Entrepreneur Motivation: How to Dramatically Increase Financial Success

Oct 31, 2022

One way that entrepreneurs can get a higher return on an investment is to take on risk. Typically, there is some level of risk that is associated with entrepreneurship. It comes with the territory. As an entrepreneur, in order to get to the point where things are easier [because you have more wealth], you will most likely have to take on risk. The level of risk you take is directly proportional to either of these three things or a combination thereof:

The first is your past history of success. Are you somebody who is just known to be a winner? So, this is a factor that is related to the level of risk you might take on.

The second is your knowledge and/or intelligence. You do not have to be a scholar. You just have to be highly knowledgeable at something. There are quite a few wealthy people who did not graduate high school—and never stepped foot on a college campus. But they know their trades or industries really well. Besides, in America literacy is not particularly important if you have the ability to generate wealth. Think about it.

Number three is your self-confidence. The type and level of risk you take on is directly proportional to your self-confidence. If your self-confidence is high, it is probably because you are generally successful when it matters. Self-confidence is often derived from past experiences.

A few years ago, I took on what I would describe as a pretty extreme risk. I am saying extreme because most people probably wouldn’t take on this level of risk. This is one of the reasons entrepreneurs tend to be more successful than everyone else. But in order to pull off this feat, there would have to be a convergence of all three characteristics: so a past history of success, knowledge and/or intelligence, and self-confidence.

At the time, my business was leasing about 8,000 square feet of warehouse space and I was paying approximately $4,600 per month in rent. Soon, it would be time to renew the lease agreement. The clock was ticking and I had about three months to make a decision as to whether to renew the lease or find another space. Landlords typically want to know your plans as soon as possible so that they too can make plans. Are you staying or leaving?

When you renew a lease, the cost typically goes up by about 20%. So, that meant I would go from paying roughly $4,600 per month to $5,500 per month. At this point, I’m thinking that if anyone can afford to pay $5,500 per month in rent, they’re doing pretty well financially. And I said not only are they doing well, but they are probably generating enough revenue to just buy their own building. So, I decided to build my own warehouse from the ground up.

In my industry, the fitness industry, I was already knowledgeable of various forms of funding for exercise equipment. An equipment lease is common for new gyms. Essentially, it is a way for them to lessen the financial burden associated with buying exercise equipment; particularly during the startup process.

There are secondary financial markets in which the rates are almost always higher than a regular bank, but the payback terms are shorter. Banks typically do not have lease-to-own agreements, for example, but the secondary markets do. My industry knowledge of the secondary financial markets ultimately helped me to secure the funding needed to buy my own warehouse.

I intended to use our existing business bank for funding, but it was going to take a while because of the construction-related paperwork they required. With the lease deadline approaching, I was trying to go the faster route by explaining to the bank that I wanted an equipment loan. But there was an issue: since the structure was permanently anchored to the ground, it would require a commercial building loan which involved, unfortunately, more red tape.

But let me explain the two scenarios:

Option 1: I continue paying the landlord at the new lease rate of $5,500 per month, which actually increases 3% year over year.

Option 2: I take the 5-year lease, which was a fixed $3,650 per month.

When a business rents from a commercial landlord, they pay in perpetuity. Most businesses can never escape rent. In my scenario, the equipment lease was to terminate at the 5-year mark. And once that lease was up, I would own the asset. Predictably, I ended up paying off the warehouse, just outside of 3 years, and due to the early pay off, I was able to negotiate a bit of a discount on the remaining balance.

The main point from my story is none of this would have been achieved had I not taken on risk. The key to rapidly accelerating financial growth is to take on risk. And the type of risks you take are directly related to those three critical areas: past history of success, intelligence/knowledge, and self-confidence.

In my example, while the risk level was high, I knew I could do it because the funds were there to be able to do it. For me, the risky part was the timing. Commercial landlords have this thing called "holdover tenant" status where they can charge you 150% per month on top of your standard rent amount. So, I needed to start construction immediately so that I could pinpoint the exact month to terminate the lease with the landlord. By the way, I did end up in holdover status, but the story of I escaped that ordeal will be saved for another day.


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