Kevin O’Leary six rules of getting rich (Shark Tank)

We have put together for you a comprehensive article to list these six rules of getting rich from very well known professional Shark Tank investor Kevin O’Leary.

1. Don’t do it for the money. Do it for the freedom.

My number one message for the entrepreneurs that I teach today is – never pursue entrepreneurship for the money, it has nothing to do with it at all! The whole reason to be an entrepreneur is the pursuit of freedom, that’s why you do it – because you want be free one day to do whatever you like. I’m here because I want to be here, I don’t have to be here, I don’t even have to listen to a phone call again if I don’t want to but that’s not want I want to do. I enjoy spending my time doing the things that I want to do and I deserve it because I worked like hell to get here.
I’m a huge advocate of capitalism, I defend entrepreneurship every day. When people say “you don’t deserve that”, I say – bullshit – I deserve it because I started with nothing, everything I have I created myself and I deserve what I have and I feel ferociously about that and I tell other entrepreneurs “Do not be embarrassed about success – where it, own it, it’s yours and you deserve it”. – Kevin O’Leary, 6 rules of getting rich

ALSO READ: Mark Cuban’s six rules of money

2. Don’t be an employee (unless you are a very good one)

A really good employee ends up with equity because they’re so invaluable you don’t want to lose them and that’s the right way to look at it. They’re either partners or they are costs, so what happens to employees and companies? The minute they’re hired there is somebody in that organisation trying to figure out how to fire them, that’s what’s going on, that’s what happens in all companies because they’re costing money for the shareholders and I think if you’re an employee you have to make sure you get up early morning and create and create value in the bussines you’re in or else you are going to get fired. – Kevin O’Leary, 6 rules of getting rich

3. To be able to create success you’ve got make sacrifices.

I’m not sure how you’re going to take this story but I’m going to tell it to you anyways okay. End of class at night, 600 people. There’s a fellow up at the top, puts his hand up and say mr. O’Leary look I have to ask you a question can you help me? And I said what’s your problem (class goes dead silent) because it’s not going to be about business.
He said – today my fiancee came to me and said that I have to make a decision between our relationship and the business.

This guy had in his dorm room in under-grad engineering built an online cloud-based compliance tool for hedge funds with under 250 million to help them reduce their cost. It’s a subscription service, the guy had a run rate of 5 million dollars, he hadn’t even graduate yet. I’m licking my chops at this business, this is fantastic. And then he said but I have no time and I never see my fiancé, she wants me to come be with her family on Sundays just once but I’m doing my compliance downloads on Sundays and I have to deal with my customers and I’m back to class at 8 o’clock in the morning on Monday.

Now the class is looking at me saying – okay big guy what’s the answer? I said – everybody let’s be pragmatic which is easier to replace: your business or your fiancé? And the shit hit the fan with that. But let me ask you something, clearly that match was not right because if you’re going to get in a relationship with an entrepreneur, man or woman, it doesn’t matter, you have to understand what drives them, it’s not going to be a successful union it’s not gonna work, I think he made the right decision. – Kevin O’Leary, 6 rules of getting rich

4. Focus on the cash flow

What’s the value of a stock that never returns capital to it shareholders? I don’t know. Because the only way you can make money is if somebody else is willing to buy that position at a higher price for some emotional reason perhaps or for some you know foresight that maybe the company will return capital one day. And I think of, you know when you learn as an investor over multiple decades is that the only thing that matters is free cash flow, that’s it. There is no other reason to own a stock. And with that philosophy it brings you into a place where you focus on a company’s ability to generate incremental cash flow because just owning a dividend paying stock is not good is not good enough.

Let’s say we find a stock today that’s paying a three percent dividend yield and tomorrow, because it’s forecast for sales get cut in half, the stocks drops by 50% now it’s yielding six percent, I don’t wanna own that stock either. So my tests in this index that I’ve created with FTSE Rusell looks at the balance sheet, every year we test to make sure that the company is viable in its ability to generate cash. This is extremely conservative in investing this is for the long haul.
These tools for as you’re suggesting for spicy’, you know, the hot stock du jour. I’ve done that I’ve been there, you know – let the young legs do that I have zero interest in that, I don’t care what the hot new stock is.

When a company comes public I won’t own it either it’s got to prove to me over multiple years that I can continue to generate cash before it even fits into what I’m doing. So I’m really boring and I like it that way. – Kevin O’Leary, 6 rules of getting rich

5. Limit your risk

No more than 5% waiting in any one stock ever, no more than 20% waiting in any one sector ever, that’s how I run my life. When you ask me about gold – 5%. If you ask me bout any name I own – 5%. I don’t care how great story is, I don’t care what they’re what they’re doing, I don’t care how emotionally sound it is, I’m selling within 5% waiting, I’m out. – Kevin O’Leary, 6 rules of getting rich

6. The three steps to raise money from investors

Whenever I talk about shark tank, these are the three attributes you find in every successful pitch by the minute, let me give you the time.

The ones that work, the ones that get a check, does not determine the outcome of the business these are the ones that get a check that actually start their journey funded on shark tank, the ones that go into the ecosphere of shark that could get followed by all the networks that get all the daytime television and all that stuff because they gotta an investor, in every case they are able to articulate the idea in 90 seconds or less.

Every single time they were able to (and most of them are 60 seconds) say look – I’m from Cohasset, Massachusetts, I put cupcakes in a jar and I FedEx them to people. I get it. The ones that ramble on and can’t get the idea out and it’s still 10 minutes later and we’re still wondering – what are they talking about? They never get funded. So that’s number one.

The next segment is the part of discovery where they explain to you, and I generally only invest in teams now, I like the yin and yang of two partners that bring different skill sets, but they explain over let’s say a 10-minute why they’re the right people to execute the business plan and this ends up being very important because when those two come together, I can see Cuban over my right starting to make noise and Barbara’s starting to get exited over here because wait a minute these guys know what they are doing, I love the idea they have a high probability of success.

But here’s the killer and here’s how you can spend an hour. By now there’s a competition going on, there’s going to be an investment it’s just who’s going to do it. But then the discovery and the one there they fall, I’ve seen so many presentations crash and burn here the numbers – they don’t know their numbers. And if you show up in front of me and shark tank and you get passed phase one and two and we spent an hour and you don’t know what the margins are, you don’t know what the break even is, you don’t know how many competitors you have, you don’t know how fast the market is growing.

If you don’t have the answer to all of those questions, I should put you in hell and perpetuity. You should burn in hell because you got there you’re on the carpet you’re there about to start your journey and you don’t know the numbers – immediate execution, I mean that’s unbelievably stupid. – Kevin O’Leary, 6 rules of getting rich

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