Why is the first million the hardest
The first million is the hardest - how to do it
September 4, 2018 - Reading time: 10 minutes
It is often said that earning the first million is the hardest. The ones after that are easier because you have the financial leeway to invest sensibly. There's something to it because a lot of people could handle money if they had it. But because of a lack of capital, they never get the chance. For this reason, I grabbed the biography of a self-made billionaire entrepreneur and analyze his advancement phase. Every aspect is examined that seems important to me as a tactical step. The first thing it hits is mr Konosuke Matsushita - the founder of Panasonic. In Japan he is called the "God of Management". The author of his biography calls him the most successful entrepreneur of the 20th century. The book was recommended to us by the experts at Treuhand Zurich. For Matsushita is a prime example of how you can build your wealth with seriousness, diligence and a sense of responsibility.
An emerging industry chosen
In 1910, Matsushita was 16 years old. At that time, electricity was very popular. It was an entirely new technology that some people were skeptical of. Not so Konsuke. His goal was to gain a foothold in this area as quickly as possible. He was convinced that this technology would revolutionize the country and open up enormous opportunities. His second application to the Osaka Electric Light Company was finally a success. He was hired as a wiring assistant. I think this step was chosen wisely. In fact, it makes a big difference whether you become the hundredth plumber, master carpenter or painter in a city, or whether you enter an industry that is about to completely change society. A new technology not only draws numerous new products behind it, but a whole chain of suppliers. Anyone who has electricity will at some point also need lamps, refrigerators, fans, batteries, etc. All of these products require components that have not existed before: wire, capacitors, coils, etc.
Innovations sometimes create completely new branches of industry. If you are there right from the start, then career opportunities arise simply because you are one of the few who are familiar with the new technology. It is also possible to find a specific niche for a product or service that is completely unknown to others. The automotive industry would probably have offered similar options in the era. It, too, was just about to emerge.
Innovative technologies open up new product niches and sometimes completely new branches of industry are behind them. Those who are there in time have a good chance of filling in the gaps.
It was like that in the end. The young Konosuke made an early career and after just a few years was a construction site manager with a decent salary.
A little innovation as a first step
1918 - At the age of 24, Matsushita presented his manager with an idea for a new product. It was a lamp holder that was supposed to be technically superior to that of Osaka Electric Light. His manager rejected the product. In retrospect, Matsushita said himself that it was full of mistakes. But at the time he didn't realize it. Offended by the rejection, he resigned in his youthful zeal and wanted to take the production and marketing of the product into his own hands.
With two employees and his wife they worked day and night on the production method. Unfortunately, they did not succeed in producing insulation material. Only an external source could help. It was a man who had worked in an insulation company. He had only done this to spy on the production process himself. Then he abandoned his plan to start his own insulation company and therefore had no problem sharing his knowledge with Matsushita. Some call it cleverness, today we would call it industrial spies. In any case, the new lamp holder could now be produced.
To put it mildly: getting ideas from the competition is always a good idea. You don't have to reinvent the wheel every time. Of course, it is most honorable not to infringe any patents in the process, which in this case has not happened either.
The methods of successful copying.
Even if quitting a well-paying job was risky, starting a business was the right step. As an employee, Konosuke might have continued his career and increased his salary every now and then. The big profit, on the other hand, would always have been pocketed by others and would have become rich with his achievements.
As an employee you can earn well - but you are more likely to get rich as an entrepreneur.
Diligence and commitment made the difference.
His commitment and his will to persevere should also be emphasized. We are talking about the 16-hour working days that he, his wife and his employees have worked to put the company on the road to success. That too is a competitive factor that can make all the difference.
The first success is a coincidence
Even if the new product was a little better than the versions available on the market, it was not successful. The reason was that the dealers didn't want to work with his company. The risk was too great to cooperate with an underfunded single-product company. Matsushita Electric was virtually bankrupt.
A trader who liked the young people gave them a tip. He knew a company that was looking for a supplier of insulation panels. He arranged a contact. Matsushita didn't hesitate and applied for the job. A smith made a mold and production started in the small apartment. Konosuke, his brother-in-law and his wife worked alternately day and night. Everything was made by hand. A sample was sent - the client was very satisfied with the quality and reordered.
Matsushita Electric earned its first real money with a coincidental product that had come up on the side.
You could now say: Ha! Just lucky, it was all coincidence. For me, however, it is what is called forced happiness and that is how success is deserved. Matsushita took many risks and tried everything to be successful. If he hadn't done it, as an employee he probably wouldn't have gotten such an assignment. It was only through his work as an entrepreneur that he put himself in a position where such situations arise. The likelihood of such coincidences increases when you spend your time networking.
Lucky coincidence is one factor, the likelihood of which can be increased through targeted activities.
Some people might have been shy about accepting an order that didn't match their product range. Some would have refused the order because they would not have been able to deliver the quality in the short time. Matsushita and his team, however, have made up for these disadvantages through diligence and have gone to their limits.
The product range is expanded
The basic idea of Matsuhita Electric was from the beginning: to improve existing products of others and to manufacture them cheaper. This was achieved by avoiding overheads for administration and R&D. They did not afford expensive laboratories, but experimented with simple components and looked for optimization options. So it was possible to place four products in the offer: insulating plates, the original lamp holder, a connection plug and a multiple plug. The latter was very popular because most houses only had one socket at the time. Households could operate multiple devices with a multiple plug.
An expansion of the product range increases the chances of sales. If this does not result in fixed costs, then the associated risk is almost zero. You can only win here.
Another successful move was made with the expansion of the product range. First, you make a name for yourself in several areas and increase your level of awareness. Furthermore, you improve your chances of additional sales, while the risks hardly change. This approach is particularly successful if the adjustments do not increase the fixed costs.
Matsushita lands a real hit
After the initial successes, the business stabilized on a solid basis. What followed was a really big hit that led to a nationwide breakthrough for the company.
Bicycles were a very popular form of transportation in Japan. Unfortunately, it was difficult to use at night because the streets were rarely lit. It was possible to put a lamp on, but the battery life was very short. The problem with the version with a lantern plus candle was that it was constantly being blown out by the wind. Matsushita therefore experimented with a few constructs and designed a new, energy-saving bicycle lamp. This worked with a battery and lasted many times longer than the products available on the market. This laid the foundation for a real cracker.
Anyone who wants to create a successful product solves the problems of as many people as possible.
Matsushita saw a large alcove. He knew that tons of Japanese would like to be able to use bikes at night. Unfortunately, this was difficult due to the technical possibilities at the time. He was looking for a solution that could significantly improve the lives of cyclists. This is how you create successful products, and in this case one for a mass market.
Only the right conditions policy brings success.
You might think the new lamp was selling like hot cakes - you're wrong! At first she was a slow seller. The dealers didn't play along, they were too skeptical of the product. Production had already started and the warehouse was full. Only through mass production could the price be kept low. Matsushita Electric was on the verge of collapse.
Mass production brings cost advantages.
Two factors helped establish the product on the market after all. The bicycle dealers were allowed to place the new lamps in their shop windows, where they remained switched on. The batteries actually worked for several days. So they could be convinced of the quality. They were also pre-financed for the product. In other words, the dealers didn't have to pay for the goods until they had sold them. This kind of policy on conditions was revolutionary for the time.
This product was probably the most important cornerstone of a flourishing corporation that formed Matsushita Electric into a corporation.
Analysis of the Matsushita strategies
In summary, it can be said that the word luck appears several times in this story. Even if you can't control coincidences, you can still say that meaningful activity can change the probabilities in the positive direction.
It is also a fact that it will be difficult to develop a technical device in your living room these days. Our times offer other ways of starting a company from scratch: programming, apps, games, etc. - so the best opportunities to expand something big today are mainly in the IT area without capital.
For the start, Matsushita has chosen products that require relatively little capital. Instead of complaining that nobody is giving him a loan, he has looked for ways where he can build something without funding. In doing so, he has also ensured that investors cannot interfere in the business.
It is easier to enter the market if you work to correct the mistakes of other companies instead of waiting for the big business idea.
Matsushita was able to keep his cost structures low because he had renounced any luxury. He also saved himself a development department and worked in fields where you didn't have to spend money to initiate improvements.
It is also important to have market-oriented thinking: What can I do to make life better or easier for people?
Also to be emphasized is the idea that you should always expand your offer as much as possible if the fixed costs remain unaffected. So you have a much higher chance of getting jobs without taking any additional risk.
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