By: Stefan Aarnio
Freedomway.ca
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Better than a thousand days of study is one day with a great teacher. – Japanese Proverb

When most people get started on the path to "self made wealth", many of us choose one of the following:

1) To become a real estate investor
2) Start a business with an MLM company aka Multi Level Marketing

Both of these paths are very difficult and there is no easy way to success. For myself, I chose to become a full time real estate investor and dedicated all of my resources towards success in my field. In some ways, I envy the people who start with MLM companies because MLMs are:

1) Cheap to start
2) Come with training
3) Have an "Upline" of information (aka coaches and mentors are part of the system)
4) Build a residual income by establishing a team or downline
5) Offer great and cheap personal development programs

When I look back on the resources, time, money, opportunity cost and risk that I spent to get into professional real estate investing, I am astounded at the "startup cost" of the business. In many ways, an MLM would have been safer, cheaper, and faster than becoming a pure real estate investor. Here is why,

Real Estate Investing is:

1) Expensive to start (down payments are expensive and training is expensive)
2) Mistakes are expensive
3) Risk and leverage can crush you
4) No set path for success
5) Coaches and mentors are hard to find

However, as I advance further into Real Estate Investing, I begin to see more similarities between Real Estate and MLM's than differences.

The first similarity is what I would call an information "up-line".

THE UPLINE

One of the biggest mistakes that I made when starting out in business (first music, then debt buying, then real estate) was that until fairly recently, I had absolutely no informational up line. I define an informational up-line as a coach, mentor or teacher who has more experience in the business, a higher degree of success and has accomplished what I was trying to do. Completely ignorantly, I fumbled around in the dark for far too long making costly mistakes. Appropriate coaches and mentors could have prevented 90% of my mistakes, but I was too cheap to hire one.

"The only way to know the right steps to take is to study with those already taking the right steps. Douglas Vermeeren"

MLM's are smart businesses because many of them come with an up-line of information. The up-line shows you the ropes and teaches you how to achieve success in the business. In real estate investing, I have paid some obscene fees to coaches and mentors to correct my past mistakes and take my business to the next level. What is even crazier than the fees I pay are the results. Although the fees are high, the results are always worth it. If you are in real estate investing, and don't have an "up-line" to help you on your path, I would suggest that you get one immediately. Of course, your "up-line" will have to be paid somehow, so consider paying a fee or give them equity in a deal you are doing. One of the reasons why I love real estate is that it is a blank canvas, whatever you wish to create, you can create. The possibilities are endless.

A mentor is someone who allows you to see the hope inside of yourself – Oprah Winfrey

THE DOWNLINE

In multi level marketing, there is an up-line of experienced mentors to help you in the business, and of course, you have a downline underneath you to push you to higher levels of success. In real estate investing, you must build a downline as well. The downline, in my opinion, is everyone on your team who helps you build a passive income. These people are:

1) Your contracting teams
2) Your wholesalers
3) Your bird dogs
4) Your realtors
5) Your property managers
6) Other investors who invest in you and refer business to you

I have made it my mission to adopt the Coca-Cola philosophy and "pay everyone who touches the product". Anyone who refers business to me, whether it be realtors, bird dogs or other investors, will always get paid in cash or equity because these people make me income, and mostly passive income. It's my job to be the up-line and train everyone on the team to work together, work efficiently and work the way I want them to work. I must educate them so that they can be the best team members possible and help me achieve success.

THE SUMMARY

The more I study the business of real estate investing, the more I see that real estate is the same as an MLM company. If you are not yet started in real estate, I would recommend joining an MLM for the training to learn how to run a business. More investors fail to become professional investors because of a lack of soft skills in general business. Many investors know how to do deals (real estate is very primitive), but have no idea how to run a business. The skills you can learn by joining an MLM are priceless. I chose to bi-pass this education and paid a much higher price for my skills. Looking back, having an MLM business on the side would have saved me a lot of time, money and effort. If you are in real estate today, make sure you have an up-line and build a profitable down-line - It's imperative to your success.

Thanks for reading,
Stefan Aarnio
Freedomway.ca
facebook.com/stefanaarnio
https://twitter.com/stefanaarnio
http://ca.linkedin.com/in/stefanaarnio

Get Stefan Aarnio's book "Money People Deal: The Fastest Way to Real Estate Wealth" at MoneyPeopleDeal.com!

P.S: Please share this article if you found it enjoyable!

By Stefan Aarnio
Freedomway.ca

Remember: Please share if you found this article helpful!

Photo: The iconic, Slash from Guns and Roses.

"A rock star is the intersection between who you are and who you want to become" -Slash, Guns and Roses.

Years ago between the ages of 16 and 22 I focused heavily on my dream of becoming a "rock star". I wrote songs, put a band together, promoted local rock shows, created websites, sold merchandise and focused on the dream of "rockstardom."

Looking back on the things that I loved about the concept of  becoming a "rock star" was:

1. To be recognized
2. To perform at a high level in front of an audience
3. To have my own business
4. To be in control of my own future
5. To have creative control of my art-form
6. To travel the world
7. To have passive income
8. To build a collection/portfolio of work
9. To earn a nice living
10. To be free from answering to a boss or a J.O.B.

When I look at my life today, at age 26, I have achieved all of the above and I no longer have a band.

I have a theory that we never really love music, art, dance, poetry, fine food, travelling or anything else that we are passionate about...

Instead we love the FEELINGS that we get from experiencing music, art, dance, poetry, fine food, travelling etc.

Rock music doesn't matter, what matters is the feelings we get from the music.

Although I "quit" pursuing the "rockstar" dream at age 22, I have achieved all 10 of the things I wanted in Music from Real Estate instead.

The work doesn't matter, what matters is the feelings that come from the work.

You don't need a band to be a rock star: you do, however, need a BRAND.

The concept of a rockstar really is a concept from the 1970's. Bands/musicians like Led Zepplin, The Rolling Stones, The Who, Jimi Hendrix, Jim Morrison etc. embody the glory of rockstardom.

When we translate the 1970's concept of a Rockstar into today's market of 2012, there are virtually zero universally recognized modern rock stars.

A list that I was reading for fun the other day was the "30 richest drummers in the world" when measured by net worth.

What interesting about the bands/drummers on the list was that NONE of them started after the year 2000. Most of the bands/musicians on the list are from the glory days of rock'n'roll in the 1970's and the rest are scattered throughout rock history. A select few became famous in the 1990's at best.

Many people have said throughout history that "rock is dead" and I would agree; especially when we examine a list like the one above. 

Although "rock is dead", living life as a rockstar has never been more alive.

The only difference between the rockstars of today and the rockstars of the 1970's is that the rockstars from the 70's all had bands. 

The rock stars of the new millennium have BRANDS instead of bands.

I believe that it is much more important to build a brand than a band/business because a successful brand can be attached to a business very easily ie: Gene Simmons of KISS has attached his brand to 100's, if not 1000's of products and is able to spawn dozens of businesses and licensing deals. KISS is a brand that has made more money than The Beatles and will likely continue to do well after all of the KISS members are dead.

Elvis, Marilyn Monroe, and Jimi Hendrix are all examples of excellent brands that make approximately $50 Million dollars per brand annually, even though the "rockstar" behind the brand has been dead for years.

A modern example of a "rockstar" would be Mike "The Situation" from MTV's Jersey Shore.

All of the reality TV stars on Jersey shore are devoid of talent, however, they are highly visible and have a well defined brand with broad appeal. In 2010 alone, Mike "The Situation" made $5 million dollars just off of endorsements and other deals.

The formula is simple, create a great brand, attach a business, rinse and repeat.

Up and coming musical rockstars have lost most of their power, especially rock'n'roll musicians because there is no longer any centralized distribution for music: Traditional radio is fragmented and listenership is down, Satellite radio is highly fragmented, online music is highly fragmented and no one has really figured out how to properly monetize and control the internet. Television is more fragmented than ever and channels like MTV do not feature music or music videos anymore.

Creating a rock star brand is not as easy as showing up on American Band Stand or the BBC as it once was because of all of the fragmented channels.

Modern musicians (especially rap musicians) are focusing more on building great brands and attaching satellite businesses to their back-end. Some examples I can think of immediately are:

1. Lady Gaga,
2. Jay-Z
3. Kanye West
4. Beyonce
5. 50 Cent

The brand is greater than the band.

Both music and business are trending towards brands in the modern economy.

All of this information may be great if you are in the music/entertainment industry, but what does this mean for you and your business?

All of this information means the following:

1. Brand value is more important than ever, focus on creating a visible, high quality brand at all costs. Brands can be monetized later if they are built properly.
2. Visibility is more important than ever. Find a niche, become visible and become the leading expert in the niche.
3. You don't need talent or a band to have a great brand. Consider Mike "The Situation".
4. Focus on monetizing the "back end" of your brand and not the front end. Modern musicians like Kanye West look at their music as a "commercial" for themselves and make money on the back end NOT the front.
5. Build a great brand and diversify your back end as much as possible. No one has a crystal ball and we never know what the next trend is going to be. Have a mother brand with a diverse portfolio of back-end businesses (think of Virgin, Richard Branson's brand with 400 companies under it).

Thanks for reading,
Stefan Aarnio
Freedomway.ca

P.S. Please share if you found this article helpful!

By Stefan Aarnio
Freedomway.ca

Remember: Please share this article if you find it educational!

What does Coca-Cola, the 59th company on the Fortune 500 and the multi-trillion dollar illegal drug industry have in common?

Both Coca-Cola and Illegal Drugs have:

1. Worldwide organizations
2. Highly addictive consumable product
3. Both have insane profit margins
4. Can operate in areas where governments fail (such as war torn zones and socially unstable areas of Africa)
5. Line ups of customers waiting to purchase a specific product and will accept no imitations
6. There is a concentrated "producer" in both models and a large network of "distributors". Coca-Cola makes it's own syrup and hundreds of "bottling companies" distribute and bottle the mix of water and syrup.
7. Established networks of dealers who get paid to move product

Years ago, I was watching a documentary on a war-torn country in Africa. The government had been wiped out and it was nearly impossible to re-establish a government because of civil unrest. Local warlords were constantly threatening any group that wished to take power and the entire country was in chaos.

The documentary also enlightened me as to why Coca-Cola was able to operate in an environment where there was no government or regulatory body to protect their supply chains from bandits, child armies and criminals.

One African man who worked for Coca-Cola attributed the success of the company to the fact that "everyone who touches the product gets paid". This means that everyone who carries it, sells it, distributes it, transports it or markets it gets paid. Government protection or not, this business can function ANYWHERE.

The multi-trillion dollar network of illegal drugs works in the same way that Coca-Cola does. These organizations face daunting odds and have gone to "war" with formidable foes like The United States of America. However, these cartels function and thrive because they have the same philosophy driving their business:

"Everyone who touches the product gets paid".

The farmers who farm the raw materials get paid, the people who process the ingredients get paid, the drug mules get paid, the networks of dealers get paid etc.

Coca-Cola and Illegal drugs have the exact same supply chain philosophy and can operate anywhere in the world against all odds. Both entities have a "Pay Everybody" philosophy and have created an extremely smooth, well organized, well oiled machine.

But what does this mean for you and your business?

Only 2% of business owners understand Joint Ventures, although most of the Fortune 500 companies derive significant revenues from creating joint ventures. 

A joint venture is where two companies, people or organizations align their goals for mutual benefit.

The most simple joint ventures are referral commissions: If a customer is referred to a company, the company receiving the referral will pay an ongoing commission on all business done between the new customer and the business. This is extremely lucrative for both the referral client and the receiving company. Ongoing revenue is what keeps the relationship strong and creates incentives for the referral client to continuously send business.

Understanding joint ventures is a huge component to becoming the leader in your market or industry. Since only 2% of entrepreneurs truly understand Joint Ventures, you can have an unfair advantage in your market.

In my own business, I have adopted a "Pay Everybody" policy and have had wild success with the program.

I have access to private real estate deals first before they hit the open market, I have access to Capital that I would not normally have access to, my phone rings all day with opportunities for deals and capital and I don't have time to take every call.

This is an extremely good problem to have.

Most businesses/entrepreneurs spend HUGE budgets on advertising and marketing, I spend virtually zero dollars, but I pay for results.

If someone refers me a private deal, they receive a handsome $500 "thank-you" fee. If another investor has a good deal under contract, I will generally pay $1000-$5000 to purchase the contract and take on the deal myself. I have similar programs in every aspect of my business and I don't spend any money on advertising because:

I pay for results, NOT promises.

In the past, I have been murdered on advertising. A year ago I spent $2700 on a print ad that generated ONE PHONE CALL for my business!

One pathetic inbound phone call and NO SALE. Just a $2700 lead.

I was furious, felt like I had been ripped off by the advertising company and vowed to never ever repeat this mistake. I felt like I was the victim of a ridiculous joke and I will be extremely cautious to repeat any form of print advertising.

Nowadays, I spend $0 on advertising and my phone rings off the hook because I have learned a lesson from Coca Cola and Drug dealers... I make sure everyone who touches my product is paid. I make sure everyone is paid well and happy to work with me. If someone doesn't like working with me, I let them leave and work with someone else. I surround myself with a network of outstanding peers and highly competent people who get my phone to ring off the hook.

Unfortunately, so many entrepreneurs are too short sighted or too cheap to pay commissions to keep their people happy. This is why so many companies cannot retain good talent, spend huge dollars on advertising and eventually become weak and vulnerable from attrition to their teams and advertising budgets. There are few things in business that are more expensive than employee attrition and advertising.

Learn from Coca Cola and Drug Dealers and implement the "Pay Everybody" strategy in your business. If you build a good program and stick with it then you will see wild results in 30 days.

Thanks for reading,
Stefan Aarnio
Freedomway.ca

P.S. Share this article if you found it educational!

By Stefan Aarnio
Freedomway.ca

Remember: Please share this article if you found it educational.

Speed is a virtue that has been coveted throughout the ages.

In the jungle, animals with speed would dominate the terrain over bigger slower animals. In evolution, animals that developed to be large with heavy armour always died out to animals that were lighter, faster and with sharp teeth and claws.

In warfare, throughout the ages, the faster more mobile armies were always able to wipe out  slower, heavily armoured forces. Whether we are referring to Atilla the Hun with his mounted archers vs the slow, heavily armoured  Roman Legion; or Hitler in WW2 with his Blitzkrieg forces that dominated the sedentary french and polish troops. 

Speed is a virtue in all arenas and is a key to victory.

Today in technology, companies that can embrace change and implement with great speed are the ones that survive. In the past, a company like Apple was able to innovate with products like the iPod, take the market by surprise and implement new ideas before any competitors could react. Apple would take over and dominate a market long before a competitor could think of stepping in.

Think of iPods... Small children call all music players iPods. A little girl will point to an analogue record player and say "look daddy, that's a big iPod!" - that is the power of speed.

In real estate investing, or investing in general, speed (in my opinion) is the difference between a novice, intermediate and advanced investor.

I was having dinner with a friend of mine tonight and we were talking about our goals for the upcoming year 2013. Every real estate investor, regardless of skill level, always wants to add more transactions and doors to their portfolio.

I mentioned to my friend that I was setting the goal of doing 100 transactions this year. This was way out of my friend's context and he couldn't comprehend that kind of volume or speed. He asked me how many transactions I have completed in 2012: "12-16 by the end of the year" was my estimate. He was impressed with my ambition and wanted to know how I was going to have an 800% increase in my business.

The answer is speed, some experts would say "velocity of money".

The general classifications for Real estate investors can be defined as follows:

1. Novice investors do less than 5-6 transactions per year
2. Intermediate investors do 1 transaction per month or 12+ transactions per year.
3. Advanced investors do 100+ transactions per year

The only difference between these three investors is speed. 

NOTE: There is likely little difference in the quality of transactions between skill levels. There are many astute and careful, slow, novice investors who can earn the same or better returns then an experienced advanced investor. However, the difference between the novice and advanced is that the advanced investor does more deals, executes them faster and utilizes opportunities to compound results. 

The advanced investor is a cheetah in the jungle and the novice is the turtle.

There is nothing wrong with being the turtle, however, the cheetah will be dominant in the market and will have access to the best opportunities and more capital due to visibility.

A problem I have had in my past businesses has been velocity. In the past, I gravitated towards slow "residual" type businesses.

1. One of my first businesses was a self-employed guitar practice where I traded my time for money. This was extremely slow because, although I had lots of clients and low over head, it was very difficult to compound or grow this business. The residual "cash-flow only business model" made it very hard to grow because there was never an injection of cash or credit. Every month I would take 22-25 little cheques into the bank and cash them. There was never a big cheque that could instigate growth.
2. Another business I started in my early twenties was my Debt buying business. Debt buying is a very simple concept. Debt buyers buy charged off, non performing credit cards (or other debt products) for pennies on the dollar and outsource them to collection agencies for residual income. However, this business is also a residual, cash flow business and it was very hard to grow this business without taking on large debt and long term risk as well.
3. My third business was my buy-and-hold Joint Venture real estate portfolio. This business was great because I could Joint Venture with many money partners and have growth every month, but the growth and speed was linear, and again, I was seduced by the cash flow of the business and was not looking at the speed of the business. A deal would take me 1 whole month to find, get under contract, find a JV partner, deal with the financing, deal with the legal, take over the property, fix the problems on acquisition, show the suite to tenants, lease up and then repeat. I became trapped in my own labour and the velocity of this strategy kept me small. I was a turtle.

All of these businesses are functional: However, the businesses above are slow, cannot grow on their own cash, cannot expand easily, cannot gain any market share and have a disproportionate amount of risk and liability when compared to the upside.

The debt buying business and the buy-and-hold JV's also are big and clunky because they rely on debt financing and bureaucratic approval from banks etc. to grow.

These models are the slow and heavily armoured roman legions that were destroyed by the fast moving mounted cavalry of Atilla the Hun. The Huns were fast, mobile, light, hit the battle field by surprise and cherry picked the best opportunities on the field.

My new strategy does not focus on buy and hold, instead it focuses on three FAST strategies:
 

1. Wholesaling
2. Lease options
3. Buy-fix-sell

Because my goal is to have 100 TRANSACTIONS and not hold 100 DOORS at the end of the year, I must focus on fast strategies. Speed is key and I don't want to get weighed down in a slow, long renovation or a long term buy and hold (although these are good models).

Three of the fastest Real Estate strategies (in my opinion) are wholesaling, lease options and buy-fix-sell.

However, to see the effects of choosing fast strategies, lets see the following strategies in terms of TIME so that we can compare them to the slower strategies I used to use.

1. Wholesaling has a time frame of less than 30 days, usually 7-14. It is a fast, no debt, "no buy" strategy that creates fast cash and fast transactions.
2. Lease options have a time frame of less than 30 days to fill or set up. They are fast, can have no debt, are a "no buy" strategy that creates fast cash and fast transactions.
3. Buy-fix-sell has a time frame of less than 90 days (I have completed some buy-fix-sells in 30 days, but that isn't every deal). These deals are fast, carry debt (sometimes hard money), require capital for acquisition but create more profits with slightly more work.

Every single strategy I am using can be executed within a 30 day time frame. Time is the real currency in the market, not money. Money can be manipulated and recreated after it is lost... Time is lost forever when wasted and it is the REAL limiting factor in any business.

Since I have chosen 3 fast, "light on debt and cash" strategies, I am confident that with the right team and systems, I can achieve my goal of 100 transactions and earn the rights to the title of "advanced investor".

If you are interested in working together on a deal for a share of the profits, please contact me on the freedomway.ca contact page and we will see if we have a fit.

In the meantime,

Thanks for reading,
Stefan Aarnio
Freedomway.ca

P.S. Please share this article if you found it educational.

By Stefan Aarnio
freedomway.ca

I am often amazed when I meet new investors at networking events with how lazy people can get with their money. Often a new real estate investor is someone in their 30's to 40's, tired of their job, making a steady median income. Since they have a stable job, they are able to obtain easy credit and financing from banks. Often these investors will have access to a home equity line of credit, a wide arsenal of credit cards and will have an RRSP account with 30-40k (if they're responsible) and have saved 10-20k cash and are ready to do a deal - with their OWN money.

The sad thing is, this type of new investor has been working since they were 18 to reach this meagre cash position and they are now in their mid thirties and ready to start investing.

Yesterday, I was attending a local investment club in Winnipeg and I was pleasantly surprised to see how many investors in the club were ready to STOP using their own money and START raising capital to grow their real estate business.

The truth of the matter is, in business or real estate, you will ALWAYS run out of money... ALWAYS. No matter how much cash and credit you have, it always gets 'tied up' in a deal and you eventually run out.

I began investing at the ripe young age of 22 and the great thing about beginning so young is that I had virtually no cash, no credit and no credibility. I had to learn to raise cash, manage my small amount of credit, and leverage credibility. I had to learn the skills required to play the game with no cash from day 1 because unlike the average 35 year old new investor - I HAD NO CASH, NO CREDIT AND NO CREDIBILITY. I was a punk kid who had taken $2000 worth of real estate investing seminars and had to make the dream happen.

My investing career didn't begin to take off until I learned a very simple principle for raising money. This principal has allowed me to raise money for ALL of my deals (except my first one where I put down a small downpayment of $1200 cash). Since I learned the fundamentals of raising money, I have never put down money on an acquisition on any business or piece of real estate under my control.

Most investors think that cash is king, and they are terrified of raising money for a deal. The truth is CASH IS TRASH, everyone has it, and it's actually a very worthless and cheap commodity that can be easily attracted if you understand a few key principals.

There are 3 major parts to putting a deal together and raising all the cash you will ever need. The parts major parts are:

1. The Money = The cash required to start the business or acquire the real estate
2. The People = The TEAM that will operate the business or asset
3. The Deal = The business or asset itself.

Most new investors do not understand the 3 fundamental parts of a real estate deal and run around trying to raise money the WRONG way and they burn their credibility and look like total fools to their network of potential investors.

The Rules of The Money, People, Deal game.

1. The rules are simple: he or she who can obtain 2 of the 3 pieces required for a deal will get the third. For example, if you have a DEAL + PEOPLE... the MONEY will come every time. I have never had a deal fall apart because of lack of funding.
2. If you only have control of 1 of the 3 pieces, you have NOTHING. You are worth nothing and can't make a transaction happen.
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. This is very lucrative and I recommend it every day of the week.
4. The least valuable piece in the game is THE MONEY. This is because everyone has access to it. Money earns virtually 0% on it's own, it's constantly depreciating, and it can come from anywhere for a price. Cash investors will line up for a good deal and will compete and bid if they know it's a winner.
5. The people are interchangeable and so are you as the person running the deal. You are part of the people team. Make sure you have a good team and management style so you can add value to the deal and become an irreplaceable lynchpin. Develop a brand and you will become harder and harder to replace.
6. The deal drives the whole game and is the KING of the 3 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.

So many investors run around, trying to raise money without a team or a deal. This is absolutely the wrong approach.

The correct approach for playing 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 as required to execute the deal.
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 and be extremely thorough in your plan.

Show your investors the:

1. The Best case scenario
2. The realistic case scenario
3. The worst case scenario
4. The NIGHTMARE scenario

It's very important to run your investor through these scenarios and make sure that they are ok with loosing all of their money, or recovering from a NIGHTMARE scenario.

Once you have 2 different investors interested in funding you, you have pressure to negotiate and can close very easy. I like to split all of my deals 50/50 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 them in the future, they are delighted to do more deals with me and have a cheque ready for me in minutes. I earn so much money for my repeat deal partners that they don't even think about going anywhere else.

After your first raise, begin building a track record, document every deal into a track record... then - rinse and repeat!

You can repeat this process UNLIMITED times and you will NEVER run out of capital.

What will eventually happen is, 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 am currently enjoying.

Homework: Think about the last time you attempted to raise money and ask yourself: Which of the 3 pieces did you have before raising capital? Were you prepared with an adequate business plan? Were you successful or unsuccessful? What could have gone wrong and what could have gone smoother?

Money raising is the ultimate skill of the entrepreneur and one that everyone should learn to perfect. I learned this skill early in life, and I will never be without capital again.

Stay hungry,
Stefan Aarnio
Freedomway.ca

P.S. Share this article if you found it helpful!

By: Stefan Aarnio

From time to time I visit my friend Shaun Furman's website millionairementorstoday.com and I watch him answer one or two questions from newbie investors/entrepreneurs that ask him questions about getting started in business.

On Shaun's site, one of his viewers asked "How do I start a business with no start up capital?" - A brilliant question. Many entrepreneurs start out with little or no money (that's how I started, with only $1200 dollars) and Freedomway Joint Ventures was started this year in February with literally under $100.

Fundamentally in business there are two types of businesses 1) Production based businesses and 2) Distribution based businesses.

Many entrepreneurs (including myself) make the mistake of jumping into a production based business without even knowing it and soon find themselves needing huge capital requirements to build/create/develop whatever their dream product is. After they spend the money or get a loan to "build the dream product that sells itself", they find there is no market for their creation and they die a horrible horrible death with their creditors (often their family members and friends).

I know this cycle because I have been through it many times myself, especially in the music industry.

If you are starting a business, THE BEST model you can pursue is a Distribution based business. A distribution based business is great for a beginner right to advanced entrepreneur because: 

1. They can leverage and use other people's proven products and systems, 
2. They need FAR less capital or even no capital to start 
3. The velocity of the business is higher (they can sell units on day one and earn revenue) 
4. They can leverage teams and systems faster because they are not bogged down in production, 
5. They are easier to finance, if financing is required,
6. The owner only has to focus on marketing/branding of the product and SELLING which is where ALL businesses make ALL of their money.
   

If you look at some of the biggest and best businesses in the world, Walmart for example, they are a distributor only. They white label a few products, but they are one of the world's biggest distributors of consumer goods. They do billions and billions of transactions a year (high velocity).

Richard Branson and Virgin is another prime example. Branson has over 400 companies all called "Virgin" that distribute different liscenced products and services. His company produces literally nothing, but markets everything. Branson started as a distributor of records and built a very healthy distribution channel in his early days. Today, EVERYTHING from his cell phone contracts for his mobile brand to his planes in his airline are all leased and only marketed and distributed through his mother brand. Why own? That's a ridiculous idea... Own nothing, control and sell everything.

Notice that Coca-Cola bottling companies are split up into separate regional distributors who distribute the product and DO NOT (I REPEAT DO NOT) produce the Coca-Cola formula. That is held by a separate "producer" company.

In my own business, I am making rapid changes from being an all-in-one "producer and distributor" with low velocity to creating two high velocity distributor divisions that will become my primary focus and my production line will slowly introduce products to my channels as we grow.

Below is the formula for "easy and low risk" success in business, write it down.

1) Build a distribution channel (this usually means a database, if you don't have one, you're not a business - you are a joke).
2) Sell other people's products first.
3) With your capital start funnelling in your own "production" line on a test.
4) If you find that you have success with your own product in your distribution line, then continue funnelling in your products for the highest rewards possible in your business. You will be making 3-7 profit centres guaranteed if you can pull this off and will have insane profits.
5) If your own product doesn't do well, cancel it fast, or change it fast and continue being a distributor with a steady cash-flow.

If you do this right, you literally cannot lose. You don't actually start investing capital or money until you decide to get to step 3, which many people never do and quite frankly, never have to do if they are good at step 1 and 2.

NEXT PARAGRAPH IS FOR NOVICE REAL ESTATE INVESTORS ONLY;

For all of the real estate people out there, if I could start again in real estate, I would start as a bird-dog and then a wholesaler. Those are excellent distribution businesses and I am approached weekly by novice investors with no cash who want to get started. I set them up with my bird dog package and tell them to some "bring me deals". Some of these novice investors bring me deals and get paid $500 to $5000 a lead... Some don't bring me anything and waste my time and resources. You can make a very good income as a bird dog, then you graduate to a wholesaler, after you have your distribution channel ready you can start rehabbing and distributing your "own" products.

But please, promise me you won't make the mistakes I've made in the past by jumping into production right away OR you will have 700 copies of a Alternative Rock CD sitting in your basement looking for a home.

Thanks for reading,
Stefan Aarnio
Serial Entrepreneur, Real Estate Investor, Artist
Freedomway.ca