest outside of startups, more are leaning towards starting their own accelerators and incubators programs. 

These types of investors can be great collaborators. However, a careful approach with a lot of patience must be taken into consideration. In order to have an enjoyable relationship between founding partners and corporate investors. It’s vital to understand each other and have some boundaries agreement. 

7. Accelerators and Incubators

Accelerators and incubators are perhaps the ultimate gateways to a variety from the types of investors on this list. Why? Because, if you’re accepted into one of their programs. You may receive from $10,000 to $120,000 dollars to develop your idea for growth. The best part about this is, you’ll be able to benefit additional knowledge and resources. 

However, there are certain things to consider when joining the program. So, if you’re looking to take your business to the next level. Be ready to hustle. 

Building an Investment Portfolio

Markets go up and down. Investing isn’t a game and certainly, it’s not something that you could acquire in the shortest period of time. You can’t achieve perfect performance through market timing. However, you can build up your ideal portfolio. A solid portfolio certainly will allow you to succeed and avoid the stress within market volatility. 

If you know how to invest, you know how to build your investment portfolio. Click To Tweet

Your investment portfolio is like an umbrella for all of your accounts and they consist of some of these, 

  • A 401(k) or employer-sponsored plan.
  • Cash in savings accounts or invested in certificates of deposit
  •  Individual retirement account

As i said in the beginning, your home and cars aren’t considered part of an investment portfolio. Rather, i’m talking about how you can use your money to make money. Such as, 

  • Stocks
  • Bonds
  • Mutual funds
  • Real estate investment trust 
  • Alternative investments
  • Private companies

So, if you understand how money works, that’ll help you build your ideal portfolio. And diversification is the key to success when investing. Also, when you understand the different types of investors. you’ll have clarity on investing principles. Here are 5 essential guides to building your ideal portfolio.  

Have a Purpose and Stay Committed

Ask yourself this question before you invest. Why do you want to invest? Maybe it’s for your family or it could be generating an additional stream of income so that you can achieve financial confidence. Or maybe you want to buy a second home. Most likely, your answer could be all of the above. So, if you are aware of your purpose and you already know what you want to accomplish. What would it take you to get there? And out of these 7 types of investors, which would best fit you? 

Solid Understanding of The Fundamentals

To build your ideal portfolio is not just investing blindly. Understanding the fundamentals of individual securities is crucial to building a solid portfolio. And that’s what they are assembled based on. 

Your ideal portfolio should be diversified across sectors that are expected to perform well. Plan and have a good strategy to execute your purpose. Think quality over quantity. Click To Tweet

Give Yourself Some Time to Build 

This is critical because building your portfolio by identifying your purpose requires you to link all of your ideas. So, when you understand the types of investor that suits you best, you need to give yourself some time. Such as, what you need to achieve? So, based on your solid fundamentals, and a proven approach. It keeps you away from in-and-out, market-timing types of investing approach.  

Focus on Things You Can Control

There are certain things you wish you could control. Such as, the market, companies that you’ve invested in and the political views. The truth is, you can’t. However, with your individual approach and mindset, focus on the things you can control. Determine a powerful strategy and stick with it. 

Be Realistic With Your Goals

While most of us know how much we have saved. Very few have a realistic understanding of our goals. You might have an inkling of what you spend today and how much you need for the next stage of life. Maybe, you have a 5-year plan. But, how much risk are you willing to take on to achieve your goals? And does your 5-year plan look realistic with the steps you’re implementing? 

What You Invest is an Indication of Your Financial Confidence

Your knowledge and skills when making decisions about money is critical. The way we save and make money can be grouped into seven types. I learned about these seven levels of investors from Robert Kiyosaki, and over the years, i’ve put my own spin on it. 

While it’s common for one investor to drift a little from one type to another, most people stay fixed at one type for their entire lives.

[bctt tweet=”Saving your money may help with future debts but it isn’t going to get you financial freedom. You need to build your wealth to invest it, and the amount you invest has nothing to do with income level. ” username=”danlok” 

As i said in the beginning, if you know how to invest and build your investment portfolio, you won’t fear changes in the stock market or unexpected bills. But most of us still have a certain fear when it involves money. Now, how to create that confidence to achieve financial independence? – to break-free from your fears. 

The most important quality for an investor is temperament, not intellect. – Warren Buffett

Before i share the secrets of the rich with you. Which level of investor you are? 

Level 0: Non-Existent Investor

At level zero, you have no investments or savings. You are oblivious of money matters in general or your spending habits in particular. You usually complain that you aren’t making enough money, or if you made just a little bit more money, everything would be okay.

The problem is your money management habits. Mike Tyson is an example of a non-existent investor. During his 20 year career, his income exceeded $400 million. Yet before his 39th birthday, he was $8 million in debt. Then $30 million, so he was $38 million in debt. 

You might say, someone who makes millions a fight can’t be broke. But his financial statements say otherwise. He has the cash flow of a poor person. In fact, he’s worse than the poor. If your net worth is zero, you’re richer than him. 

Level 1: The Borrower

If you’re a borrower, you’re often in far worse financial position than the non-existent investor, although your potential for change is greater. You usually make a bit more money than level 0. You have high debt because you spend all you make and more. Your idea of financial planning is to get a new Visa or Mastercard. 

You live in complete financial denial and have often come to believe the situation is hopeless. When you are depressed, you buy more and get more debt.

Level 2: The Saver

As a saver, you usually set aside a small amount of money on a regular basis. The money is usually deposited into low-risk, low-returning vehicles such as a term deposit or money market account. You save to consume. 

You save to go on a vacation, then save to buy a car, or save to buy a big TV. You are afraid of financial matters and won’t take risks. In fact, you’ll drive many hours to save a few dollars or line up on Boxing Day for 10 hours to save on one item. 

Level 3a: Passive Investor

Passive investors are aware of the need to invest and top up their RSP or 401K by making employee contributions or outside investments like mutual funds, shares, stocks, or bonds. This level makes up two-thirds of the middle class. If you’re here, you’re financially illiterate. You don’t like to take risks.

You like to say things like, “I’m not very good with numbers,” or “I prefer to leave the money decisions to the professionals.” You’ll leave things in the hands of your financial planner but have little idea where things are invested or why. You also believe high rates of return like 20 percent are either illegal or impossible. You believe what you read in the news and do what others tell you to do. 

Level 3b: Passive Investor Gambler

At this level, you don’t like to take risks but you also like to use sophisticated investment techniques such as margins, puts, and calls, without understanding what you’re really committing yourself to. Most of the time, you don’t discuss your losses with anyone, but always brag about your wins. You like to gamble. 

I’ve seen entrepreneurs work very hard their entire lives to accumulate quite a bit of money. Then they take another person’s advice and in one year they lose what took them 10 years to make. It’s in the nature of entrepreneurs to work hard, so they’re smarter next time. But they’ve already lost decades of time because they took a gamble. 

Level 4: Automatic Investor

Automatic investors are aware of the need to invest but they are also actively involved with their investments. If you’re at this level, you have a long term plan that will enable you to reach your financial objectives. You follow the plan of the wealth triangle: you have a high-income skill, build a scalable business, and have high-return investments. 

You don’t use the fancy stuff that money managers use, like options or margin accounts. You buy good shares, proven managed funds or solid funds, and hold them for the long term. Warren Buffett is an automatic investor.

Level 5: Active Investor

If you’re an active investor, you manage your own money and don’t trust other people with it. You have a clearer awareness of investments and rates of return. You don’t necessarily take the advice you hear. 

For example, i’ve worked in finance. I can say that 97 percent of mutual funds don’t work. Only 3 percent of the 5000 funds in Canada work, so i would not take the advice of financial advisors.

Active investors have to be clear on investing principles, which are the rules of investing. Your vehicles might be real estate or private companies. You actively participate in managing your investments and don’t just put aside your money and hope it grows. 

You’re always looking, monitoring, and seeing how you can add value. You optimize performance and minimize risk, getting long term annual returns of 20 to 100 percent. You intimately understand money and how it works.

This type of investor has cash flow. You spend what you want after your assets crank out the cashflow for you. I am at this level. 

Level 6: The Capitalist

Few reach this level and fewer manage to remain there. They are the Rockefellers, the Kennedys, the Fords, the Bill Gates, the Warren Buffets. They have two motivations for investing: they are good managers of their money while they are alive, and they leave a legacy to continue after they are gone. 

Discover The Secrets of The Rich

No matter what your income level is, start investing. Have a financial plan for your future. Begin at the first level and work your way up. Remember, investing is about how much money you keep and what you do with it. So, do you want to learn the secrets of the rich? How do they invest, and build their ideal portfolio? How do they stay rich by investing? 

To the select few of you… here’s your chance to learn from me in person. As i said in the beginning, many people are skeptical about where and how they should invest their money. And this is what i realized.

The secrets of the rich aren’t taught anywhere. So, I decided to show you how it’s done. And because you might have the same question as my followers and mentees. To answer these and many other questions, you’re invited to my event in Vegas i’m holding with my good friend. And the question is, “Dan, how do I grow my savings predictably and sustainably?”

  • Without losing to inflation.
  • Without risking it all on the latest opportunities that could be gone with the wind.
  • Or without keeping it in my low-return savings account?

If you want to discover the secrets of the rich. You must have the mindset to give more, do more and be more…

Learn the secrets of the rich. And change your life forever. 

IMPORTANT.. About your marketing message

WARNING! 

What you’re about to read COULD completely change your positioning in the marketplace…

So pay close attention…

Because this may have a profound effect on your bottom line.

I’ve asked my audience this many times, and EVERY time without fail, the answers vary.

“What’s the difference between a coach, a consultant, and a mentor?”

If your definition of these is incorrect or unclear…

Your positioning in the marketplace could be wrong…

And this could have a huge effect on your business and revenue.

So before we go any further, let’s clarify these definitions together.

In this short but powerful podcast episode, you’ll discover difference between a coach, consultant, and a mentor >> 

In short, a coach will motivate you, point out your blindspots, and help you achieve certain goals, think basketball coach.

A consultant may also help you achieve certain goals, but will implement their expertise and it for you, think marketing consultant.

You may want to get better at basketball, but when it comes to marketing, you just want someone to do it for you.

A mentor is someone who’s “been there and done that”.

They help their clients get similar results to what they’ve achieved and will save them time, heartache, and help them avoid mistakes before they make them.

How Should You Position Yourself In The Marketplace?

So now you know the difference between a coach, consultant, and mentor.

Let me ask you something…

Are you positioned in the marketplace correctly?

The reason why this is so important is that the way you position yourself changes your marketing message.

And it’s your marketing message that moves the needle in your business.

You want your positioning to be as unique as possible…

And marketing expert Todd Brown does a great job of explaining this here >>

So now you know why positioning is so important, next, you must know…

How To Position Yourself In The Marketplace And Stand Out From Your Competitors

In order to position your product or service correctly, you must first work out what your Unique Selling Proposition (USP) is.

This is a product/service-centric statement that sets you aside from your competitors.

After you have this, you’re in a good position to create your Positioning Strategy.

The following factors will help you create your Positioning Strategy:

  1. Product characteristics…
  2. Price…
  3. Quality or luxury…
  4. Product use or application…
  5. Competition…

This article will help you create your USP and your Positioning Strategy based on what we’ve discussed >>

It will also help you identify gaps and opportunities in your marketplace…

So I urge you to read it as it will help you take your business to a whole new level.

Why Your Personal Positioning Is Vital To Your Success

Now before we close this out, as you run a primarily service based business…

YOU are such a big part of your product.

So far we’ve talked about how to position your product or service, but YOUR positioning is just as important.

Here’s what I mean.

At the very least you should position yourself as an expert in your niche.

If you can, positioning yourself as a Celebrity Authority would be ideal.

Why is this so important?

Think of some celebrity authorities you know of…

Steve Jobs, Elon Musk, or Oprah Winfrey.

If you can create that kind of celebrity and authority in your niche, it attracts clients to you like a magnet.

In our space, we have people like Tony Robbins, and I myself am also a celebrity authority, although not at the same level as Tony.

So, in this video, you’ll discover how to position yourself as a celebrity authority in your niche >>


Because as people cannot see your service, they judge by what they can see.

Ultimately, it’s your reputation that precedes you and makes you money, and this is why it’s so important.

For a final video, I’d like to share with you external positioning secrets that attract high end buyers.

This will seem counter-intuitive, but in this video, I explain why the best people in anything are generally the poorest and what you want to do instead of being “the best” >>


So that’s about all I got for you today.

Although I could easily segue into personal branding, I think that will be a topic for another newsletter.

So, look out for that one, but until then…

Go high ticket,

Dan Lok

P.S. – If you’d like complete clarity on your offer so you know exactly what your USP and your Positioning Strategy is, we’re running a live event called High Ticket Mastery, in January.

At this event, you’ll discover exactly how to create an irresistible offer, how to attract an abundance of high ticket leads, and close those leads without being salesy, sleazy, pushy, or inauthentic.

Our last event was a huge success and everyone who attended received immense value and a “done list” of tasks they’d completed during the event.

So, click here for the full scoop and to secure your seat >>

How Do You Know If Your New Business Idea Will Actually Work?

So you’ve got a big business idea. It could be something you’ve been stewing over for several years. Or it’s a spur-of-the-moment idea you feel you could actually commit to. 

Regardless of the stage of your idea, you may be asking: 

  • Am I willing to quit my job to pursue this? 
  • Do I have to sacrifice any money to make this work? 
  • Do I have what it takes to be an entrepreneur? 

Many times, these fears can be summed up in one question: 

  • How do I know my new business idea will actually work?

Life isn’t built on certainty, and the variables of success are too many to count. If you could ensure your ultimate success early in your entrepreneurial journey, wouldn’t you?

Of course you would.

These steps aren’t part of a mindless checklist. They require intensive research and effort. They’ll also call for a dose of introspection and plenty of thinking time. So if you’re looking for an easy checklist, you’ve come to the wrong place. 

But if you’re willing to put in the work to follow through on your business idea, these action items are for you.

The first step is asking the right questions. If you can channel the questions you have in an effective way, you’ll learn to better understand yourself and get a stronger grasp on your business idea. 

The second step is putting your business idea to the test. Technology enables you to test the concept behind your business before you go all-in. Using social media and other channels to test your business plan will let you know if you can succeed in the “real” world.

In this article, we’ll hand you the keys to both of these action items. First, we’ll cover some questions you should ask yourself as you think through your business idea. Second, we’ll share some of the best ways we’ve seen entrepreneurs put their ideas to the test. 

5 Questions to Ask About Your New Business Idea

1. Why do I want to start this business?

We’re not talking about your business plan here. We’re talking about your why.

The biggest success factor for your new business idea is you. - Dan Lok Click To Tweet

Now is the time to realize if you care about the business or if you’re chasing something else – fame, money, or approval. Fame, money, and approval aren’t bad in themselves. But if you make them your focus, you’re digging a hole for yourself and the business. 

Uncovering your “why” —your core business motivation —will be an advantage when you hit tough times. Your “why” will guide you through the challenges every entrepreneur is bound to face. 

Take a look at the mission statement for the Disney company: 

The mission of The Walt Disney Company is to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds, and innovative technologies that make ours the world’s premier entertainment company.

Everyone surrounding Walt Disney knew that he was an incredible optimist and a master storyteller. These core motivations haven’t changed since the company’s early days. They impact every movie Disney releases and add the spark of magic people experience at Disney World. 

As the founder of your company, this is the same kind of impact that you can have on the lasting legacy of your business.

walt-disney

2. Am I willing to do whatever it takes to make this happen?

Successful businesses rely on a leadership team with total commitment to the company vision. 

If you’re not willing to sacrifice a great job, free time, social life, or other things that are important, you may not be ready to launch your business. 

There was once a man passionate about duck hunting. He was so passionate that he actually turned down a career in the NFL to follow his vision. He ended up inventing several duck calls, and that’s the beginning of the story of the Duck Dynasty. That man was Phil Robertson, and he and his sons still run this hugely successful company. 

Does your business idea have to be your biggest passion? No. 

But do you need the inner resolve to push through the hurdles that are sure to come your way? Unquestionably, yes. 

Where there’s a will there’s a way, and this resolve increases the chances of your business succeeding.

Phil-robertson

3. What is the problem my business idea solves? 

Let’s face it: not having a problem you can solve with your new business makes success less attainable. We call these pain points. Unless your customers see a way your product can improve their lives, they won’t buy it. Simple as that. 

If you don’t know the problem you’re trying to solve or the way your company is making the world a better place, you’ll have no selling point for your product.

If your company is groundbreaking, there’s a chance you’ll have to show people a problem they didn’t know they have. Take Ford Motor company, for example. Henry Ford is famously known for saying 

“If I had asked people what they wanted, they would have said faster horses.”

Another example of a company that solves a huge problem is GrubHub. The company was started by two developers working for Apartments.com. Working late, they were frustrated with the lack of food options and the constant issue of having to give credit card numbers over the phone. 

So they built Grubhub—a directory for restaurants plus a service that allowed people to order food from the comfort of their homes. 

This is a problem most busy people had, but everyone just dealt with it. Grubhub posed a solution to a previously unsolved problem for many Americans. 

grubhub-maloney-evans

4. How big is the market my business could reach? 

Ask questions about the market you want to reach. This approach is simply an extension of the question “What is the problem my business idea solves?” 

Let’s take it a little further:

  • Is this problem something only a certain group of people have? 
  • Is this problem affected by where my customers live? 
  • How many people have this problem? 
  • Will my product be something anybody can access, or does the amount of money they make come into play?

Simply asking these questions means doing substantial market research. 

Wouldn’t you want to dive into the research if it meant more money?

There are two ways to make a lot of money:

  1. Sell a high volume of products at a reasonable price.
  2. Sell fewer products at a higher price.

If your target market is small (i.e. entrepreneurs in Chicago with a net worth of over $2M) then your product needs to be worthy of and sell for a higher price point. 

On the flip side, if the potential market for your company is large, you’ll need to find some way to convince that market of the value of your product. 

5. What strengths and weaknesses do I bring to the table? 

What do you think is the most important factor of success in your business?

YOU.

Start now and do some serious self-assessment. You won’t want a personal downfall to mean the demise of your business later on. 

When it comes to entrepreneurship, many founders are really good at one or two things. Yet they lack ability in several others. 

For example, some entrepreneurs are great at marketing and sales but are chronically disorganized. It pays for them to recognize this and to hire other people to manage the company operations. 

Others may be technically skilled but have no concept of how to pitch their product. 

If you correctly analyze your business strengths and weaknesses now, you'll do yourself a favor in the long run. - Dan Lok Click To Tweet

The success of Apple had to do with partners who complimented each others’ strengths and weaknesses. Steve Wozniak and Steve Jobs met while working a summer job. 

At the time, Wozniak was building a computer. Jobs, on the other hand, saw its potential to solve a global problem. 

Without the insight and business sense Jobs brought to the table, Wozniak probably would never have put the computer on the market. And of course, Jobs would never have had a product without Wozniak’s analytical and technical abilities.

apple-jobs-wozniak

6 Ways to test your New Business Idea

Now that you have gone through the big questions, it’s time to put your big idea to a potential test.

1. Use social media to test your ideas.

Isn’t it funny how one simple post asking a question on Facebook can get hundreds of comments? How quick are people to share their opinion on Twitter?

These are opportunities.

Start sharing the problem you’re solving with your friends. Ask them directly if they would buy the product you’re trying to sell. See if they’re willing to share details about the company you’re trying to build. Ask for their feedback on potential business models or marketing ideas. 

If you’re extra adventurous, try starting a Facebook page and running some simple ads to a landing page that explains the product you want to develop. 

Chances are if you can get engagement on social media around the idea you’re building a product around, there will also be people who want to invest money in it. 

Social media is also a great way to get an idea of other perspectives as you build out your business plan. Just remember to take everything with a grain of salt: not everything people say on social media should be taken to heart. 

2. Start a newsletter.

A newsletter about your business idea will have so many benefits. First, you’ll be able to test whether people are willing to make a commitment to your business.

An email is one of the most valuable things you can have when it actually comes time to launch your business. Email gives you direct access to a potential customer who is already invested enough in your idea to give you personal information. 

Finally, it’s going to be incredibly valuable to you to regularly share the progress you’re making on your business as you figure out how to build it. You’ll be able to stay accountable to potential customers and get continual feedback as you test and implement your product. 

3. Get yourself in front of investors. 

What’s one of the best indicators of success? When someone is willing to commit to and invest in whatever you’re building. 

You can look for potential investors by networking. You may have already been keeping your eyes open for potential partners in this business venture. If so, offer to take these people out for coffee or pay for their lunch and ask for their advice and ideas. 

Use LinkedIn to pitch investors who have been involved in companies similar to yours. Make a point to connect to these people. This way, when you’re ready to ask for investments, you will have a network of people who already know and trust you. 

If you don’t want to go the route of traditional investors, you could try crowdfunding. Kickstarter, SeedInvest, and Patreon are several options if you’re going for smaller investors.

Finally, maybe the best option for you will be to create an MVP (a minimum viable product) that you can test on the market for a lesser price than what you eventually want to charge. 

This way, you’re already accountable to the market while you’re bringing in the first bit of money you’ll need to grow your business. 

Regardless of how you choose to get your initial funding, the basic idea still stands: you won’t know your business can be successful until someone can put their money where their mouth is. 

4. Create a survey. 

Are you looking to do more market research and understand a bit more about your potential customers before you raise money? No problem. 

You can create a quick survey using SurveyMonkey, Typeform, Google Forms, or FormAssembly where people can give you their true opinions about what you’re building. 

Ask family and friends to complete the form as a favor to you. You’d be surprised how much they know about you! Then market your survey to a broader group of people.

5. Get an understanding of the financial side. 

Do you have any idea how much it’s going to cost to create your product? Or if it’s even reasonable to think you can make money off of it? 

How much of the work will you need to outsource? How many employees will you need st a minimum and how experienced do they have to be? 

If you don’t feel equipped to do the research on this yourself, flesh out the idea with someone who can give you good advice.

If you can’t make money, your business will ultimately fail.

And it’s better to find that out now rather than to run into a hiccup you could have avoided by doing the proper legwork in advance. 

6. Do some background research. 

Most people like to call this “researching the competition.” 

Know your competition and their successes. The time you invest in this research will be valuable when you’re assessing how to build your business.

Besides, it will let you know if your potential market is saturated or if you have the potential to create a true win. 

Here are several tools you can use to research your competition:

  • Social media profiles. What does a product similar to yours do for an Instagram page? How active are the founding members and C-level employees on social media? Do they run ads on Facebook or Twitter? 
  • Google. Search “Products for (Problem You’re Trying To Solve)” or “(Industry Name) Companies”. Take some time to assess the top pages that come up during your searches. Is your competition spending time creating content around the problem you’re solving? What are they doing to get noticed?
  • Keyword Tools. Want to know how your business can succeed? Study what people are searching for in your target industry. Keyword tools like Ubersuggest or Ahrefs allow you to study the analytics of certain search terms in your target industry. With these tools, you can see who consistently ranks for keywords in the space you’re targeting. The companies who are ranking for your target keywords are the ones you should begin to study.

If you’re interested in diving deeper, Dan goes into more detail about the idea in this video.

Wrapping it all up

In the end, you can’t determine the profit of your business by doing the same thing as another entrepreneur. You won’t have a guaranteed path to success by following a set of rules. 

Your business will succeed because of your hustle. It’s going to make money because of your determination to keep going.

Finally, your business will power through difficulty with your ability to research, test, and adapt. You can start the process while your business is still in the idea phase.

If you start the process of research today, you’ll set your business up for long-lasting success.

How To Negotiate Profit Sharing Once The Deal Is Closed

How can you approach profit sharing after having closed a deal?

Maybe you made a deal with a business partner, individual contractor, or another professional – you agreed to work together and share the profit. Or maybe you hired employees and want to motivate them to work harder by offering them a profit share.

But now you might be wondering: how exactly should you negotiate profit sharing? How big of a share is considered fair and ethical? Which structure should you choose?

One thing to keep in mind is that there is no one-size-fits-all approach to profit sharing. What works best completely depends on your business’s specific situation.

Profit sharing depends on your business model, current income, and many other factors.

The thing is, every deal is a deal and therefore, can be negotiated. Which system you choose for profit sharing will depend on many factors.

That’s why, in this article, we’ll go over how and why you want to do profit sharing as well as how you could do it and which system might fit best for your situation.

What Is Profit Sharing?

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Profit sharing can take on a variety of forms. Usually, we’re talking about an allocated share of the profit of a business before taxes.

Some businesses choose to use a part of annual profits and pay out the profit share once a year. But there are also models where the profit share takes place twice a year, quarterly, or monthly.

There are different ways to parcel out the share accordingly. We’ll go deeper into those strategies below.

What’s important to note is that profit sharing is usually determined and negotiated after the business estimates their annual profits. If the business fails to make accurate predictions,  the profit share could be affected.

This system has many advantages, but it’s only for successful businesses who can estimate how much money they’ll make. If you are currently in the red, profit sharing might not be your best option.

However, sharing the profit is also a great way to motivate employees. If the business’s profit has an immediate impact on how much money employees make, then they feel motivated to bring in more money.

If your business is in the red but close to making profit, offering a profit share to your employees might be exactly what you need. Their increased efforts will help you make more money.

What Profit Sharing Is Not

Some companies and businesses pay out a section of their annual profit in addition to regular salaries and bonuses. They do so without tying the profit share to profitability.

They treat it more like an extra bonus for employees and pay it out to motivate their workforce.

There is nothing wrong with being generous and sharing profit with your employees, contractors, or business partners: just be aware this is not actually profit sharing.

Things To Consider

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There are a few things to consider when estimating profit sharing. You want everyone to get paid in proportion to their efforts and according to the results they bring in.

One thing to definitely think about is how fast the money will come in. Do you already have a marketing campaign that generates leads and sales regularly, or are you building everything from scratch? If you have accounts receivable, how fast do they pay?

The reason you want to consider how long it will take for money to flow in is that profit share implies that everyone will get paid only after you make some money. Use your estimate to set the right expectation from the beginning.

If you promise your business partners or contractors that they will get paid within one week when, in reality, your marketing requires three weeks to produce results, they will get impatient. Morale shrinks if you nourish the wrong expectations with regards to the profit share.

So be honest about the situation from the get-go. How soon can the other person expect to make money? Is your shared profit their only source of income? Address possible concerns early, and avoid disappointment later.

You also want to have a backup plan in mind in case the numbers used to calculate the profit share turn out wrong. Maybe you predicted a certain profit, but unforeseen developments in the economy undermined your plan. What will you do if you can’t meet the expectations of employees, contractors, or business partners?

Worth

One more thing to consider is if the matter is worth a negotiation at all. There can be instances where profit sharing isn’t the best approach. Sometimes, it’s better to offer business partners or contractors a fixed payment. Then there are also circumstances where it’s best to just name your rate and don’t negotiate at all.

Timing

The timing of the negotiation is also something you want to consider.  In many cases, you’ll actually estimate the rate before a deal is closed.

But your business partners or contractors might also want to re-negotiate later. If they keep bringing great results, there is no harm in offering them a better rate for their efforts.

In fact, if they have proven to work hard and get you consistent results, it’s great if you can pay them a bit more than the industry standard. They will love you for it, stay on your team, and continue to put in their best efforts.

So when it comes to profit sharing, set the stage before you make a deal. Set expectations and be fair. If someone turns out to be good, don’t be afraid to re-negotiate with them.

Now, how can you actually approach profit sharing?

Approach 1: Commission Structures

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A very popular way is to pay commission. The person you are partnering up with or taking on as a contractor gets paid a certain percentage for certain results.

For example, if you hire a closer to close deals for you, you can pay them based on how many sales they make. A common way is to pay the closer 10-20% of the sale.

If you work with a business partner who is putting in equally as much time, effort, and investments as you do, then you likely will split the profit in half. Half of the money goes to your business partner, half goes to you.

In the case that your business partner is doing less, then you can also do 40% and 60% or 30% and 70% profit share.

You want to use commissions when you have a team that is focused on results. Your employees have incredible skills that help you make money. If it fits their personality type, reward them with a profit sharing system.

The great thing about paying for money-making services on commission is bringing in more revenue without extra cost for your business. If you pay a closer to close deals for you and they don’t, they don’t get any money. Meaning, you only pay them if they make you money.

A possible downside of commissions is that your competition might try to hire your people by offering them a bigger commission. Definitely make sure that your commission structure is fair, and you should have nothing to worry about.

Approach 2: Monthly Retainer

Some business owners approach profit sharing this way: the person gets a monthly fixed payment but can earn more if they reach a certain quota.

Depending on your business model, the retainer can be high or low. The advantage of offering a fixed rate is that everyone’s income is secured. No one has to worry about getting their basic income, and everyone can fully focus on the work.

This works well for people who need security but who are also motivated by the opportunity to earn more if they achieve certain results.

Approach 3: Contribution Levels

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Creating a profit sharing plan based on contribution levels means that not all employees or contractors get the same amount. Instead, you base the percentage they get on their role. An account executive or manager might get more than an assistant.

This means you have to determine the amount each position gets paid. Usually, the employees who perform tasks that help you generate more money should get paid more.

Pay attention to the sales and marketing teams who are responsible for generating revenue. Also, consider managers and team leaders who might not do sales directly themselves but lead their teams in doing so.

When you choose to do profit sharing based on contribution levels, be careful not to accidentally de-motivate some of your employees. No one likes feeling like their work is worth less compared to others.

If you choose to discuss openly how much of the share goes to whom, make sure everyone understands why they get what they get. Keep a great business culture that doesn’t emphasize unhealthy competition or foster envy among employees.

Make Your Profit Sharing Easy To Understand

There are all kinds of formulas to calculate profit sharing. You can adjust them to your situation or come up with a completely new way to do it.

No matter what you choose to do, make sure your employees, partners, or contractors understand HOW they get their share. If they have no clue how their pay is put together and how they can increase it, morale will go down.

In the book Extreme Ownership, the authors Jocko Willink and Leif Barbin talk about earning bonuses, but the lesson may be applied here.

Willink and Barbin headed out to help a business that had recently introduced a new way for employees to earn bonuses. The problem was, hardly any of the employees ended up taking this new opportunity to earn more money. After inspecting it, Willink and Barbin found out why: the system was so complicated, the employees had no idea what to do to get their bonuses.

So, make sure you use a way that your employees, partners, or contractors understand; they will be more effective if they know how to potentially earn more.

How To Negotiate Profit Sharing?

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The amount of the share is usually determined towards the end of a compensation negotiation. In the first part of the negotiation, you want to see if the person is the right fit for the position you had in mind.

You investigate their strengths and weaknesses and how invested they are in working with you. What results can you expect from them based on their past experiences?

There is no point in talking about money and payments if these points aren’t ticked off. So save the profit negotiation for the end of the conversation.

Now, how do you determine how much of the profit you want to share with an individual employee or contractor? If you do profit sharing often, you might want to have fixed rates.

Let’s assume that, for example, you are working with a team of closers. Some of them are doing outbound calls, dealing with cold prospects, and therefore usually have the harder job. The others are inbound closers, dealing with warm prospects and having an easier time closing.

The outbound closers have a harder job, and they bring in new customers, so you’d normally want to pay them a bit more than the inbound closers. Your outbound closers might get a 12% commission, while the inbound closers get 8%.

If a person thinks that they have an outstanding performance and should get paid more, they can always approach you for a re-negotiation.

According to Jim Schleckser, CEO of Inc.com, a profit share of 8% is enough to motivate someone to perform better. So that’s a great place to start.

A profit share of 8% increases employee motivation. Click To Tweet

If you can do more than 8%, however, it’s a good idea to do so to get ahead of competition and to increase the loyalty of your employees or contractors.

Advantages of Profit Sharing

Using profit sharing and commissions instead of regular salaries or bonuses has some advantages.

As we mentioned before, one of the biggest reasons to go for profit sharing is to motivate your employees or contractors.

If your workforce benefits from making you more money, then they will find efficient ways to do so. They are more invested in the success of the whole business.

In a company where everyone gets a salary, it’s easy for employees to do just the minimum –  they are getting paid anyway. Paying them based on results prevents that.

So profit sharing improves the culture of the whole business. Employees are happier, they are actively looking for solutions to bring in more money, and they are motivated to perform at their best.

What’s more, if you are in a niche where profit sharing is less common, this can really make you stand out. Any time you are the only one who can offer something, you should. It will give you and your business an edge.

Implementing a profit sharing plan can also strengthen your team as everybody is working on the same goal: to generate more profit.

Possible Pitfalls

Advantages of profit sharing aside, there are some things to watch out for. The first thing, as we’ve already mentioned, is that your workforce has to understand how they get the share. What’s the system and how does their effort impact their pay?

The second thing we briefly touched on is to ensure your profit sharing system remains fair. If some employees or contractors feel undervalued, they will be less motivated to perform at their best. In the worst case, they might even leave your team.

If you choose a system where only parts of the profit are eligible for profit sharing, you want to be able to explain how you calculated it. For example, if you make 2 million dollars in profits a year, you might want to share 10% with your employees.

You, then, determine which person gets how much. And while you do so, you want the breakdown to be simple enough for your team to understand.

Profit sharing should also be measurable. If every team member at any time can calculate how much their efforts benefit them, then you did well. They are aware of their impact and their results.

Want More Next-Level Business Advice?

On the Dragon 100 advisory board, Dan Lok coaches and mentors top-level entrepreneurs on how to scale their businesses.

Every stage of your business comes with unique challenges. In Dragon 100, you profit from Dan Lok’s 20+ years in business experience and from being in a high-level business environment.

Profit sharing plans are only one of countless examples of what you can learn from Dan Lok.  Business models profiting from Dragon 100 are as diverse as their owners.

If you think that you and your business would profit from Dragon 100 and be of value to other Dragon 100 members, learn more about the Dragon 100 advisory board here.

What The Top 1% Of Highest-Paid Coaches Are Doing That You Aren’t

A lot of people think most highest-paid coaches are so-called fake “gurus.”

Why is that?

It could be because some of them seem to have success almost overnight. Or it could be because there isn’t enough proof online for the audience to believe. 

Either way, there must be something they’re doing right that most people aren’t to become the top 1%.

And the only way for people to believe in that type of success is if coaches can generate trust.

You see, trust is the ultimate asset, but it takes a long time to develop. 

If unheard-of coaches disrupt the online world, most people are going to think they’re a scam. That’s because there hasn’t been enough trust for people to believe in them. 

People want to know who you are and how you got your success. The best way to do that is to add value over time. You can share your wisdom, and if that changes at least one person’s life, people will start to develop more trust.

So if you’re a rising coach who’d like to become one of the highest-paid coaches, you’ll need to follow what they’re doing now.

When you start to act more like the 1%, you’ll become them. All it takes is for you to keep adding value to attract more clients. And the more trust you build with clients, the more revenue you’ll have.

The Old You Must Die

Before you can start becoming the person you hope to be, the old you must die first.

If you can’t accept that, then it’ll be harder for you to move forward. This might not be something that’s easy to do, but it’s necessary. 

Successful people are willing to do what makes them uncomfortable in the interest of growth. - Bob Proctor Click To Tweet

It’s possible for anyone to achieve the top 1%. If you ask any of the highest-paid coaches, most of them will tell you they did not come from a fortunate background.

If you ask the young Dan Lok, he’s going to tell you that he’s far from being rich. But because he left his old identity, he was able to create a new one.

So for you to bridge that gap and become the next addition to the top 1%, you’ll need to see how those before you succeeded.

The fastest way to wealth is to learn from the wealth. Wouldn’t you agree? They can show you what they’ve done, so you can follow their footsteps.

And until you can master in skills, then you’ll start to see results. So if you still don’t have clarity in what those skills are yet, you’ll need to find a mentor to help you. 

Getting Started With Coaching 

If you want to earn like the highest-paid coaches, you’ll have to cut out all the distractions in your life. 

That means if you still plan to work for someone else, it’s going to slow down your path to being the top 1%. So your goal should be to branch out on your own and to start a business if you haven’t already. 

But don’t ditch your steady paycheck if you can’t survive to pay the bills. You’ll need to work on your business on the side first, and when that picks up, you can then fire your boss.

When you have your own business, you’ll have full ownership and more earning potential. That’ll be a great source of wealth to have when you own the assets.

And if you don’t know what business to start, it all comes down to your skills. What is that one thing you’re good at? 

Once you become a master of your craft, a lot of people will look up to you as an industry leader. But first, you need to be able to show it in your skills. 

Being a coach isn’t going to be easy. You can expect to take a lot of risks, go against the norm, and make tons of mistakes. But once you get past through these challenges, your success will reward you.

Become A Bookworm

If you weren’t a reader before, now is the best time to get into the habit of reading.

Author James Altucher once said, “Only read books you enjoy, that makes you happy to be human.”

And believe it or not, reading books is life-changing. It can teach you a lot more than what you get out of school.

That’s how Dan Lok was able to go from being a broke kid to finding his first mentor. He started reading thousands of self-help books, and it opened his mind to a whole new world of marketing.

And even reading ads too. He kept all the ads he received in the mail to study copywriting. That led him to his first high-income skill and 6-figure income.

You can think of it like this – each book contains someone’s lifetime of secrets. The more you read, the more money you’ll make. 

It’s true. According to Inc.com, reading taught Elon Musk how to build a rocket ship. It also showed Tony Robbins how to build a better life. And now he’s teaching others how to do it as well.

So if you’d like to know what the highest-paid coaches are doing to earn more, they read every single day. 

Imagine for every page you read, you get a raise. How many pages would you read every day?

When you read a lot, you’ll start to find it easier to come up with ideas and innovate. You’ll begin to feel more knowledgeable and see things from a different perspective. It’s a powerful feeling when you know something that few people won’t understand.

You will also attract more success when you learn a lot. That’s because it’ll be easy for you to share things people have never noticed before. They will start to see how valuable you are.

Make Money Work In Your Favor

The top 1% knows how money works. 

That’s why it’s easy for the rich to become richer. And to crack the code on how to be like the highest-paid coaches, you’ll need to learn how money works too.

Money may seem complicated to understand. In fact, 33% of American adults have $0 saved for retirement. Most people will spend their whole lives working hard and never knowing how money works.

So if you take the time to learn about money-making strategies now, the payoff in the future will thank you.

This all goes back to reading. When you read more about money, you’ll attract more of it. 

And what most people are doing wrong right now is being scared of learning how money works. They either spend it all or save it all – both of these are neither the solutions to a good way of living.

What the top 1% is doing is they’re careful with how they manage money. They have to balance cash flow early on to avoid being broke.

Self-made millionaire Grant Cardone said, “I didn’t buy my first luxury watch or car until my businesses and investments were producing multiple secure flows of income.”

Even when they start to see success, they won’t blow up all that money. That wouldn’t be a smart choice for anyone to make. 

When you gain a dollar, you have to think to yourself: “How can I use this to make more?

Only that mindset will take you closer to your goals. 

Smart People Don’t Work Hard – They Leverage Instead

Leveraging could be the smartest decision you’ll ever make for your business. 

Think about it.

There’s only one of you. Everyone has the same 24 hours each day. It would be impossible for you to run everything in your business. And it wouldn’t be the best idea either.

You see, your time is valuable. Since you’re the business owner, you should focus on innovation and moving the needle. 

If there are tasks that someone else can help you do – hire them to do it. And if there’s something you don’t know how to do, find someone else to do it instead of learning it from scratch.

For example, Dan Lok hires people to help him create his YouTube videos. That is because Dan, himself, doesn’t have the time to edit his own videos. Also, he’s not a video editor, so hiring professionals would be a better choice if he wants to create results.

You can also leverage money. 

Don’t be afraid to use other people’s money when you need it. If your great ideas need funding to help turn them into reality, leverage other people’s money to make it happen.

It’s better to take action now than to wait until you’re ready. Because when you wait, the opportunity might not be the same anymore.

But to get someone else to fund your ideas, you’ll have to be confident that your ideas will work in the marketplace. It has to sound promising.

Creating More Wealth With Wealth

Once you’ve made some success, you can then move on to creating many income streams.

But keep in mind, you can only do this after you’ve mastered your skill first. Otherwise, you could get into financial risks.

You do not want to create a new income stream if you’re still broke, in debt, or have too many bills to keep up with.

The majority of highest-paid coaches have many income streams to create more wealth. 

Tom Corley, the author of Rich Habits, says 65% of self-made millionaires had 3 streams of income.

If you’re like any of these millionaires, you would know to keep learning. Once you focus on building that knowledge, your wealth will follow.

This includes not spending your money on whatever you want. You have to develop financial intelligence. 

For example, every dollar you own has the potential to develop more. You can multiply your money by investing, not by saving nor spending. That’s how you can make money work for you.

Work Hard Now So You Won’t Later

Here’s the sad reality – most people are waiting until they’re 65 to retire and rely on government funds.

They work hard all their lives, and by the time they get older, they’re too old to travel. They can’t do the things they could’ve done at a younger age.

But what if you can start working harder now to enjoy life sooner?

These people might not have been aware of other paths to take other than the traditional route. You graduate school, get a good job, pay bills, and then retire. 

This route is fine, but it doesn’t always end up well. You could still be years in debt because of student loans. And when you’re in debt, it makes it a lot harder for you to enjoy your hard-earned money.

So, what do you do?

Highest-paid coaches had to sacrifice something to get to where they’re at today. Instead of partying on the weekends, they build their network. And instead of watching TV, they read books.

This is what Dan Lok did in his early life. He did not focus on hanging out with friends, but he focused on sharpening his skills instead. And with that, he was able to retire at an early age of 27. 

Now everything he does is easier to achieve. Since he’s a master of his skills, he can always rely on them to make money.

Let’s say he loses everything he has today. He can make it all back in a short amount of time. But if he hadn’t mastered his skill set yet, he’d still struggle to make success. 

The main point is, the 1% do what’s different from most people. And when you’re a business owner, you’re going to get a lot of people discouraging you from your dreams. This is a normal part of the process. 

Do The Complete Opposite

You don’t have to follow what your circle of friends is doing.

In fact, you’ll find more success if you do the complete opposite. So don’t let peer pressure or anything else stop you from your tracks to success.

Only you know what’s right for you. Not even your parents or the people closest to you know. And it would be a sad life to listen to what everyone else does instead of what you want.

With that said, you’ll need to train yourself to keep making sacrifices. This could mean giving up all the things you want right now to have a better tomorrow.

It’s going to take a lot of discipline. If you give in to everything you want today, you’ll have to end up working harder for the things you want in the future.

For example, if you spend all your savings on your dream car now, you’ll continue to work hard longer. Why not work hard now and enjoy the reward later?

It will get easier along the way. Because once you start making sacrifices, you’ll start to see results. Then you’ll want to keep doing whatever it takes to move forward to bigger goals.

So the more you can resist now, the sooner your life will be easier. Wouldn’t you want to retire earlier too? Until then, you’ll have the freedom to do whatever you want whenever you like. But first, you have to earn it. 

Your Shortcut To Becoming One Of The Highest-Paid Coaches

Becoming the top 1% isn’t as hard as you think.

Once you find out what the highest-paid coaches are doing, you’ll want to follow their footsteps. And when you do, you’ll see how easy it can be to get closer to your goals.

The reason why most people can’t come close to being in the top 1% is that they haven’t left their old identity yet. They think working hard their whole lives is the answer to surviving. 

But that’s not all true. You can work less and make a lot more income. If you know how to leverage the right resources, you’ll have more time to make money move. 

And understanding money is a big part of making money too. You have to know how to use it to attract more. Because if you don’t, you could end up making a few costly mistakes and going broke. 

That’s why it’s so important for you to read books on how to succeed in everything. Better yet, it’s important for you to have a mentor to follow. 

If you have someone showing you all the ropes, you’ll fast-forward your success and get to where you want to be at the top 1%.

This is exactly what High-Ticket Influencer (HTI) can do for you. HTI is a coaching mentorship for those looking to scale their business to 6-7+ figures online.

In it, you’ll get Dan Lok to mentor you and to show you the road to becoming one of the highest-paid coaches.

So if you’d like for Dan to teach you all the methods he used to scale his businesses…

Click here to learn more about the High-Ticket Influencer program.

Systematic Inventive Thinking: How To Facilitate Rapid Cycles of Idea Generation and Solve Complex Problems

Systematic inventive thinking (SIT) produces an incredible outcome when used for idea generation and problem solving. Leading companies such as Tesla, Amazon and Apple use this strategy to outperform their competition on a consistent basis.

Systematic inventive thinking is changing the way companies create value. Over the last decade, this new thinking methodology has been allowing creativity to take the center stage.

You might be thinking, why not look to my customers for guidance?

Despite what experts have to say, corporate decisions should not be based solely on customer feedback. After all, customers are just looking for an incredible product or service at a great price.

A recent publication by Jacob Goldenberg at Harvard Business Review states: “Marketers will tell you that the best sources of new product ideas are customers, both current and potential. However, we’re seeing that customers lack the imagination to envision innovative products that address their emerging, or even existing needs or desires.” 

So, in order to be truly original and innovative, you’ll have to brainstorm without any restraints. The more ideas on the table, the better. This unique approach helps companies break away from their normal patterns of thinking and come up with great ideas. These ideas are then translated into actions, which then lead to results.

When these ideas are applied to the SIT Formula, amazing things happen.

This formula contains five thinking techniques that marketers have used for many years. It attends to all aspects of an organization’s innovation strategy – from acquiring skills all the way to piloting and deploying new business models.

Before we go over these techniques, let’s cover the correlation between idea generation and problem solving. 

The Correlation Between Idea Generation and Problem Solving

systematic inventive thinking

Einstein famously said, “we can’t solve problems by using the same kind of thinking we used when we created them”.

Idea generation is a procedure by which a company identifies solutions for any number of difficult challenges.

This is the time to brainstorm with no restraint – make analogies to things that have nothing to do with your product, services or processes; stretch as far as possible to reach a breakthrough idea.

Your next breakthrough idea is right around the corner. Click To Tweet

When you come up with many ideas at once, it’s impossible not to get closer to the solution you are looking for. However, it’s crucial that you follow the appropriate guidelines to ensure that you don’t waste your time generating useless information.

Whenever you are facing uncertainty, it’s essential that you have a structured thinking process to guide you. The most successful companies in the world follow three rules when brainstorming:

#1: They work inside a familiar niche.

#2: They generate solutions that are independent of any specific problem.

#3: They use the five techniques of SIT.

Out of the three rules above, Rule #3 is the most important. These techniques are embedded in the products and services you see every day. With their help, you will be able to generate ideas that directly reflect your organization’s goals.

The five techniques are:

  1. Subtraction
  2. Task Unification
  3. Multiplication
  4. Division
  5. Attribute Dependency

With these techniques, there is plenty of room for improvisation. But, as with any art or form, you need to master the basics first. In this article, we will cover how these five techniques may be applied to systematic inventive thinking.

1. Subtraction

systematic inventive thinking: Subtraction

Innovative products and services tend to, with time, lose a certain function.  This could be an element of the system that seemed essential for identifying a new value or benefit.

Here, you are not creating new ideas. Instead, you are working backward to imagine what benefits there are in using only the existing features.

Here is a five-step formula to apply subtraction to systematic inventive learning:

1. List Out Every Internal Component of Your Product or Service

If you are working with a product, list every single component, and its function. If you are working with a service, make note of every function it performs.

2. Imagine What Would Happen if You Removed One

You could either remove an entire component or remove a piece. Either way, think about what would happen if it was no longer there.

3. Visualize the Result – Even if It Seems Strange

It’s always a good idea to visualize the final result. Even if it seems far fetched, it never hurts to see your product or service from a different angle.

4. What are the Potential Benefits and Added Value?

Who would want this new product or service, and how could it help them? What are the benefits of this revised concept?

5. Is this New Idea Feasible?

Can you actually create this new product or service – why or why not? Is there any way to refine the idea to make it more adaptable?

By applying this five-step formula to your business, you will be able to innovate on demand. New ideas, solutions, and theories will overflow your meeting room.

Application of Subtraction: Amazon

A company that took advantage of subtraction to reap great rewards is Amazon.

Amazon is a household name in today’s world of online shopping, and its innovative efforts do not stop short of brick-and-mortar retail.

In 2018, Amazon unveiled one of its newest creations called Amazon Go. Using its walkout technology, Amazon removed the need for checkout lines and registers from the shopping experience.

With the help of the app, buyers can walk into the store, select the items they want off the shelf, and walk out. The app then detects that the items were purchased, and charges the appropriate Amazon account – it’s that simple.

This is a perfect example of subtraction. By eliminating much of the staff needed to operate a store, Amazon is able to keep its costs low and stay ahead of its competitors.

According to Macrotrends, Amazon’s stock price grew by 28% in 2018 –  outperforming the S&P 500 index by more than 35%.

But it doesn’t stop there. Amazon took this a step further and applied the task unification technique to systematic inventive thinking. They collected the data from their customers’ shopping habits so they could provide them with better suggestions.

The benefit? Both parties are happy, and Amazon takes off as a leader in the online marketplace. 

2. Task Unification

systematic inventive thinking: Task Unification

Task unification means to assign a new or additional task to an existing resource.

It is a collaborative process that requires contributions from your entire team. After all, in order to create new functions for a product or service, you need to have a strong understanding of it.  

There are five critical success factors to be mindful of when applying task unification to systematic inventive thinking:

Identify the Obvious Components

Look at the components that are so obvious that they are easily missed. Seek help from otherscolleagues, experts, or customersto identify these components. 

Don’t Play it Too Safe

Believe it or not, non-intuitive components are much more likely to lead to creative breakthroughs. If your ideas sound absolutely insane, you’re on the right track.

Don’t Confuse Task Aggregation with Assigning New Tasks

If your idea presents a new function for your product or service, it’s likely not task unification. Instead, look for creative ways to assign an additional task to an existing function.

Task unification takes multitasking to a whole new level. However, correct use is essential for getting results. By being aware of these common misconceptions, you will set yourself and your team up for success. 

The Power of Task Unification

Cultures that are rich in resources tend to adopt the task unification mindset. For example, Samsung took its new smart TV one step further by integrating two new features into it.

Picture this: you’ve just moved into your new home and you’re trying to decorate it. Do you want to have trendy art, family photos, or a flat-screen TV on your wall?

Samsung’s new QLED TV’s are designed to end that dilemma. The TV now serves two purposes: to provide endless entertainment and personalized decor.

Samsung applied task unification to systematic inventive thinking, in order to overcome functional fixedness.

Solving a problem doesn't always mean you must come up with something new. Click To Tweet 

But it doesn’t stop there: Samsung took this a step further by implementing this technique into nearly all of its products. They now offer a washing machine with a built-in sink, a dryer with a two-part lid, and a dishwasher with an auto-clean function.

This strategy begins with developing a strong understanding of your product or service. From there, you link different functions to provide ideal solutions based on the needs of real people.

Here, Samsung took the initiative to simplify regular processes and improve their customer’s experience. Leading companies like Samsung tend to be conscious of these opportunities, which is why they rise as industry leaders. 

3. Multiplication

systematic inventive thinking: Multiplication

Many innovative products and services tend to have components copied but changed in some way. Usually, these changes are made to remove or edit features that present themselves to be unnecessary or redundant.

Think about it – if you received feedback from your customers that a feature of your product is great, wouldn’t it make sense to invest time into making it even better?

You could take what you have, copy it, and change it in a counterintuitive way. Not only would this minimize the risks of making a bad decision; it would reduce costs, improve speed, and energize employees.

For this reason, multiplication is widely used by many businesses today. When this technique is applied to systematic inventive thinking, the results are spectacular.

Multiply your potentials with your plans and it will be equal to your purpose of existence”. – Israelmore Ayivor

A common misconception that many brands face today is that they believe they should focus on improving the weak aspects of their products or services.

The problem is, by the time they end up solving the problem, they’re already one step behind the curve.

Emerging as an industry leader is not a matter of luck – in fact, it’s far from it. Rather, it’s a scientific approach used by business owners. With a strong understanding of their brand and a deep understanding of their customers’  unmet needs, business owners know what direction to take their business in.

Multiplication in Action: Apple Inc.

Think about multiplication as a jazz piece. Halfway through the song, a musician usually takes center stage and performs a solo.

This is exactly what Apple did for the launch of the iPhone 11 Pro.

The debate between which cell phone brand has the best camera has been ongoing for many years. Each generation seems to have a new feature that helps it stand out from the existing competition.

Apple took this one step further by introducing three rear-facing cameras onto their flagship phone. This shook the entire industry and left their competition in the dust.

According to Newsroom, Apple saw its highest quarterly revenue ever after the announcement of the iPhone 11 and iPhone 11 Pro models.

You might be thinking to yourself, what if no one liked the new iPhone design? How would Apple be able to recover?

Because Apple applied multiplication to systematic inventive thinking, there was little to no risk involved. Since their last generation iPhone had an incredible camera, all they had to do was add a new twist onto an existing technology. The secret is to encourage multiple perspectives during the idea generation process. After all, there is no such thing as a bad idea.

4. Division

Division

Division works by breaking a product into its different components and then rearranging them. This is a powerful technique in systematic inventive learning because it forces you to create new configurations of your product. 

It’s likely that you don’t envision smashing your product into many pieces. After all, you worked hard to create it.

But what if you had to build it back up from the ground? What will likely happen is you will see new ways to use the product that you would have missed, had you try to think of it on your own.

There are three ways to apply the division technique:

1. Functionality

What are the specific functions of your product? How can you simplify these functions by breaking them down further?

2. Physicality

If your product takes up a lot of space, what can you adjust to make it more compact?   

3. Preservability

Is it possible to divide your product into a smaller version of itself, where each smaller unit would still preserve the characteristics of the whole product? 

Division helps to size your biggest challenges down, e so you can see innovative opportunities.

Once you have envisioned a new product, all you need to do is to identify the potential benefits and it’s target market. From there, you modify, adapt and improve the concept.

Digging Deeper with Division

The concept of division starts with something you know and turns it into something new. In the end, we are left with a sense of surprise.

It turns out that some of the most revolutionary ideas are right below our noses. All we need to do is find them.

 The people who are crazy enough to think they can change the world are the ones who do.” ― Rob Siltanen 

Take product functionality, for example. A water sports company took the controls of a speed boat and mounted it onto a water skier. Now, the water skier controls the movements of the boat without needing a separate driver.

Next, let’s look at product physicality. Think about a GoPro camera and its ability to capture video from a variety of different points. Whether it be on a selfie-stick or mounted to the side of your car, it makes for an excellent experience.

Finally, there is product preservability: picture a baking company creating cupcakes that mimic the characteristics of normal-sized cakes. This way, customers can experience their inventions without committing to purchasing an entire cake.

By applying division to systematic inventive thinking, these new ideas emerged into the market. Thanks to this, each one of these companies has found massive success.

These examples just touch the surface of how division can be applied to your products.

5. Attribute Dependency

Attribute Dependency

The final technique to apply to systematic inventive thinking is attribute dependency.

The basic principle underlying this tool is creating dependencies between variables of a product. Here, we are working with variables rather than components.

A variable is anything that has the potential to create values. For example, what are the characteristics that can change within your product?

Furthermore, variables can be internal or external. The internal variables are those that can be controlled by the manufacturer when the external variables are out of their control.

There are three ways to implement attribute dependency:

1. Passive

As the name implies, nothing has to happen for the dependency to take place. There doesn’t need to be an external element or action applied.

2. Active

An active dependency is one that requires an external factor in order for an event to take place. This can come in many different shapes and forms.

3. Automatic

These dependencies are unique because they happen automatically. The product is designed to change on its own in response to a third-party element.

How do you know which type of dependency is best to use on your product? It all comes down to which one will be the most convenient for your customers.

Additionally, you should consider if you want your customers to have the ability to create the change for themselves. Whichever you choose, you will create a fantastic experience for your target audience.

Why Attribute Dependency?

With four other simpler techniques to apply to systematic inventive thinking, why should you look to attribute dependency?

The truth is, this is one of the areas of innovation businesses overlook, and yet one with the most potential to create the next breakthrough.

Take Sun Master for example. They are a professional and reliable solar LED light manufacturer. During the day, the light captures and stores energy from the sun; at night these lights illuminate your garden.

According to Markets and Markets, the solar lighting system market is projected to reach 10.8 Billion dollars by 2024.

This is an example of an automatic dependency.

Here, the consumer doesn’t have to do anything. There are no batteries required, no chords, and no troublesome set-up. The lights are designed to turn on when the solar panels detect that the sun is setting.  

Products with an attribute dependency present themselves as being smart. They know when it’s appropriate to change in response to some other variable – whether it be internal, external or automatic. This creates a simple yet engaging experience for the customer. 

Apply SIT Today

Systematic inventive thinking relies on three key ideas.

The first idea is that you must work within a niche you are familiar with. Secondly, you must generate solutions that are independent of any problem. And, finally, you must apply the five techniques of SIT.

When used correctly, these techniques have the ability to transform the way your business generates ideas. With it, you will be able to create an endless stream of consumable products and services.

SIT is one of the many strategies taught at Dragon 100, an executive club comprised of 7 and 8- figure entrepreneurs.

If you want to learn more strategies that will help you to get where you want to go, click here to enter the Dragon 100 path.