Tycoon Playbook

  • Wealth secrets of the one per cent: How the super-rich became uber rich

    Source: www.financialpost.com

  • Asset Transparency in Families of Wealth & Family Business – David Berek

    Asset Transparency in Families of Wealth & Family Business – David Berek   Chicago attorney Dave Berek explores the question, “To Reveal or Not Reveal?” in his presentation, The Transparency Myth in Families of Wealth and Family Business, together with co-panelists Dr. James Weiner and Nadine Scully at the Family Firm Institute  

  • Tycoon Profiles: Tom Gores by Peter Ireland

    Tycoon Profiles: Tom Gores by Peter Ireland   Here’s a must read on how Tom Gores of Platinum Equity started with next to nothing and became one of today’s best examples of a self-made tycoon. Here are a few excerpts to whet your appetite:   Dropping in on Platinum Equity is an adventure in cognitive dissonance. It’s a tad odd in such an opulent setting to hear Tom Gores, founder and chief executive of the buyout firm, talk about getting his hands dirty running a garbage truck maker, a troubled real estate business or a distressed auto parts distributor. – It’s a long way from working in his father’s grocery stores in Flint, Mich. His family emigrated from Israel. Tom, the fifth of sixth children, hustled his way through Michigan State working as a janitor and telemarketer. After a short stint at Continental Telephone (where he met his future wife, Holly), Gores helped found a lumber-logistics software firm with his older brother Alec (currently the billionaire head of rival buyout firm the Gores Group LLC). In 1989 Tom and Holly drove to Los Angeles in a used Cadillac to run West Coast operations. Gores lost big at the blackjack tables in Las Vegas. Near the California border he stopped at a casino for one last game–and won $4,500. – Perhaps nothing typified Gores’ moxie better than his furious attempt to grab Pilot Software (now a unit of SAP) from Dun & Bradstreet . Over a frantic weekend in May 1997 Gores scrambled to put a fresh gloss on his threadbare offices as he learned that a group of Pilot executives would fly out from Boston for a meeting that Monday. “We thought, ‘Who the hell are these guys in suits from L.A.?’” recalls Philip Norment, who worked for Pilot at the time and is now a Platinum partner. “We went out to see if these guys were real.” Gores knew his cramped eight-person Encino, Calif. headquarters wouldn’t cut it; they shared the building with a doctor’s office and a gym. He quickly sublet a corner lair in a sparkling Century City office tower, rented furniture and recruited his wife and other employees’ spouses to mind phones, pour coffee and pad the thin personnel roster. According to company lore, they slapped a freshly made “Platinum Equity” sign on the door just as the d&b group entered the lobby. Gores closed the deal that August. Tom exemplifies the Tycoon Playbook approach to growth. Read the full article Ready to Play here.   To learn more about The Tycoon Playbook, click here.

  • Tycoon Playbook Review

    Tycoon Playbook Review   As a recent IRS report on America’s wealthiest proves, the surest way to becoming rich has always been and still is by building your own business. There are two basic approaches to building a business. One way is to focus on finding the home run product or service to build a single company around. The other way is to focus on accumulating many businesses over time. The first variation requires far more luck considering just how many failures there are relative to successes. The second variation is a simple numbers game based on the reality that once you have a system and team in place for acquisitions, you will have far more winners than losers over the long run.   This second path is often referred to as the PacMan strategy because you use your company to gobble up other companies. It’s the most proven path to billionaire status.   As with most things in life, the basic concept is simple while the devil is in the details. This is where the Playbook truly shines. The three month course reverse engineers the acquisitions strategy employed by tycoons and billionaires who made their fortunes through wheeling and dealing in businesses. Then it breaks down this complex topic into easy to understand and follow action steps. Equally importantly, it also shows you how to avoid the minefields. This is not a course built on dry academic theory.   The creator of the course worked for many years helping entrepreneurs and mini-tycoons to buy and sell businesses. In addition, he has also spent decades studying how they got started in the game and built their empires. As a result, the Playbook is rich in examples of actionable steps taken by tycoons to not only get going but to get it right.   What are the key rewards of the course in my opinion?   First, if you’re thinking that becoming wealthy requires an element of good luck in addition to work and perseverance, you are absolutely correct. The course reveals how you can maximize your luck if we agree that luck is a matter of being in the right place at the right time. It does so by having the second learning module reveal how insiders spot emerging opportunities well before the masses do. The eighth module teaches you how to take a calculated risk by revealing the do-able deal test for acquisition opportunities. Once you have digested these two lessons your ability to do successful acquisitions increases dramatically.   A second reward of the Playbook is in how it takes a complex subject such as acquisition finance, which intimidates most people, breaks it down into its constituent parts, and lists the many options you have available for buying a business. You need not be a mathematical genius to understand how tycoons acquire control of businesses. By the end of the financing section you will feel like an up and coming Kirk Kerkorian.   A third reward in taking […]

  • How Did Carlos Slim Make His Fortune? by Peter Ireland

    How Did Carlos Slim Make His Fortune? by Peter Ireland So How Did Carlos Slim Become one of the World’s Richest Men?   When I’m asked how tycoons make their fortunes the One Red Paperclip story often comes to mind. If you are not familiar with it it’s the one about a man who started a chain of Craig’s List barter trades with a red paperclip and ended up with a house. It took him just 10 or 12 trades to accomplish this feat. Tycoons apply the same basic principle to building wealth although the mechanism is not quite the same. Both stories are about building wealth through incremental improvements in the value of assets over time. It’s the opposite of trying to strike it rich with just one deal. Think of the differences as those between a football team that wins because it has a strong ground game consistently moving the ball down the field instead and one that relies on the occasional “Hail Mary Pass” to win.   In the paper clip story, the man committed to doing small transactions that brought about incremental improvements in his asset position in order to see how far it would take him. I doubt that he had any idea that it would ultimately lead to a house. His initial motivation was most likely to have some fun and meet new people. Similarly, tycoons commit to a long term plan for accruing wealth by wheeling and dealing in companies because they enjoy the work. It’s about the journey not the destination. However, instead of trading one company for another as with the paperclip story, they leverage the cashflow from the first to acquire the second. Then the larger combined cashflow is leveraged to acquire a third company and so forth. At some point the entire portfolio may be sold off for a huge pay day or kept for the cash that it throws off.   The Carlos Slim Growth Strategy   If we look at the Carlos Slim strategy for wealth creation it can be seen to follow this basic principle. However, Carlos used cashflow producing businesses instead of paperclips. In addition, he didn’t stake everything on building up just one company. Rather he adopted a growth strategy based on both accumulating many business over the long haul as well as diversification. To demonstrate this, let’s take a look at his history.   Let’s begin with a quick biographical recap for context. Carlos Slim was born in 1940. After entering university to major in Civil Engineering he was hired to work as a part-time faculty member teaching algebra and linear programming to undergraduate classes. After university, at the age of 25, he started his first company Inversora Bursátil. This company then made its first acquisition within a year: Jarritos del Sur. At this point he named the portfolio “Grupo Carso,” whose name is a combinationthe first letters of Carlos’s name and that of his new bride Soumaya. This was 1965.   At this point the […]

  • Revolving Door Deals by Peter Ireland

    Revolving Door Deals by Peter Ireland   Bebo’s $849M Implosion Teaches a Brutal Lesson in Business   This news story gave me a chuckle as I have a long-held fascination with revolving door deals. There are two basic kinds. The unintentional and the intentional. The Bebo one is an example of the unintentional variety with a spectacular payoff.   Also-ran social network Bebo has been bought back by one of its founders for$1 million five years after that same founder, along with his wife, sold Bebo to AOL for $850 million. Sure, the couple made out like bandits, but there’s a bigger lesson here: Buying a copycat social network is a terrible idea. (source)   In a nutshell, a revolving door deal is one in which a company is sold and then taken back when the buyer is unable to make his payments. The seller gets to keep the down payment and all the other payments received to date in addition to regaining full control of the business. I believe the term was first coined to describe Kirk Kerkorian’s various deals involving Las Vegas casinos and movie studios. When a buyer came along who needed seller financing help, Kirk would accommodate them but under some pretty onerous conditions. These were created by having a set of covenants that would create a death spiral in the event that the buyer failed to comply with even a single one.   The Death Spiral   Kirk Kerkorian the master of the revolving door deal. Let’s take a quick look at an example involving public company. I will keep this as simple as possible to get the basic concept across. If the buyer misses a single debt payment a penalty would be triggered. The penalty could be the release of a sizable block of free trading common shares to the seller. If the share price then dropped below a certain level as a result of the market being flooded with new shares, it would trigger a second penalty such as the release of more stock to the seller. If this then drove the share price down below another level, it would trigger cascade of other events which would start returning control of the company to the seller. This could be more shares, more board seats, and even the ability to replace the CEO. Think of it as a chain reaction triggered by a single incident. Kerkorian was a master at this game who sold some companies multiple times. We analyze one of them in detail in the Playbook.   Lesser tycoons use this same tactic with certain types of smaller privately-held businesses. It’s not uncommon for inexperienced buyers to run into trouble making payments and then lose the company back to the seller. Indeed some business owners see revolving door sales as a source of extra revenue. As a result, the practice is common in industries where the business is basically faceless and the customers don’t care who the owner is. Think self-serve businesses such as car washes, […]

  • Business Growth Strategies: Double Your Customer Base Overnight by Peter Ireland

    Entrepreneurs and Small Business Owners Can Use Acquisitions to Double or Triple Their Customer Base Overnight   Oftentimes it’s easier to significantly increase your customer base through the acquisition of competitors than it is with the more commonly used marketing route.  Anyone with at least a modicum of business experience appreciates just how challenging it is for an established business to grow its customer base by 10% per annum if it relies solely on marketing efforts.  On the other hand, the acquisition of a competitor can double, triple, or quadruple your customer base at deal closing.  Business Growth Strategies     What many business owners don’t realize is that it can be cheaper as well faster to go with the acquisitions growth strategy. To illustrate this, let’s take a look at cases where this was capitalized on from the recent past.  Specifically, let’s look at businesses which utilized subscriber revenue models such as cable-TV and Internet service providers.  If you owned a small system in either industry, you were faced with a choice of growth through marketing or acquisitions. Now suppose that you had set as your goal a doubling of your subscriber base in five year’s time. We will assume that this target is extrapolated from your growth rates over the last three years. An analysis of your customer acquisition costs needed to double your sales over three years may show that a marketing based strategy’s costs will exceed those of an acquisition strategy.  Morever, the acquisitions route will achieve your goal by doubling the subscriber base as soon as the deal is finalized.   Are you still not convinced that an acquisitions-base growth strategy is the way to go? Okay, let me throw in another reason to seriously consider this option: lower risk. Yes, if you know your business and industry and decide to buy-out a competitor your risk can be reduced because you are taking control of an asset that you understand and that has passed your due diligence. Imagine for a moment that you own and operate a pizza parlor and are looking for ways to expand. One day a marketing consultant calls on you to pitch a new marketing strategy which he promises will double your sales over three years–but at a substantial cost. The week after you are notified by a friend that your competitor down the street is for sale. Acquisition of this pizza joint would instantly double your revenue. You compare the prices of the two options and discover that they are only about 15% apart.   Which is the lower risk option? In most cases, the acquisition of an add-on profit center for your business. After all, you already know to successfully operate such a business and the lenders will trust you more than someone needing a loan to attempt some unproven growth strategy.   Business Growth via Acquisitions   Back in the 1990s, there was a great deal of M&A activity in the printing industry.  One large printer embarked on […]

  • Small Business vs Entrepreneurship vs Capitalism by Peter Ireland

    Small Business vs Entrepreneurship vs Capitalism   If you are trying to get a handle on The Tycoon Playbook as some still are, I think this may help.   Think of the business world as having three separate rungs. At the bottom you have the small business rung. The consensus definition of small business is that it’s primarily about having a steady pay-check for oneself with a little extra left over, hopefully, for the Golden Years. As a result, typical small business owners are concerned with playing it safe, taking as few risks as possible, and basically maintaining the status quo. Once a small business owner has reached a certain level of income their focus shifts to merely maintaining it rather than increasing it. Many small businesses can be found along the proverbial “Main Street.”   On the next rung up is entrepreneurship. Entrepreneurship is an entirely different game. It’s about marshaling resources and taking calculated risks to create something new that will hopefully reward the founders with substantial wealth. Entrepreneurship has no allegiance to the status quo. Rather it’s about starting from scratch and disrupting the marketplace. Most entrepreneurial ventures will be found in emerging industries and fast growth markets.   A few years ago I found myself in a heated exchange with a college business professor who was claiming that there is no difference between small business and entrepreneurship. I was flabbergasted by his inability to see the obvious differences.   The highest and most lucrative rung is capitalism. Capitalism is simple to grasp if you think of it this way. It’s about using capital to acquire more capital. To make the concept as simple and clear as possible, it’s about starting with a single cashflow, in most cases, and then using it to keep acquiring more cashflows until the clock runs out.   If you study how billionaires have made their fortunes over the past 200 or so years starting with the first tycoon, Commodore Cornelius Vanderbilt, you will see that wheeling and dealing in assets is the most proven route to great wealth. Most people today don’t understand this because for the past 15 years the media has been obsessed with the Internet and technology wunderkind.   This narrow focus has led the masses to conclude that the Internet is the only road to wealth creation. However, for every online success story you hear about there are hundreds of failures, and I am only counting the teams which had a shot a success. I am excluding all the one-person blogs and sites that comprise 99.9999% of the 250 million domains registered as of December 2012.   To put it bluntly, there’s just too much competition online today. All of the low-hanging fruit that could be picked by the little guy or gal was gone ten years ago. Today you need a high quality team and financial backing to go after any online opportunity still worth pursuing. Another serious problem with doing business exclusively online is the culture. No one under […]


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