 |
Make Money Formula: Entrepreneurs…Do You Know The One Essential Ingredient The Bankers Left Out?
Welcome back!
The “make money” formula is really very simple, yet some of the biggest banks in the world got it wrong because they left out one essential ingredient.
What is the formula and what essential element did the failed and bailed out banks leave out?
The formula is: If you want to “make” money, sell something of value at a profit.
The essential ingredient the failed bankers left out of the formula is the word “value.”
So what is “value?” Value can be anything that makes what you offer to sell worth money to a potential customer.
For example, if you consider why people pay for carpet cleaning, or real estate, or books, consider the value they get from these goods and services.
- Buyers pay carpet cleaners because they “value” clean carpets more than dirty ones.
- Buyers pay for real estate because they “value” having a home more than being homeless.
- Buyers pay for published books because they “value” the information and stories the books contain.
Just as beauty is in the eye of the beholder, value is determined by the buyer. Nothing has inherent value.
If you doubt this, consider how much you would pay for a bottle of water if you were dying of thirst in the desert. Would you pay the same amount for a bottle of water in the supermarket on your weekly shopping trip?
Value is always determined by how much anyone wants, or doesn’t want, what you are offering.
So, what can you, as an entrepreneur or business owner, learn from the bankers who went broke?
The most important lesson from the sorry spectacle of the near collapse of the banking industry, with all of the collateral damage inflicted upon the entire global economic system, comes down to value.
The bankers made gobs of money in their relentless quest for more and more profit, but they didn’t add value with each money-making step.
Instead, the bankers created a series of transactions, using a wide range of paper instruments called “derivatives.” Each transaction increased profit but didn’t add any real value for the buyer.
The most notable example from the subprime mortgage meltdown is the process of “mortgage securitization” that inflated value as it disconnected mortgages from real assets.
The essential point to learn from the bankers who went broke with their mortgage securitization of subprime mortgages is that they got only part of the formula right. They knew how to make money by creating mortgages, but they ignored the critical element of value.
This means that the most reliable method to create financial success is to follow the simple formula. If you want to “make” money, sell something of value at a profit.
By Kalinda Rose Stevenson, Ph.D.
Discover how the banks created massive profit without adding value in Why Banks Went Broke Making Money: The Money-Making Magic That Triggered The Global Recession. Go to www.nomoneylimits.com. Find out more about how greed, privilege, and lax laws and regulations caused the banking crisis and how you can change your own financial situation by discovering what the bankers know about making money. By Kalinda Rose Stevenson. Ph.D. Author of No Money Limits For Real Estate Investors: Discover The Money-Making Secret In The Real Estate Game That Transforms Your Money Struggles Into Financial Abundance, National Best Books Awards Winner in Business: Real Estate Category and Finalist in Business: Personal Finance Category.
