Business tips from the Shark
Excerpt from podcast Erika Taught Me, interviewing Kevin O’Leary
Kevin O’Leary is a businessman, investor and Shark Tank star. In this episode, Kevin talks about his relationship with money, what it takes to be a good leader, and how he finds good talent for his companies. He also shares advice on investing, what his current portfolio allocation looks like, and gives advice on how anyone can make their first $100,000.
Kevin O’Leary begins by crediting his mentor Jerry Patterson, recalling what Patterson had told him years ago: “if things go well, a lot of things will be thrown at you. You are going to hear a lot of noise, criticism, and all kinds of things from every angle every day and successful managers will be able to focus on the goal and shut off all the noise.” So O’Leary has been following a pattern of focusing on three things he wants to get done every day. Even though there are a lot of things going on a daily basis, he focuses on three paramount things for a particular day. He chooses not to heed to the noise and criticism which is irrelevant to achieving his goal. He says that if he achieves his goal it helps a lot of people since he is a businessman, an investor. He and his team assess every situation as either an opportunity, or a catastrophe and focus their energy in serving the opportunities. When shooting a television commercial for customer acquisition, using a remarkable fusion of art and technology, he relates to the importance of quality of work that he used to follow when he used to be a cameraman with 60mm film and editing tools. He keeps editing even today with Premiere Pro editor just to keep his chops. If he notices a jump frame or something that doesn’t look great in the commercial, he wants to fix it until it is perfect.
His routine is to get up at 5 every morning, get on the bike as soon as the Sun breaks the horizon on the ocean, ride for about nine miles, go to the gym for 40 mins and be back on the saddle by 7:45 and get started with work for the day. O’Leary explains that one has to be careful in settling for less. He emphasizes that there is no gray area in the financial services industry; either you make money or you lose it. The hardest job for any entrepreneur is to prioritize what is important, because that’s the real skill of managing and not wasting time on unimportant things. Managers that fail are the ones who try to make everyone happy all the time because it is impossible to please everyone.
O’Leary expounds that someone had told him that it was impossible to make his first million dollars and he agrees that it was really hard to earn that first million dollars, then it was impossible to make his first five million dollars, again he acknowledges that they were right and it was indeed very hard to make that five million dollars. And then it wasn’t so hard anymore, since he started to figure out what works and what doesn’t. He has had a lot of success and a lot of failures too. Today, he says that he doesn’t need any more money and he’s been fortunate enough to have the wealth he own, but what he really likes is to have more time.
Hence, he has realized that his most valuable asset today is how he utilizes his time. You could either use the time available wisely or waste it. “The whole reason for becoming an entrepreneur is not for the greed of money, it’s about the pursuit of personal freedom; that’s what it’s about, to be able to do whatever you want with your time, the most valuable asset,” O’Leary lays out. He explains that he chops up each day into 30 minute blocks. At the end of the day, he reviews for the next day, and he has the freedom to discard a task if he doesn’t feel like doing it. He says he wishes that kind of success for everybody so that they will be able to control their own white space of time.
O’Leary is a wrist watch collector and he is interested in new brands and what they have to offer. When someone has money, they can take risks. He advises his young entrepreneurs and CEOs that they have to get to the point that they have five million dollars in the bank because they can survive the rest of their lives no matter what happens and will also be able to take care of others with 5 – 6 percent returns from $5 million. When they make that five million dollars, they have to keep it aside and not risk it. Thereafter, they can take a bit of risk, since people will know what works and what doesn’t. That’s why some are extremely successful while some are catastrophic failures. Fortunately, his success surpasses setbacks and his motivation endures, the only reason he keeps working, he says, is because he can buy more watches.
He goes on explaining his own success story. While many think it’s an overnight success, the reality is quite different. His journey started with a dream of becoming a photographer or a cinematographer. O’Leary expressed his desire to his father. His father opposed the idea and warned him that he would starve to death competing with great photographers, cinematographers and so many great editors, breaking through the competition would be impossible. Obviously, O’Leary was disappointed and replied to his dad that he was not being supportive. Guided by his father, who recognized his unfamiliarity with the field, he was advised to complete school, pursue University education and ultimately attain a Master’s degree in Business Administration. This comprehensive approach equipped O’Leary with necessary skills for entrepreneurship, allowing him the flexibility to choose any direction he desired.
As soon as he got out of business school per plan he started his first company that made short films for the original six hockey teams for the networks. He and his team would hussle all week shooting with Hockey players, teams and coaches in Detroit, New York, Toronto and so on. O’Leary would edit the films and send them to the satellite to appear on Saturday Hockey games. Then he started producing Don Cherry’s Grapevine, a podcast format which talks about hockey and more. He barely knew what a format was, at the time. A format is an ownership, a type of Intellectual Property in Television. He also produced another program called The Original Six. In a couple of years, the network started knocking on the doors, saying that they wanted to buy the company. O’Leary was thrilled to understand the strategy of running a business. “Oh this is how it works!” he exclaims. He sold that company and moved on to his next project. O’Leary, along with John Freeman, co-founded SoftKey Software products, a software company in Ontario. It was known as The Learning Company after acquiring the original The Learning Company and taking its name. He sold the software to giant plotter manufacturers. Back in those days, if a business wanted to plot a graph with a multi-access plotter, his company had the controlling software. The Learning Company was the world’s largest educational reference software company and was eventually sold for 4.2 billion dollars. He and his team realized they were rich, took a moment to internalize the fact and went back to work. That was the key, he says. He has had many many deals since then.
“It’s not greed for capital, you don’t need that kind of money to live to be honest, you will definitely enjoy certain things, but it didn’t change our lives” says O’Leary. In fact he circles back to utilizing the time productively and how it has been used to help other entrepreneurs succeed. He believes that if anyone has made good money, they should pass it forward.
Growing up, his mother imparted crucial financial wisdom, emphasizing the importance of living
within one’s means. O’Leary advocates for saving 20 percent of the income, investing into the market over a 20 – 30 year span with an expected annual return of 6 – 8 percent. Following this disciplined approach, he envisions the potential of accumulated substantial sums, like a million and a half dollars, in the bank account upon retirement with an average income of $54,000 in America. His relationship with money has always been being careful not to waste it.
O’Leary gets into the nuances of saving money for people who are on a budget and who live paycheck to paycheck. He confidently says that he can walk around with a person for a day and show that they are wasting 15 percent of their money on unnecessary stuff. Spending a lot of money on a daily basis on a sandwich, coffee, water bottle, a drink and many other things can add up to a lot and can be cut down by carrying them from home instead. He quotes that making a sandwich at home costs 99 cents against $15 for buying it. Especially for those working in metropolitan areas or starting to save their money, keeping a tab on spending is crucial.
On the other hand, to increase income, engaging in side hustles is advocated. O’Leary suggests numerous contemporary options, such as editing social media content, creating commercials, narrating corporate stories, and managing TikTok accounts for prominent media figures. These avenues present diverse opportunities for individuals seeking additional sources of income. Either upscaling or putting one’s skills to work is a smart way to make an extra buck. He clearly doesn’t believe in the nine to five job market anymore, since his team is spread all over the world and are very productive. That’s the new economy, he says.
O’Leary claims that hiring good talent leads to more talent and he says that he follows a ‘slow to hire and quick to fire’ strategy in his companies since it hinders if everyone is not moving in the same direction. He is very proud of his extremely talented team. He is generous in sharing the profits and everybody gets rewarded and recognised for their contribution. He acknowledges that running millions of dollars worth of advisory business is not easy and he cannot do it alone. He recently became an Emirati citizen, because he wants to do a lot of work in Abu Dhabi. He thinks that Abu Dhabi is going to become the capital of the capital in terms of business in the next ten years and he wants to be part of it.
Best way to start building wealth is by saving 15 percent of your paycheck each week, according to O’Leary. His mother used to do that in 1950s and she kept it concealed from her husband (she was married twice). He shares an anecdote about his mother, when she passed away, the executors called upon O’Leary since he is the older son. He thought he was from a middle class family and didn’t expect much. To his surprise, his mother had created an immense amount of wealth. The executors explained that she had bought 50 percent Telco bonds that were yielding at 6 and 7 percent, she also had invested 50 percent in S&P which were earning dividends and she kept that portfolio for 32 years so it grew geometrically over time. It was a remarkable move he recalls. His mother made sure that she had invested no more than 5 percent in any one stock and no more than 20 percent in any one sector like, energy or technology. She made sure there was a lot of diversification. If someone wants to make their first $100,000 relatively faster, they need to invest 15 percent of their paycheck in Index funds, generally yielding 6 – 8 percent that compounds within seven years which results in $100,000 and that’s O’Leary’s formula for his own investments. Considering current financial market conditions, he suggests investing 70 percent in stocks and 30 percent in bonds. He invests in high quality stocks, uses ETFs, and funds. He insists on distributing cash in diversified bank accounts as against having all the money in one bank.
He says he regrets that he wasted a lot of money on unnecessary things like buying 20 pairs of sneakers while he wore only 3 of them. He wishes he had better focus on what he spent his money on. Talking about his Black Suit and Black Tie look that he carries, he got it from Shark Tank 4th year and the crew suggested that he be portrayed as the mean one and has to sport Black Suit, White Shirt, Black Tie, Tie Pin and Red Watch band. He gladly accepted it and made it his signature look.
Kevin O’Leary is a businessman, investor and Shark Tank star with quite a few money tricks up his sleeve. Anyone can take O’Leary’s advice on investing, leadership skills, and making their first $100,000, regardless of whether they’re an entrepreneur or not.
Here are the closing notes from Kevin O’Leary for entrepreneurs:
- Divide the company’s funds into different bank accounts with 20 percent in each bank in order to mitigate risk.
- Apply for ERC – Employment Retention Credit, which many employers do not know about. For more details check out www.wondertrust.com
- Irrespective, do not squander money
- Emphasizes on the importance of customer acquisition, Social Media, and telling your story to the world
- Focus on customer support
- Always be a student of new ideas
