Saturday, December 1, 2012
Friday, October 12, 2012
Financial Stages of Life
As stock markets continue to jump up and down, it’s important to remember some timeless principles through your financial stages in life. Often we need to focus on the basics no matter what stage in life you are at.
Early Accumulation (20’s and 30’s)
Independent life is usually starting at this stage. Many things can happen in your 20’s and 30’s. You may continue your education. You might start working at your first full time job. Your career is just getting under way. You might get married, set roots and even start a family. Often your goals are short term and while you should start setting money away for the future, typically your youth and inexperience cause you to start material accumulation. Chances are you have bought your first home and taken on one of your biggest financial responsibilities. Budgeting will be a key focus at this stage in life. You will have lots of expenditures and hopefully enough income to cover those expenses.- Watch your debt levels.
- Amortize debt for as short a time frame as possible.
- Always pay off high interest debt
- Get a good credit history
- Start a savings habit (dollar cost average)
- Get your RRSPs started.
- Build an emergency fund
- Consider the benefits of a Tax Free Savings Account (TFSA)
- If you have a family, make sure you have enough life insurance
Mid accumulation (40’s and 50’s)
Your financial plan should be in full swing. In many cases you will be halfway to retirement and you will need to assess your success. Make sure you know your net worth by taking your assets minus your debt. It is likely that you have built up some net worth. If not, you better start getting serious.As you progress in your accumulation phase, you will continue to reach your peak in earning income. At this stage it is not uncommon to pay off your mortgage and become debt free. While tax planning is important at any stage, you are likely to become more aware of its importance as time moves on. Your focus is really shifting from wealth accumulation to wealth management. Make sure you have some plans and goals in place.
Pre-retirement (50’s and 60’s)
The closer you get to retirement the more realistic it becomes. Your financial goals and needs have changed dramatically. Chances are, your experience in life has caused you to be more conservative and cautious when it comes to investing. You will start shifting from thinking growth and accumulation to safety and creating income from your portfolio. You will need to start planning for changes in cashflow and expenses. You should be ensuring that you enter retirement having little to no debt.Retirement
That magic date has come. It is now time to retire. You have hopefully prepared yourself already and taken a serious look at retirement income planning and replacing your lost income from employment.Pensions, government benefits, and RRIFs become the key to your financial success. You must take a hard look at lifestyle and determine what you want to do with your time and money. You’ve worked hard to get here so you want to make the best of it. Typically, you will be in the “ACTIVE” retirement stage. You will have the energy and physical ability to enjoy the time freedom. When you retire, it is likely that you have less income but also fewer expenses. Cashflow transition is really the name of the game here.Stable retirement (70’s and beyond)
You have found your patterns and routines in retirement. You have done and accomplished many things in life. And the things you have not accomplished become less important. Your discretionary expenses are likely to drop but your medical expenses will likely go up. Your friends and peer groups age too. Some of your friends and associates will start dying forcing you to think about your assets. While you needed to plan much earlier, you start thinking about the estate, wills, heirs, life insurance, and long term care. Your housing needs may change and downsizing is a common practice.As you get older, life can become more limited due to physical constraints. Financially, we are just not spending as much money and if our financial assets have lasted this long, the focus turns to estate preservation and estate maximization.
Summary
As you go through life and walk through these different stages, it is important that you plan ahead. In my opinion, you always need to be thinking at least 5 years ahead with some vision of the next 10 years. Far too often, people start planning after it is too late.©Mkimya Ent.
Wednesday, October 10, 2012
How to Become Wealthy
Nine Truths That Can Set You on the Path to Financial Freedom
#1: Change the Way You Think About Money
The general population has a love / hate relationship with wealth. They resent those who have it, but spend their entire lives attempting to get it for themselves. The reason a vast majority of people never accumulate a substantial nest egg is because they don't understand the nature of money or how it works.
Cash, like a person, is a living thing. When you wake up in the morning and go to work, you are selling a product - yourself (or more specifically, your labor). When you realize that every morning your assets wake up and have the same potential to work as you do, you unlock a powerful key in your life. Each dollar you save is like an employee. Over the course of time, the goal is to make your employees work hard, and eventually, they will make enough money to hire more workers (cash). When you have become truly successful, you no longer have to sell your own labor, but can live off of the labor of your assets.
#2: Develop an Understanding of the Power of Small Amounts
The biggest mistake most people make is that they think they have to start with an entire Napoleon-like army. They suffer from the "not enough" mentality; namely that if they aren't making $1,000 or $5,000 investments at a time, they will never become rich. What these people don't realize is that entire armies are built one soldier at a time; so too is their financial arsenal.
A friend of mine once knew a woman who worked as a dishwasher and made her purses out of used liquid detergent bottles. This woman invested and saved everything she had despite it never being more than a few dollars at a time. Now, her portfolio is worth millions upon millions of dollars, all of which was built upon small investments. I am not suggesting you become this frugal, but the lesson is still a valuable one. Do not despise the day of small beginnings!
#3: With Each Dollar You Save, You Are Buying Yourself Freedom
When you put it in these terms, you see how spending $20 here and $40 there can make a huge difference in the long run. Since money has the ability to work in your place, the more of it you employ, the faster and larger it will grow. Along with more money comes more freedom - the freedom to stay home with your kids, the freedom to retire and travel around the world, or the freedom to quit your job. If you have any source of income, it is possible for you to start building wealth today. It may only be $5 or $10 at a time, but each of those investments is a stone in the foundation of your financial freedom.#4: You Are Responsible for Where You Are in Your Life
Years ago, a friend told me she didn't want to invest in stocks because she "didn't want to wait ten years to be rich..." she would rather enjoy her money now. The folly with this school of thinking is that the odds are, you are going to be alive in ten years. The question is whether or not you will be better off when you arrive there. Where you are right now is the sum total of the decisions you have made in the past. Why not set the stage for your life in the future right now?#5: Instead of Buying the Product... Buy the Stock!
Someone once asked me why they weren't wealthy. They always felt like they were putting money aside, yet never seemed to get any further ahead. The answer is simple. I told them to stop buying the products companies sell and start buying the company itself! A survey of America's affluent (those who make over $225,000 a year or own $3,000,000 in assets) revealed that 27-30% of all the income the wealthy earned went into investments and savings. That isn't a result of being rich, that is why they are rich. When the pain of getting out of the bondage of financial slavery is greater than the pain of changing your spending habits, you will become rich. Either change, or be content to live as you are.#6: Study and Admire Success and Those Who Have Achieved It... Then Emulate It
A very wise investor once said to pick the traits you admire and dislike the most about your heroes, then do everything in your power to develop the traits you like and reject the ones you don't. Mold yourself into who you want to become. You'll find that by investing in yourself first, money will begin to flow into your life. Success and wealth beget success and wealth. You have to purchase your way into that cycle, and you do so by building your army one soldier at a time and putting your money to work for you.#7: Realize that More Money is Not the Answer
More money is not going to solve your problem. Money is a magnifying glass; it will accelerate and bring to light your true habits. If you are not capable of handling a job paying $18,000 a year, the worst possible thing that could happen to you is for you to earn six figures. It would destroy you. I have met too many people earning $100,000 a year who are living from paycheck to paycheck and don't understand why it is happening. The problem isn't the size of their checkbook, it is the way in which they were taught to use money.#8: Unless Your Parents Were Wealthy, Don't Do What They Did
The definition of insanity is doing the same thing over and over again and expecting a different result. If your parents were not living the life you want to live then don't do what they did! You must break away from the mentality of past generations if you want to have a different lifestyle than they had.
To achieve the financial freedom and success that your family may or may not have had, you have to do two things. First, make a firm commitment to get out of debt. To find out which debts should be paid off before you invest and those that are acceptable, read Pay Off Your Debt or Invest?. Second, make saving and investing the highest financial priority in your life; one technique is to pay yourself first.
Purchasing equity is vital to your financial success as an individual whether you are in need of cash income or desire long-term appreciation in stock value. Nowhere else can your money do as much for you as when you use it to invest in a business that has wonderful long-term prospects.
#9: Don't Worry
The miracle of life is that it doesn't matter so much where you are, it matters where you are going. Once you have made the choice to take control back of your life by building up your net worth, don't give a second thought to the "what ifs". Every moment that goes by, you are growing closer and closer to your ultimate goal - control and freedom.Every dollar that passes through your hands is a seed to your financial future. Rest assured, if you are diligent and responsible, financial prosperity is an inevitability. The day will come when you make your last payment on your car, your house, or whatever else it is you owe. Until then, enjoy the process.©Mkimya Ent.
Two Ways to Become Rich
In the old industrial economy, people became rich the “company-builder way,” by setting up large companies and having other people work for them. That’s how the “King of Steel” Andrew Carnegie amassed his wealth in the last quarter of the 19th century. He built the largest steel company in the world and had scores of people working in his steel mills under the close supervision of legendary managers like Bill Jones and Henry Clay Frick who didn’t hesitate to use force to make sure that workers pursued Carnegie’s dream rather than their own. The “King of the Automobile,” Henry Ford (NYSE:F) followed a similar path. He, too, created a large corporation where thousands of people worked in his T-model assembly lines under the close supervision of scores of upper, middle, and lower-level managers within the “scientific management” model invented by his engineer Frederick Taylor; and so did the “King of Oil” John Rockefeller and his Standard Oil Corporation, employing legions of workers in drilling, pumping, refining, and shipping oil.
In the new post-industrial economy, people become rich the “business-builder way,” by building business rather than companies, by helping other people work for themselves, build their own business, become rich, and make them richer in the process. That’s how Silicon Valley scientists-entrepreneurs became rich. Frederick Terman, Robert N. Noyce, Gordon E. Moore, William Hewlett, and David Packard (NYSE:HPQ) amassed their fortunes by helping other high-tech scientists-entrepreneurs amass theirs. Venture capitalists like Ned Heizer, Jim Markkula, Bill Drapper, Eugen Kleimer, Tom Perkins, and Andy Bechtolsheim became wealthy by serving as financiers and mentors to high-tech start-up entrepreneurs. Andy Bechtolsheim helped Larry Page and Sergey Brin become rich by launching Google (NASDAQ:GOOG), a venture that turned him rich, too. In a few years, he saw his $100,000 turn into over billion dollars! Boston’s Route 128 business builders followed a similar path. Georges F. Doriot and the investors of the Boston-based American Research and Development Corporation (ARDC) became rich by making rich Ken H. Olsen, founder of high-tech start-up Digital Equipment Corporation (DEC). In a few years, ARDC’s $70,000 investment in Olsen’s DEC turned into $350 million. Microsoft (NYSE:MSFT) founder Bill Gates and Apple (NASDAQ:AAPL) founder Steve Jobs amassed their own fortunes by helping scores of engineers and marketers become entrepreneurs, who in turn helped other engineers and marketers become their own entrepreneurs, work at their own pace often in their own place, sharing the risks and the rewards with him. Ray Kroc became rich by creating a franchise organization—McDonald’s (NYSE:MCD), helping franchisees build their own business; making money for themselves and for Ray Kroc in the process. Multi-level marketers Richard DeVos and Jay Van Andel became rich by sharing their business experience and expertise with others and helping them build their own business network, others who in turn helped the next layer of people to build theirs, and so on.©Mkimya Ent.
Tuesday, October 9, 2012
Oprah Winfrey’s Zero-to-Hero Story
There is absolutely no doubt about Oprah Winfrey’s fame, financial status, or impact on the world. My cynical side always associated her personal success with heavy marketing and excessive branding efforts, but whether or not I agree with every marketing tactic, it is impossible to dispute that she has achieved status as a role model to millions. She has taught any of us who were willing learn: “zero to hero” means that, regardless of where or how you begin in life, you can make a difference in the world.
From Zero…
It would be impossible to dispute the odds that were stacked against this young unknown African American child born in Mississippi in the 1950s. Although Oprah Winfrey came into people’s living rooms daily for two-and-a-half decades, she did not start out there. Her own history, and rise to world-renown influence, is quite a story.
Zero, or the starting point for Oprah Winfrey, refers to her youth and childhood as an abused young girl growing-up in the racially torn Deep South. Oprah was born into a series of circumstances which caused her to begin life with what some would categorize as indisputable disadvantages.
Despite the lack of funds that were available to her family living on their farm in Mississippi, despite the fact that Oprah was not protected from sexual abuse at the age of nine, and despite the fact that she may have been seen by some as “less than” for being born with dark skin in 1954, Oprah new that she was destined for greatness. She believed that she could have an impact on the world, and she was willing to work hard in order to do that.
The Journey…
Broadcasting and Communications took her from radio programs to small unknown television shows that seemed to be short on content structure. Oprah knew that she would need to design a format for herself that would keep the audience coming back. In the meantime, authenticity was the key.
Chicago called in the 1980s. Oprah was in her 30s, and ready for the change and challenge. Initially, she still struggled in attempting to find a format. Very quickly, however, Oprah discovered that competing with other “talk shows” that focused on exploitation rather than heart was not the way she wanted to win an audience.
In fact, one of the most powerful ways in which Oprah did choose to differentiate herself was to share some of the most painful and violating experiences that anyone could endure. She shared and recounted these experiences publicly, on an open platform. By doing this, not only did she endear herself to a loyal and growing audience, she developed a safety zone through which communication regarding previously taboo subjects could be vented and purged.
In effect, Oprah created a healing zone for millions of viewers and fans. People began to find themselves gravitating toward the Oprah show as a counseling session of sorts. Eventually, she introduced Dr. Phil as a means to provide an entirely credible and universally recognized authority who would take on the deeper problems of the masses, particularly as an outlet for those without available resources to enlist their own therapist.
Oprah, the Hero
These pivotal turning points began the monumental growth phase of Oprah’s journey forward. This growth phase saw the transition from her local Chicago-based show to a daily program with first National, and then International, reach and appeal. Oprah not only became a brand, and a household name; she became a phenomenon.
Key aspects of the Oprah Winfrey show and legacy, including the Angel Network and the Oprah Book Club, have become anchors of philanthropic movements and standard gauges for quality in literature. These, however, were not anchors that were implemented overnight. In fact, Oprah was in her mid-thirties as the show in Chicago presented itself in her life, and it took time to sprout wings. More than another decade would pass before the Angel Network came into being. Like Rome, after all, the Oprah Winfrey Empire was not built in a day. Neither were her school buildings in Africa.
Oprah has said repeatedly over the past twenty-five years that there are many key things to which she attributes her success. Of course, she has been willing to work hard. She builds teams of people who share her vision and goals, and these people understand how to implement these goals effectively. Also, she carefully monitors all of the finances and financial decisions related to each portion of her enterprises
Lessons We Can Learn From Oprah’s Journey
“I don’t think of myself as a poor deprived ghetto girl who made good. I think of myself as somebody who from an early age knew I was responsible for myself, and I had to make good.”
Among the many lessons to be gleaned from Oprah Winfrey’s profound success story, one relates to the prophetic vision of men like Martin Luther King, Jr.: the power of belief can subsequently create manifestations of greatness.
Oprah Winfrey, in her very heart and soul, knew the level to which she had the capacity to contribute to society. She saw her task positively, as an obligation as much as a possibility.
Oprah Winfrey, in her very heart and soul, knew the level to which she had the capacity to contribute to society. She saw her task positively, as an obligation as much as a possibility.
From among all of the notable accomplishments and accolades to date, what is consistent and over-arching is her effort to uplift people’s spirit. In the midst of the abundance of low-class reality programs that blatantly exploit negative and crass attention-seeking behavior, Oprah has created an entire network that intends to showcase people and events that can uplift and educate.
Whatever you think of Oprah, she has earned her way, step-by-step, and she continues to do things her way. If each of us can be as committed to a personal mission as she is, I believe our life will be well spent.
Live your dreams
©Mkimya Ent.
Wednesday, October 3, 2012
HOW CHINA IS INFLUENCING AFRICA’S DEVELOPMENT
Over the last 20 years, economic and political power has been shifting towards
emerging economies. A number of developing countries have become centres of strong
growth, raising their shares of global income significantly, which has made them major
players in regional and global affairs. Furthermore, flows of trade, aid and investment
between emerging and developing countries have all intensified.
The Perspectives on Global Development 2010 presents the evidence which documents
these changes, what we call ‘Shifting Wealth’. As the world emerges from the crisis, the
report clarifies this new global reality and what it means for development. Clearly, it implies
that development strategies need to be rethought in the new international environment. The
PGD 2010 suggests ways in which developing countries can best take advantage of the new
economic landscape and supports calls for global governance to be reformed, making it
more inclusive.
The Perspectives on Global Development has been guided by and contributed to by
eminent scholars from developing and emerging countries, our Non-Residential Fellows. In
this paper, Dr. Martyn Davies, from the University of Pretoria, discusses how the global
financial crisis is accelerating China’s investment in Africa, a region that is becoming more
important to Chinese firms that are beginning to venture out into the global economy. In
particular, he poses three important questions: What contribution will China have on
industrialization efforts in Africa? Does China’s concessional finance model offer a new
mode of developmental finance for Africa’s extractive industries? And will China’s
investment in infrastructure on the continent assist regional integration of African
economies? Combined, these three questions provide an overview of the impact China will
have on the long term developmental prospects of Africa.
©Mkimya Ent.
emerging economies. A number of developing countries have become centres of strong
growth, raising their shares of global income significantly, which has made them major
players in regional and global affairs. Furthermore, flows of trade, aid and investment
between emerging and developing countries have all intensified.
The Perspectives on Global Development 2010 presents the evidence which documents
these changes, what we call ‘Shifting Wealth’. As the world emerges from the crisis, the
report clarifies this new global reality and what it means for development. Clearly, it implies
that development strategies need to be rethought in the new international environment. The
PGD 2010 suggests ways in which developing countries can best take advantage of the new
economic landscape and supports calls for global governance to be reformed, making it
more inclusive.
The Perspectives on Global Development has been guided by and contributed to by
eminent scholars from developing and emerging countries, our Non-Residential Fellows. In
this paper, Dr. Martyn Davies, from the University of Pretoria, discusses how the global
financial crisis is accelerating China’s investment in Africa, a region that is becoming more
important to Chinese firms that are beginning to venture out into the global economy. In
particular, he poses three important questions: What contribution will China have on
industrialization efforts in Africa? Does China’s concessional finance model offer a new
mode of developmental finance for Africa’s extractive industries? And will China’s
investment in infrastructure on the continent assist regional integration of African
economies? Combined, these three questions provide an overview of the impact China will
have on the long term developmental prospects of Africa.
©Mkimya Ent.
What's The Long Term Vision For China's Increased Investment In Africa?
While anyone believing that China’s vision for investment in Africa is motivated solely by altruism as pure as the driven snow would be guilty of contemptible naivete, the notion that it’s a sinister, nakedly imperialistic drive purely for control of resources is equally misguided.
A good read on this topic is Deborah Brautigam’s The Dragon’s Gift: The Real Story of China in Africa. What she argues in essence is that China is replicating something that really worked to kick-start China’s own development in the 70s and 80s, with Japan playing the role in China that China now hopes to play in much of Africa.
In China, Japan did a great number of resource-for-infrastructure deals, where it built mines, roads, ore processing facilities, rail lines, shipping ports, and much more and took in exchange the mineral wealth that that infrastructure produced and helped to transport. China at the time simply couldn’t have paid for the infrastructure, and therefore had no real way to turn its resources — coal, copper, iron ore, even back then oil —into infrastructure or the money to pay for it. Aside from the infrastructure, which Japan simply transferred to China once the in-kind payment in resources had been made, China also got a whole lot of know-how. Technology transfer was always a part of these agreements.
Yes, China is also playing a geostrategic game to win the support of African (and Latin American) states, which it has, for a long time, courted as a check against perceived American and (once upon a time) Soviet hegemony. It plays checkbook diplomacy against the government in Taipei to try to win away those few remaining states that acknowledge Taiwan rather than mainland China as “China.” And it has certainly gotten in bed with rulers who most of the rest of the world rightly regards as kleptocrats and tyrants — Basheer, Mugabe, and more. And I think there’s much to the argument that all this largess is enabling the kind of corruption and kleptocracy that still plagues the continent.
But Brautigam points out that Chinese aid and investment in Africa is actually rather evenly spread among countries in Africa that don’t have Zambia’s copper or Angola’s oil. She details investment and aid in a large number of countries that have no obvious mineral or resource wealth that China would want to export. Chalk this up to China’s efforts to gain “soft power,” however clumsy and ham-fisted many of those efforts have been. (They do seem to build a lot of stadiums, which by my lights shouldn’t necessarily be a priority in countries where 90 percent of the people are living on less than a dollar a day!)
There’s a misconception that all Chinese investment in Africa is driven by state-owned enterprises or the Chinese government itself. That isn’t actually the case. China’s overall strategy in Africa, and its actions on that continent on the ground, are not by any means all centrally directed. Private companies, state-owned enterprises, and individual entrepreneurs have their own agendas, sometimes in line with and sometimes at odds with what Beijing is trying to accomplish.
Actually, it’s often just a bunch of scrappy, entrepreneurial types typically from southern Chinese provinces like Zhejiang, Fujian, and Guangzhou who set out for Africa initially as small traders, but realize that there are other opportunities where their skills and capacity for hard work can turn into profits. I’ll remember what I can of a similar story told by Lindsey Hilsum inGranta back in 2005 in their Africa issue, where the author argues that the scrappy entrepreneurial guys from Fujian, Anhui, Zhejiang and what have you have done more for Africa than Bob Geldof, Tony Blair, and Bono put together.
A bunch of guys from the same hometown might notice, for instance, that in the particular sub-Saharan African country where they’ve come as workers, the capital is swarming with European and American NGO workers and UN types who come in for meetings (on AIDS, or malaria, or agricultural or water projects, or what have you) and they’re all being gouged by the one and only decent hotel in town. “Aha!” think the scrappy southern Chinese guys. “What if we built a cheap-and-chipper three-star type hotel at a third the room rate but with all the amenities? We’d be rich!” And so they build the thing. Then they need to improve the road, and ensure a steady power supply for the air conditioners, and make sure there’s Internet access and decent phone lines, and that the mobile network covers their place, and that the plumbing works. They mobilize their networks of contacts — road construction teams, guys who sell diesel generators, or better yet the people they know who are building the new power plant, their friends at Huawei or ZTE to get the telecoms situation in shape. And before you know it, they’ve been responsible for catalyzing a fair bit of infrastructure with very tangible benefits to all living in the vicinity.
There’s another book that argues Brautigam’s position perhaps even more forcefully. It’s called Dead Aid: Why Aid is Not Working and How there is a Better Way for Africa by Dambisa Moyo (a Zambian by birth), and though it’s focused mainly, as the title suggests, at the problems of aid, it also extols the virtues of the Chinese approach.
©Mkimya Ent.
The World's Richest Restaurateur Has A Secret: It's Not About The Food
Tilman Fertitta has made a fortune buying up and revamping distressed restaurant and entertainment brands. Photo by Tim Pannel.
Tilman Fertitta is barely past the first of his many morning cups of coffee and the first ten minutes of our meeting when he decides, as is his wont, to take control. As soon as I break out my tape recorder, he picks it up and places it on top of a paper cup, within wrist-snapping distance, turning it off and on during our discussion as he deems fit. Having noticed poor lighting on another floor, he dispatches a passing employee to fix it. When I ask the 55-year-old to tell me about how he got started, he admonishes me in his thick Texas twang: “I’ve overread that story. I just hate to go that far back.” So we don’t, for now, because as Fertitta later tells me, laughing, “I do whatever the f–k I want.”
Most of the time Fertitta, the 100% owner of Landry’s, wants to gobble up hospitality businesses: specifically, poorly managed, out-of-date and distressed restaurants, hotels, casinos and boardwalks that he can buy on the cheap, often right out of bankruptcy court. Fertitta then cleans house. He fires top executives, closes failing locations, revamps existing ones and moves management to Landry’s headquarters in Houston, where he can keep an eye on everyone. “When we buy somebody, we cut the head off,” he says. “We keep the operators who are looking–I hate to use this term–they’re looking for a leader. We lead very well. And we immediately spend money on them and make them better. Everybody wants to be led.
“Except for me,” he adds. “I want to lead.”
We’re having coffee at Michael Patrick’s Brasserie, a 24-hour restaurant (named after his two eldest sons) housed inside the Golden Nugget Atlantic City, one of the latest turnarounds he’s leading. Throughout the weekend Fertitta, who is bunking on his 164-foot yacht, the appropriately named Boardwalk, will oversee the property’s grand reopening, featuring a value-oriented talent roster, including Whoopi Goldberg, the Cake Boss and the Real Housewives of New Jersey. It was a typical Fertitta deal: He bought the waterfront casino and hotel from bankrupt Trump Entertainment Resorts for $38 million in February 2011, less than one-tenth a recent offer and $282 million less than what Trump paid in 1985.
As gambling options pop up around it, the Atlantic City market remains troubled. But bettors would be foolish to wager against Fertitta, who knows how to get leisure dollars out of consumer pockets. Fertitta is the richest restaurateur in the world and its most active dealmaker. Using Landry’s as his vehicle, he has rolled up five public companies and countless smaller deals, and floated six larger equity offerings. His biggest deal was taking Landry’s private in October 2010 for $1.4 billion, including $700 million in debt. He now lords over a $2.5 billion (sales) company that encompasses 421 outlets–all but 10 are stand-alone restaurants–and 56 brands, with a heavy dose of tourist-driven sit-down spots like Chart House and Bubba Gump Shrimp.
Mediocre food, it turns out, pays. FORBES estimates that Fertitta, who also owns a Rolls-Royceand Bentley dealership, is worth $1.5 billion, and his fortune is growing as he continues to expand. “He is like a private equity investor, but he does it with his own money,” says Rich Handler, CEO of the investment bank Jefferies, who helped refinance Landry’s debt in 2007 and has become Fertitta’s close friend. “He took Landry’s private because the public markets weren’t going to allow him to invest in the properties as he saw fit. Now he has operated his way to exceptional cash flow that he continuously invests to improve and expand his properties.” In January Fertitta completed his first hostile takeover, buying 90-plus-location McCormick & Schmick’s for $131.6 million and quickly closing locations that were losing money. “I had never done a hostile before. I wanted to see what it was like,” he laughs. “It wasn’t painful for me. Was painful for them.”
While his blustery demeanor masks it, hospitality is in his blood. His grandfather Vic Fertitta ran Galveston’s legendary Balinese Room, a gambling house that in the 1940s hosted stars like Frank Sinatra, the Marx Brothers and Bob Hope. Fertitta’s father, also Vic, later owned a seafood restaurant in Galveston, where Fertitta peeled shrimp after school. That family history is still visible across the Landry’s empire. One steak house brand, Vic & Anthony’s, is named after Fertitta’s father and uncle. Cousins Lorenzo and Frank Fertitta operate Ultimate Fighting Championship and Station Casinos in Las Vegas.
But it was his youth spent on the Texas coast that perhaps had the biggest impact on Fertitta. As a teen he often worked as a lifeguard at a Galveston hotel, where he says he learned firsthand that people always flock to coasts. Today he owns and operates the Pleasure Pier where that hotel once sat. Almost half of his properties are in coastal cities; 80% of those are right on the water. Of his restaurants, 196 primarily serve seafood, under brands like Fish Tales and the Oceanaire, as well as Chart House and Bubba Gump Shrimp. “You can put the greatest seafood restaurant next to an average steak house in an urban area, and that steak house will do more business than the seafood place,” he says. “If you go to the water, you can put an average seafood place next to the greatest steak house, and people are going to eat seafood.”
Fertitta took his first big gamble at 23. Capitalizing on the vast wealth of the Texas oil boom he obtained a loan and built his first hotel, the 160-room Key Largo on the water in Galveston. He entered the restaurant business in 1980 when he joined up as a real estate specialist with Landry’s Seafood restaurant. Six years later he sold Key Largo and used that cash to acquire a majority interest in Landry’s and another restaurant, Willie G’s Steakhouse & Seafood. In 1988 he bought a hurricane-ravaged restaurant named Jimmie Walker’s on the boardwalk in Kemah, Tex., 20 miles from Houston. “It was a huge risk,” says Jim Gossen, an early partner.
Fertitta converted Jimmie Walker’s into a Landry’s Seafood, and it became the most popular restaurant on the boardwalk. He eventually bought up every restaurant on the 40-acre Kemah boardwalk and transformed it into an entertainment complex with a wooden roller coaster, a Ferris wheel, hotel, stores and plenty of Landry’s-owned restaurants. One Houston Press reporter would later pejoratively call Kemah “the Land of Landry’s,” for having turned what was once a quiet shrimping town into a glitzy, full-blown theme park.
Landry’s went public in 1993 and then went on a buying binge: Joe’s Crab Shack in 1994, Crab House in 1996, Rainforest Cafe in 2000, Chart House and Saltgrass Steakhouse in 2002. Fertitta was famously patient in waiting for the privilege to pay bottom dollar. He bid for casual restaurant chain Claim Jumper in 2005 but lost out to a group of private investors who paid $220 million for its 20 restaurants. Five years later he bought the then 38-restaurant chain out of bankruptcy for $48 million. He offered $125 million for Rainforest Cafe in 2000, but a large shareholder rejected the offer; the stock plunged, and Fertitta picked it up for $75 million seven months later. In his 2010 book, It’s a Jungle in There (Sterling Publishing, 2010), Rainforest Cafe founder Steven Schussler termed Fertitta “a brash, arrogant, bargain-basement, bottom-feeding acquisition nemesis.” And those are some of the tamer words that have been used to describe him: ruthless and, yes, controlling, among them. Even Fertitta admits he is a bit obsessive, involved in all aspects of his business from negotiating deals to approving fabric swatches and working with chefs to perfect dishes.
Above all, Fertitta preaches cost control. He’s boosted restaurant-level operating cash flow at every chain he’s recently acquired: Chart House’s margin has jumped from 15.5% to 23.3%, Claim Jumper’s is up 4.9% since being bought in December 2010. Combined Ebitda of his last ten acquisitions (not including the recently opened Golden Nugget Atlantic City) is approximately $350 million, up from $200 million, as margins improve by an average of 6.3%.
This discipline proved especially useful during the last recession. “We were getting leaner and leaner before the downturn happened,” says Rick Liem, Landry’s CFO for the past ten years. At the time the company reviewed more than 250 items looking for cost savings. Where there were hardwood tables, tablecloths disappeared. In restaurants where the carpets were shampooed every two weeks, the schedule changed to every three weeks. Lemon wedges disappeared from plates that didn’t need them, and in restaurants where fries were apportioned liberally, meaning more than 8 ounces, the piles came down to 7. The line items added up to millions in savings.
Rainforest Cafe was a textbook example: Efficiency-minded Fertitta was quick to make changes to the concept, altering signature dishes and even removing what had previously been a hallmark of the restaurants–live birds. The chain’s founder, Schussler, had insisted that the birds not be behind glass walls but in the open, to be used as conversation-starters about recycling and conservation. But between bird feed, care and the ceiling vacuum systems required to keep bird dander off the food, the birds were costing each unit as much as $150,000 a year. Fertitta ditched the birds. Whenever he saw Schussler, Fertitta was always quick to mention what a steal he had made on the Rainforest concept, which Schussler describes as “rubbing salt in the wound.”
Yet when Schussler came up with two new “eatertainment” concepts, Yak & Yeti and T-Rex Cafe (he describes the latter as “the most oversensory place on earth”), there was only one partner he could find to bankroll the $100 million price tag of the new projects–Fertitta. “Who else would let me put an animatronic dinosaur on top of a live shark tank in the middle of a restaurant?” Schussler asks.
So what’s next? Fertitta says the company is busy “digesting” all of its recent acquisitions and claims to be done buying up 40-unit restaurant chains. “As the economy improves, there aren’t as many opportunities,” he moans. Any future moves will be on a grander scale. So now he is closing on his latest acquisition, a casino in Biloxi, Miss. that he plans to reopen as his fourth Golden Nugget Casino.
One thing Fertitta won’t do: dump any of his dozens of brands. In all his years in the business he has sold only one: Joe’s Crab Shack for $192 million in 2006. “I buy things that are good properties that I’m going to have forever,” he says. “I just don’t have any intention to sell anything. I believe you acquire good assets and you keep them and operate them. Twenty years from now,” Fertitta insists, looking across the lobby of the Golden Nugget Atlantic City, “I’ll still be here.”©Mkimya Ent.
Donald Trump Has The Midas Touch [Exclusive Interview]
I had the pleasure of catching up with real estate icon and billionaire, Donald Trump, who is the Chairman and President of The Trump Organization. Out of almost anyone, he represents what it means to have a personal brand. From his role as star and co-producer of the NBC hit series The Apprentice and The Celebrity Apprentice to his award winning golf courses and skyscrapers, the name Trump can be heard and seen across the world. Trump has authored over ten bestsellers and his first book, The Art of the Deal, is considered a business classic. His latest book, that he co-authored with Robert Kiyosaki, is called Midas Touch: Why Some Entrepreneurs Get Rich-And Why Most Don’t. You can find it in bookstores tomorrow and look for my interview with Robert on Forbes tomorrow. In my interview with Trump, he talks about what it takes to be an entrepreneur, explains why most entrepreneurs fail, gives some career advice tips and life lessons, and more!
What is “The Midas Touch” and why should entrepreneurs care about it right now?
It’s really about how to make money. By making money you’re also making a good life for yourself and I’ve seen so many things that Robert (Kiyosaki) has too. Robert has been a great testament to it but we see so many moves that are so wrong. It’s a complex world but we’ve tried to simplify it as much as possible, where people have a chance to make real wealth and therefore a better life for themselves.
Do you believe that entrepreneurs are born or made?
It’s a combination of both. To a certain extent you can’t take the born out of it because you’re born with a certain level of intelligence but you can also learn a lot through other people. You can learn a lot from other people’s successes, and mistakes, and I really think that there is a combination – you definitely need a combination of both. Now if you’re born with “The Midas Touch,” you don’t have to read anybody’s book because you just have it. If you are born with some talents, which is in the case of most people where they have some ability and some talent, a book like this is a necessity.
Robert Kiyosaki (co-author of “Midas Touch”) said that you’re a born entrepreneur and he was a made entrepreneur.
Robert’s told me that too and maybe he’s giving me too much credit! Robert is an extremely smart guy who really has proven to have “The Midas Touch” in what he does. You know “Rich Dad, Poor Dad” was one of the biggest selling books of all time and so was “The Art of the Deal.” So, we got together on doing this book and it’s sort of an interesting combination.
Can you name some of the biggest reasons why most entrepreneurs fail?
They tend to give up too easily. I’ve seen people that are extremely brilliant and they don’t have the staying power. They don’t have that never give up quality. I’ve always said that other than bad ideas, which is a reason for failure, the ability to never ever quit or give up is something that is very, very important for success as an entrepreneur.
Was there a time in your life when you had a business idea that didn’t work out? Do you have a story to share?
I could take the greatest deal-makers of all time and they’ve always have something that didn’t quite work out. You never want to put yourself in the position where something not working out is bigger than what you are and therefore takes you down. It’s got to be in smaller chunks. In all cases, I want to learn something from things that didn’t quite work out and learn, so that it doesn’t happen again or so that in the future, you make great decisions. You don’t want to make the same mistake twice and you have to learn that early on in your life.
Can “The Midas Touch,” help job-seekers right now who might be unemployed for six months or more?
Yes, “The Midas Touch” is about life more than anything else and it will absolutely help job seekers and we had that very much in mind when we wrote it, Dan.
What are a few of your tips for job seekers right now?
As someone who has established a global brand, what recommendations do you have for others who want to do the same?
I had the fortune of buying great locations. Then I had the fortune early on in my life to name the buildings after myself and I had a good name – because you know the name “Trump” is sort of a good name; it’s the winning card, there are a lot of good things that come with that name. A lot of people have a name that doesn’t work. When you can create a brand not around your name, you can create a brand about a name that you make up. You just come up with a name – lion or whatever. There are lots of good names you can come up with. You’ve got to show quality, imagination, and a lot of different attributes in order to create a brand and creating a brand doesn’t happen overnight – it takes a long period of time.
Donald Trump and Robert Kiyosaki's "Midas Touch"
When you go through the process of thinking about putting your name on something, whether it is an ice skating rink or a stage or another building, what do you look for?
I only would put my name on something that’s really good and really quality and I look to only do quality names. I’ve done deals without putting my name on them, and I still do. For the most part, I don’t like doing that – I enjoy doing the whole “DONALD TRUMP” thing. The only way I’ll put my name on something is if I think it’s really at the highest level. That doesn’t mean that you can’t make money if it’s not at the highest level – not everybody’s going to do things at the highest level. When I put my name on something, I only want it to be at the highest level.
What lessons did you teach your children when they were growing up that led to their own personal and professional success?
When you’re looking to hire someone for the Trump organization, what qualities are you looking for? If you had twenty résumés, which are the ones that are going to stand out?
I look for is somebody that has been at another job for a long period of time. I don’t like people that hop around for six months – every six months they are in a new job. That is something I look for a lot. If I see somebody that has had seven jobs in two years, I’m not interested because I know they’ll probably be leaving me pretty soon.
Dan Schawbel, recognized as a “personal branding guru” by The New York Times, is the Managing Partner of Millennial Branding, LLC, a full-servicepersonal branding agency. Dan is the author of Me 2.0: 4 Steps to Building Your Future, the founder of the Personal Branding Blog, and publisher ofPersonal Branding Magazine. He has worked with companies such asGoogle, Time Warner, Symantec, IBM, EMC, and CitiGroup.
©Mkimya Ent.
Robert Kiyosaki Says Entrepreneurship Will Bring Back Jobs
After interviewing Donald Trump yesterday, I spoke with his co-author, Robert Kiyosaki today. There new book is called Midas Touch: Why Some Entrepreneurs Get Rich-And Why Most Don’t and it’s available in bookstores everywhere! Robert is best known as the bestselling author of Rich Dad Poor Dad. Kiyosaki has challenged and changed the way tens of millions of people around the world think about money. He is an entrepreneur, educator and investor who believes the world needs more entrepreneurs. With perspectives on money and investing that often contradict conventional wisdom, Robert has earned a reputation for straight talk, irreverence and courage. I asked Robert some of the same questions as I did Trump to get the duel perspectives on entrepreneurship in the new economy.
What is “The Midas touch” and why should entrepreneurs care about it right now?
Well entrepreneurship is, I would say, the number one subject, because we talk about unemployment and every entrepreneur creates at least five jobs – bookkeeper, accountant, attorney, receptionist, etc. That’s how you really get away – that’s how we solve the unemployment problem is not by creating phony jobs, it’s by actually having entrepreneurs create jobs. That’s why it’s important today.
Do you believe that entrepreneurs are born or made? Can you explain?
I actually think that Donald was born an entrepreneur and I had to become an entrepreneur. I really had to study entrepreneurship – I became a student of it and then progressed; so it took me a little longer. Donald apparently has a lot more self-confidence than I do – that was a big factor. Plus, he went to a business school, which I didn’t – I went to a military school. A lot of things I had to learn it, which somewhat makes me a better teacher of it, not better than Donald but I can teach it.
What were a few of the things you learned in military school that help you build your business today?
In military school, on day one you must memorize the mission of the Merchant Marine Academy. I don’t remember it anymore, but the mission was everything. Teamwork was second and leadership was third. They were constantly training you to be a team player that becomes the leader and in most businesses, mission is just something they put on the wall and then teamwork is “who can I stab on the back to get to the top of the ladder.” I was in corporate America for only four years and that was enough – I couldn’t stand it. Military school was great and especially great for leadership and then I spent two years in Vietnam. If you can ask a young man to give his life for his country, you can lead people.
Can you name some of the biggest reasons why most entrepreneurs fail?
In “The Midas Touch” I cover the five points – number one is you must have strength of character, which is the thumb. The index finger is your focus – can you stay focused on a target? The middle finger is what you stand for – your brand. Next is the ring, which is your relationships. Then the little things that count and the things that you do. For example, Domino’s Pizza – pizza in thirty minutes or less and Wal-Mart is absolutely the lowest prices and they build the whole company around that. Most people don’t have any defining process – they’re not good at anything. Instead of building a company around low prices, they have sales, but that doesn’t really help the process for them. I would say the number one skill, and Donald will say this, is pressure – that’s the number one problem.
Can you handle pressure? Most people cannot handle it. It’s awesome. Number two is they lack focus – they cannot stay on track. And three, they don’t have a distinguishing brand. The Trump brand and the Rich Dad brand are worth more than the companies today. Then your relationships – you’ve got to have people skills – can you raise capital? Most people cannot raise capital. They don’t have people skills – they cannot lead people. And then the fifth one again is that they don’t have anything that really defines them – anything that is really unique that only they can do. I would say raising capital is one of the weakest things for most entrepreneurs.
Was there a time in your life when you had a business idea that didn’t work out? Do you have a story to share?
Well just recently we were looking at going into retailing because I was looking at how much retail space was coming up. Shopping centers were empty and I thought this might be a good time to go into retailing. We worked on it for about six months and it was a good idea but a better idea came along and we said okay we will go with the better idea. So we stopped. So many people have come up to me and said I have an idea and well I said “well good you better have at least ten thousand more of them” because in the start up phase you need to have idea after idea after idea. Most people can come up with one idea but that’s all you got. They lack creativity.
What would make you want to invest in one person over the next? What are some of the types of ideas you would invest in?
I don’t invest in ideas because ideas are a dime a dozen. I could steal the idea pretty quickly. There is a four-prong approach – number one I look at the project. Project is first, and then the partners. Who are the partners? Who else is going to be a part of this plan? Three – what is the financial structure? How much debt and how much equity? What’s my ROI? Four – who is going to manage it? Most entrepreneurs can’t answer those questions. All they have is this idea.
Just recently I bought five golf courses and a major resort here in Arizona. The guy walked up to me and said I want you to be my partner in this. So I said “okay, okay what’s the deal?” He said it was a major golf resort in Arizona with five golf courses in a prime location. It took less than ten minutes and that was it. He answered all the questions. The problem is most people don’t build the business; they build themselves a job. They’re self-employed and that’s the problem. Businesses by definition must have integrity. Integrity means it just holds its shape and it can operate without you. If the business needs you, it doesn’t work. If Donald shut Trump down today, it would still work. If I shut down Rich Dad today, it would still work. If I am a dentist and I stop working, then money stops too.
As someone who has established a global brand, what recommendations do you have for other people who are looking to do the same?
I always say to become a student. If you want to be an entrepreneur, you’ve got to become a student immediately. Most people lack the vital skills it takes to be an entrepreneur. You can never stop learning – my wife and I just came back from a week-long seminar and because we’re always studying. The people who fail are the people who don’t want to study more – they think that all the answers are in their head. One of the benefits I have is that I’m always in seminars, which is how I met Donald. It’s the biggest secret that we have. But unfortunately most people, even coming out of business school, really don’t have the others skills that are required for entrepreneurship.
Most people coming out of an MBA program have those skills to be an employee and climb the corporate ladder, but they don’t have those skills to be an entrepreneur and start a business. One of those skills is handling pressure. How long can you operate without money? Can you raise capital? What are your people skills? And who’s your team? Those are really basic questions. A lot of times I notice with small business startups is the ring finger. They start with the wrong people and then business falls apart and they have to get rid of the bad partners before starting the business again. It’s part of a process – it’s not about getting rich overnight. I met a guy today who said that he went without a paycheck for thirteen-hundred days. I only went 400 days without a paycheck.
Is now is the best time to be an entrepreneur?
Oh yes, it always is. I was listening to Steve Case, who started AOL and he was on CNBC. They asked him what he thought about all the government regulations. Steve Case said if you’re a true entrepreneur, government regulations will never stop you. A lot of people let little things stop them as a way of saying that. So good economy, bad economy, it’s always a good time. It’s especially easier today because I always tell the young people, when I started out I needed to carry loads of quarters so I could use pay phones. Now it’s cell phones and the web – it is so much easier to be an entrepreneur and interest rates are so low!
When I was an entrepreneur, it was 12%. It was tough to borrow money because then I had to promise 20%. All an entrepreneur is doing is solving a problem. See a problem, solve it. Everybody could be an entrepreneur and everybody should be an entrepreneur. You really have to have the Midas Touch. If what we say in the book scares you, then you probably don’t have it.
What do you think about someone having the Midas touch later in life? Does age even make a difference?
I don’t think so. The greatest story of all is Colonel Sanders. He didn’t start until he was sixty-six on a freeway bypass for his chicken shop. Anything is possible! I think you know in your soul if you’re one or not. You may not have the skills yet but it’s really about the spirit. When I was in military school, it was always the mission first. Then I went on to become a pilot for the Marine Corps and again and it was still the same mission. So what’s the mission of your business? Are you willing to give your life for it? In the Marines it was very clear. I asked a lot of young men to die for their country, including myself. I was willing to die for my country. Most employees only want to know how much they get paid and how much time off they get – they probably don’t have the mission in their souls.
Dan Schawbel, recognized as a “personal branding guru” by The New York Times, is the Managing Partner of Millennial Branding, LLC, a full-servicepersonal branding agency. Dan is the author of Me 2.0: 4 Steps to Building Your Future, the founder of the Personal Branding Blog, and publisher ofPersonal Branding Magazine. He has worked with companies such as Google, Time Warner, Symantec, IBM, EMC, and CitiGroup.
Donald Trump and Robert Kiyosaki's "Midas Touch"
©Mkimya Ent.
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