by Dr. Monroe Mann, PhD, MBA, Esq, LLM
Founder & Executive Director, Break Diving, Inc.
(c) 2017 by Monroe Mann
Chapter 1. Why Finding Potential Investors Is So Difficult
Great news! You already know the investors for your next project!
It’s true. The only reason some people think finding investors is difficult is because they don’t know where to look.
Think about this: people with money—millionaires even—are around you every day. Some may not have millions, but everybody—even your friend who works at McDonald’s—has some sort of paycheck. It may be two hundred dollars or it may be two hundred thousand dollars, but almost everyone has a source of income. The question is: what do they do with that income?
Now the source (where the money comes from) is totally irrelevant, so let’s just forget about that; what matters here is where these people are putting this money and what exactly they are doing with it.
Well, they are doing only one of three things with it:
1) they are spending it;
2) they are saving it; or
3) they are investing it.
That’s it. They can’t do anything else with their money except burn it or give it away, but each of these is actually just a form of spending (on entertainment or heat) or investing (in other people’s happiness), depending on how you look at it.
So three options: spend, save, or invest. With me so far?
The question you now need to ask yourself is…. Why? Why do people put their money in one place or another? There are many different ways people can spend, save, or invest their money. People make decisions every day about where to put it and what to do with it. Why? Why? Why?
Think about it: they can spend their money on a vacation; on a child’s tuition; on food, on rent; on a coffee; at a casino; on beer; or even on reducing a debt they have. Ask yourself WHY and you will begin to understand the psychology of investors. Why do people choose to spend their money on a vacation instead of at the casino? Or vice-versa, why the casino instead of a child’s tuition? Start asking these types of questions religiously and the answers you come up with will be the beginning of your education in investor psychology. For now, just think of possible answers, and we’ll return to them at a later point.
Alternatively, people can save their money in a savings account; or save it in the form of a treasury bond; save it in their checking account; or even save it under their mattress. Why? Why do they do this? Why do they choose to put their money in a savings bond instead of buying more food, or buying more expensive food? Why do some people choose to literally keep some cash under their mattresses and yet still keep some money in a savings account?
Finally, people can invest their paycheck in the stock market; in real estate; in their own private business; and just as often, in someone else’s private business. Why? Why do some investors put most of their money into the stock market, and none in real estate? Why do some who invest in the stock market only use a stock broker, while others completely avoid a stock broker and manager their stock market portfolios themselves? Why do some avoid both the stock market and real estate completely and thrust all of their investment capital into their own business, or someone else’s business?
In case it is not completely obvious to you yet, the answer to every single one of these questions can be found in the title of this book: TRUST! Yeah, trust! (A whole lot more simple than you thought, right?)
Let’s revisit the first question I encouraged you to ask: Why do people choose to spend their money on a vacation instead of at the casino? Answer: They trust that the money spent on a vacation will have a higher return than if spent at the casino. Notice that the ‘return’ from a vacation is usually fun, memories, and a break from work; the return has nothing to do with money. This is something fund raisers (and potential investors alike) often fail to realize: a ‘return’ does not need to be of a financial nature! Knowing just this simple fact can help your fund raising efforts tremendously (and we will revisit this in depth in another chapter): money returned is not the only possible return. In fact, most of the decisions we make in life have nothing to do with money. We simply always choose the path we believe will give us the greater ‘rate of return’—whatever that return may be to us at the time. So as we proceed, let’s remember this very important key: ‘rate of return’ does not necessarily have to be financial.
Let’s now revisit the second question I asked you to consider: Why do some people choose to spend their money at the casino instead of on a child’s tuition? Well, it’s because they trust that the money spent at the casino will provide a greater return than if spent on a child’s tuition. At the time, they make a decision, trusting that they are making the right one, convinced that it is their lucky night; convinced that they will soon be able to pay for two kids’ tuition, and not just one. Instead, they usually come home with no money to pay for any kids’ tuition. But my oh my, they sure trusted their decision at the time, didn’t they? They had trust as strong as a bull. The one problem: they were wrong. They put their trust in the wrong place. The lesson here? Trust can be misplaced. Trust can be warped. Sometimes it takes a very strong argument and even stronger evidence to convince someone that he is mistakenly believing a lie. So, keep this in mind too when speaking with potential investors: their beliefs are strong, and yet they may be completely inaccurate. You are going to have to pull their ironclad trust in something else towards an ironclad trust in you and it may not be easy. But rest assured, everyone is doing something with their money, and it all comes down to trust when we try to figure out why they put it where they do.
But wait a second! If saving money for the future is such a great and ‘trustworthy’ idea, why not simply save all money earned? In fact, why do people bother even spending their money at all? The answer again goes back to trust: they trust that spending some of their money will bring back a greater return than if they keep it all in the bank. They believe the money they spend can help them survive (with the purchase of food); help them live more comfortably (with the purchase of an air conditioner); help them relax (with the purchase of some beer); etc. Bottom line, people spend money because they trust it will be provide a better return if spent than saved.
But if spending some money brings a return, wouldn’t spending all of it bring an even better return? Clearly not, because most people try to avoid that, knowing full well that living paycheck to paycheck is never fun. In fact, it can be downright frightening, stressful, and anxiety-ridden. And while spending willy-nilly might provide a short-term high, you probably also know that tomorrow may not be as financially bountiful as today, so spending everything you make is pretty foolish as well. In other words, people save a portion of their paycheck because money saved provides a cushion for the future. It allows one to breathe a little more easily knowing the future is accounted for: it allows one a financial emergency fund in the case of lost income; it allows one to pay for a child’s future education tomorrow by putting money away today; it allows one to buy something nice in the future without feeling guilty—by ‘earning it’ ahead of time.
So, let’s proceed to the next question: why do people choose to save money in a savings bond instead of buying more food, or buying more expensive food? You already know the answer: trust! They trust that they already have enough food. They trust that they don’t need more expensive food. They trust that the extra money they have in their hand would be better saved than spent. They trust that a portion of their income should always go into savings, regardless of their income, because they trust that they will probably need it for something else in the future.
Taken a step further, why do some people choose to literally keep some cash under their mattresses and yet still keep some money in a savings account? Can you guess the answer?! And you are right! TRUST! In this case, they don’t trust the bank entirely. Or they don’t trust themselves enough, so they keep some money away from their savings account. Or maybe they just trust that having some extra cold, hard, cash on hand is a smart idea. Whatever the reason, it goes back to trust.
Finally, the question near and dear to your heart: why do people invest? People invest their money because they trust that the return they will get from an investment will be better than the return provided elsewhere. Note that I did not say, “financial rate of return”. The return does not need to be financial, remember? A vacation may not provide a financial return, but it is definitely an investment—of money; of time; of other resources. The return? Fun, enjoyment, relaxation, etc. People invest their money because they think the return will in some way make them feel better. Take some time to realize that people invest their money for the very same reasons they invest in anything else in life: they think the return on their choice will bring a greater return than from any other possible choice.
So, then, why do some investors put most of their investments into the stock market, and none in real estate? Answer; trust in the stock market and their knowledge of the stock market.
Why do some who invest in the stock market only use a stock broker, while others completely avoid a stock broker and manager their stock market portfolios themselves? Answer: trust in their stock broker, and lack of trust in stockbrokers, respectively.
Why do some people avoid both the stock market and real estate completely and thrust all of their investment capital into their own business? Trust, of course! They trust that the return from an investment into their own business will be greater than an investment somewhere else!
And why do some people choose to invest in someone else’s business? Ain’t that the million dollar question?! (Yeah, pun intended, haha!) If you don’t know the answer by now, please look at the cover of this book! For those who already do know what the target answer is, let me remind you that this is unequivocally, absolutely, without a doubt, and irrevocably the only reason why people invest in someone else’s business. They TRUST that the investment in someone’s business (i.e. your business!) will reap a greater return (financial or otherwise) than they can find absolutely anywhere else. Let me repeat that: they TRUST that the investment in someone’s business (i.e. your business!) will reap a greater return (financial or otherwise) than they can find absolutely anywhere else. It doesn’t mean that they know for sure; it doesn’t mean that they are right; it doesn’t even mean that your business is going to even come close to bringing them even a modicum of love, joy, or happiness. But… they trust that it will. And therein lies the key. They trust that an investment with you will bring them some type of return: financial; psychic; social; educational; philanthropic; tax related; whatever!
In other words…
Listen up people! You’ve been waiting for this! Are you ready? ARE YOU READY?!
Someone will give you his very last dollar if he simply trusts that you will deliver to him—in both the short and long term—a more valuable return than it’s currently getting.
If you can convince your potential investors—and that means absolutely anyone with a paycheck—that money spent with you is money best spent for both the short term and the long term, then you’ve got yourself an investor. It’s as simple as that. An investment with you needs to promise a better return than the money’s current allocation. Voila. If you can prove that this is the case (and the investor indeed believes you), you will receive as much money as you need from as many sources as you decide to approach.
So, how to do it? Like this: you just need to convince a potential investor of five things and you will have the money you need for your project. You need to prove:
1) that you have a Track record;
2) that you will provide a promising Rate of Return;
3) that you provide a Unique investment opportunity;
4) that you have already in place Systems and Savvy; and finally,
5) that you have in place a solid Team.
Voila: T.R.U.S.T. You now know the five key elements you need to convince potential investors to T.R.U.S.T. you.
By the end of this book, you will know exactly how to secure each one and present each one confidently to potential investors. Where are the potential investors? Every single person you see and interact with on a daily basis. And yes, some are millionaires, and you don’t even know it yet!
Let the games begin.
Check back soon for Chapter 2! If you’re just arriving, be sure to read part 1 of this series.