A staggering 70 percent of the billionaires who made this year’s list of the richest people in America were self-made. If you want your kids to have a shot at joining them someday, you must teach them to think and work like entrepreneurs—starting now.
Forbes has just released its list of the 400 Richest People in America. The combined net worth of these men and women clocks in at a staggering $1.7 trillion dollars. And here’s the truly amazing part: Some 70 percent of this year’s 400 built their fortunes from the ground up. If you’re a parent, this statistic may lead you to wonder: Will my kids ever have a shot at this kind of success?
Absolutely! But first they’ll have to learn to think and work like entrepreneurs.
“The Forbes 400 list proves that you don’t have to be born wealthy,” asserts Gregory Downing, author of Entrepreneur Unleashed: Wealth to Stand the Test of Time as well as an upcoming book on providing a financial legacy for kids. “You just have to have the right skills and know how to leverage them. But here’s the thing: Your chances will dramatically improve if you can learn these skills, and the mindset to apply them, at an early age.”
Of course, raising billionaires might not be your goal. Maybe you just want your kids to grow up to be financially stable, live comfortable lives, and maybe retire someday. Even if that’s the case, Downing insists, they must learn to think about working and building wealth in a new way. That’s because the world is undergoing a profound shift.
The old path—get good grades, go to college, get a good job, and save money—no longer leads anywhere you’d want your kids to go. Degrees are a dime a dozen. College grads are moving back home with six-figure debt. Gold-watch jobs are a relic of another era. We’ve entered the age of the entrepreneur, and those who blindly pursue the rules of an earlier time will be left behind.
Downing puts his money where his mouth is. A former car dealership manager who made the leap to entrepreneurship and motivational speaking, he is teaching his 16-year-old son the ropes of real estate investing. Greg Junior is on track to amass a net worth of a million dollars by the time he starts college.
Teaching kids the basics of entrepreneurship is not a radical notion, insists Downing. It’s a necessity. Even people who do end up working for someone else will be expected to think and work like entrepreneurs. The more we narrate the mindset and the skills of entrepreneurship to our kids—and even better, let them experience the reality for themselves (see attached tipsheet)—the more suited they’ll be for tomorrow’s workforce.
“Teaching these foundational skills is not optional if we want our children to be able to maintain even a minimal standard of living,” warns Downing.
He says there are certain fundamental truths parents need to teach their kids about being an entrepreneur. Here are some of the most important (keeping in mind that their appropriateness may depend on the ages of your kids):
Mindset matters. The old path to success—get good grades, go to college, get a good job, work hard for 40 years, and retire comfortably—no longer works in a flat global economy. Even if your children manage to find a “good job” (and there are fewer and fewer of them), the income it yields may not be enough to maintain a comfortable lifestyle. Multiple streams of income will be necessary—Downing stresses the importance of having all three types: earned, passive, and portfolio—and kids need to get their minds around this reality now.
Of course, the entrepreneurial mindset isn’t just about wealth building. It’s also about being able to find fresh solutions to problems no one has ever thought to solve, to figure out how what you offer can be applied to new markets, and to team up with other people in such a way that everyone wins.
Opportunity is everywhere. Develop a nose for finding it. As a parent, it’s up to you to point out opportunities as you see them. If you’re at a golf tournament in July you can say, “Wouldn’t this be a great place to sell ice water, sunscreen, and hats?” Or if your child is talking about how no one at afterschool daycare can ever seem to get their homework done, you might say, “Wouldn’t it be great to start a business where high school students come to afterschool daycares to tutor younger kids?” Ask them how they think such a business might work.
Your brand will create the foundation for your business. Depending on their ages, your kids may or may not be familiar with the word “brand.” But explain to them that, basically, it comes down to what they want to be known for. Neatness? Friendliness? Trustworthiness? Then, start a dialogue on how to make that happen—and how to avoid doing things that might tear down that brand.
You need a differentiator. Help your kids determine what makes their business different and explain how it will bring them more business. Maybe they offer an exceptional level of personal service. Maybe they cater to a certain group or meet a particular need. Maybe they’re eco-friendly. Help kids talk through what makes them different and better. Ask them how they might play up their differentiator and use it to get themselves seen in a crowded marketplace.
Know the value of marketing. Having a great business idea is one thing. Telling people about it is another. Help kids figure out ways to maximize their exposure without spending a ton of money (which they probably don’t have) or turning off potential customers with a hard sell approach. Teach them to introduce themselves and talk about their business when it’s appropriate: “I heard you mention your dog, Buster. I wanted to let you know I have a pet sitting business if you ever need that.”
Specifically, you might work with them to develop several “scripts” (elevator speeches) about their business to use in a variety of settings. Also, help them create some simple business cards to hand out.
Sometimes you have to give something away up-front. Explain that before people will be willing to pay for your product or service, they need a taste of how great it is just to get their attention. That might mean giving out a free sample of their homemade salsa or offering a free hour of math tutoring to new customers.
The trick is always learning how much to give away without giving away the farm. This is a balancing act that will need to be walked again and again throughout an entrepreneur’s life.
A big part of success is learning how to buy your own supplies and manage your own business. When your child wants to start a lemonade stand, you will be tempted to provide the lemonade mix, the cups, and the poster board for the sign in order to give your child a leg up. You may also want to get out the calendar and figure out a schedule that works for him and takes advantage of high traffic. While you can offer helpful hints and be supportive, don’t do these things for him, says Downing.
Kids need to do the work themselves. Only by handling the details—buying supplies, managing inventory, setting a schedule—will they get an accurate picture of what running a business is really like.
Know the difference between revenue and profits. This is a big part of the reason for the previous point. Kids need to understand that the $40 they receive from customers isn’t all free and clear profit. What about the costs of the lemonade ingredients? What about the cups? What about the marketing materials? Beyond that, what about the value of their time? Have them subtract the cost of the supplies and then divide the rest by the number of hours they spent sitting at the lemonade booth.
When kids realize how little of the money actually is free and clear profit, and when they realize that they spent seven hours of their time to make such a small amount of money, they begin to see the value of franchising and passive income.
The highest price won’t necessarily earn you the most money. Teach kids the importance of finding the “sweet spot” on pricing. If they price too high, they may not get many customers. If they price too low, on the other hand, they may get lots of customers but make so little profit that they’ll go out of business.
Learning to set the right price won’t just attract more customers; it will keep them coming back. It’s so much easier to make money off return customers and referrals than to constantly have to seek out new customers.
Don’t overcommit. Learn to manage your workload. Sometimes kids get so excited when business starts rolling in that they take on more customers than they can handle. Then, they either have to skimp on quality or fail to meet all their commitments. Teach kids that both will hurt their reputation.
Kids need to learn to evaluate their capabilities and be realistic. Just a few dissatisfied customers can ruin a reputation.
Being able to manage others will help your business grow. This may sound a bit far-fetched, but a motivated child could make it work. For example, a lemonade stand owner could start another stand at the other end of the neighborhood and ask a friend to staff it for a cut of the profits. Or a dog walker could hire a “poop scooper” assistant to clean up the client’s yard while he is taking Rover for his daily stroll (a nice add-on!).
Bite the bullet and have the tough conversations. Whatever their age, business owners will face uncomfortable moments. Your kids may have to deal with unhappy customers or customers who don’t pay on time. Don’t step in and handle these problems for them. Instead, guide them through their fear of confrontation and provide pointers on finding win/win solutions and remaining calm and professional.
Nothing replaces picking up the phone. Kids love to text and we all know it. That’s their world, for better or worse. But they need to learn that most adults appreciate a phone call when things aren’t going exactly right. “Mrs. Laney, I wanted to let you know I was throwing the ball to Princess and I accidentally broke the lamp on your end table in the living room. I am so sorry.”
Even better is making a phone call when things are going well: “I just wanted to let you know that Princess is doing fine. She didn’t eat a lot this morning, but after our evening walk she ate a whole bowlful of food.” That phone call will ease the client’s mind and really distinguish your child from the competition.
Failure happens. Learn from it and move on. Every business and business owner will fail at some point. That’s okay. In fact, it shows that she is pushing beyond her comfort zone, and that’s a good thing. Make sure your child understands that it’s how you deal with failure that matters. When something goes wrong, use it as a teachable moment to help her reevaluate her strategy. What decisions might have led to this mistake? What might she do differently next time?
“Don’t let kids use failure as a reason to quit,” stresses Downing. “Failure is not a get-out-of-trying-new-things card. It’s an impetus to do something great next time.”
A good mentor can make all the difference. You may assume you’re the one who should teach your child, and you certainly do have a critical role to play. But there may be other adults in your family’s sphere of influence who have demonstrated the ability to achieve in business. Nurture those relationships.
“A cornerstone of my philosophy is learning from other successful people,” says Downing. “I wouldn’t be where I am today if I hadn’t been open to learning from the experts, and my son wouldn’t be where he is without learning from me.”
Worried that all this is way over your kids’ heads? You might be surprised, says Downing.
“Kids are generally open to new approaches and new ways of thinking,” he says. “Their minds haven’t become ‘programmed’ like those of adults, so they don’t have to do a lot of unlearning old, outdated ideas. They’re creative and fearless and they realize this way of thinking makes sense.
Frankly, it’s the parents who struggle with the entrepreneurial mindset. I always say that the toughest part of the journey takes place in the mind. But it’s absolutely crucial that you take the first step, right alongside your child. Both of you can learn together. Your family’s future depends on it.