Tuesday, September 22, 2015

5 Things Bill Gates and other mega entrepreneurs have in common

Bill Gates' net worth is around $80 billion. He owns the $12.6 billion ownership of Microsoft. He also owns a $4.5 billion ownership in Canadian National Railroads, a $3 billion ownership in Republic Services, and a $2.8 billion ownership in in Ecolab. His diversified investments, through Cascade Investments, amount to $37.6 billion. 

As such, Microsoft, the company he started and associated with the most, stands for only 16% of his family wealth. 

Bill Gates is a mega entrepreneur. 

What sets very successful entrepreneurs, like Bill Bill Gates, apart from the rest? What turns them into mega entrepreneurs running a myriad of companies, overseeing immense and complex web of capital, and forging multigenerational wealth and legacy?

Here are some interesting statistics on mega entrepreneurs:
  • One third of FORTUNE 500 companies are owned or controlled by mega entrepreneurs or their families
  • 67% of NYSE companies are owned or controlled by mega entrepreneurs or their families
On the other hand:
  • About 30% of entrepreneur started and led business survive to the second generation
  • Only 12% make it to the third generation
  • Only 3% make it to the fourth generation
Many wonder what has become of the Rockefellers' ownership and clout over Exxon, Mobil, Chevron, Amoco, Standard Oil of Ohio, Atlantic Richfield, etc. We wonder as well, but its not there...anymore.

All entrepreneurs face the same challenges as they grow their start-ups in to successful companies:
  1. Raising capital without losing control 
  2. Recruiting and retaining top talent 
  3. Business continuation and succession 
  4. Converting profits and value to wealth
How mega entrepreneurs deal and keep dealing with the above challenges makes the difference. 

So, what sets mega entrepreneurs, apart from the rest? 

  1. Mega entrepreneurs have the "big-picture focus".
  2. They take risk and leverage financial and human capital to grow their enterprise.
  3. They rely on their entrepreneur's offices to manage finances, support M&A deals, raise or repay personal capital, execute financial reorganizations or restructure debt. Employees of their core companies are not involved in these processes. 
  4. Liquidity and cash management is given a high priority, managing cash efficiently and having it ready for difficult times and when great opportunities arise.
  5. Risk management is paramount.
Below are some examples of mega entrepreneurs and their strategies. 

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Susanne Klatten: Dynasty Company as the Backbone of Dynasty Fortune. Wealth created though growth of a single company, BMW. Company is still a key asset of the family and its business identity. Other key assets are acquired and sold in line with “Dynasty Company” strategy

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Leonardo Del Vecchio: Multi-Generational Family Company Leading to a Dynasty Fortune. Wealth creation through growth of a single company, Luxottica. Company is the identity of business family. Strategically and selectively diversifying dynasty fortune.

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Bill Gates: Company Value Leading to a Multi-Company Family Fortune. Wealth creation though a growth of a single company, Microsoft. Diversification of holdings and assets. Establishment of strategic wealth thought.

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Wang Jianlin: Diversified Entrepreneurships Leading to Family Fortune. Wealth creation through network of holdings growth. Increased concentration of holdings in key companies and assets. Strategic diversification across asset classes and geographies.

“The difference between a business family and a business dynasty is the strategy. Everything must be in line with strategy. Selling assets, exiting ventures… followed by reinvestment of capital – in everything strategy sets the rules.” - Baron Albert Frère, Founder and Chairman of Groupe Bruxelles Lambert, one of the largest family enterprises.

Statistics & Graphics: Courtesy of Financial Strategist Board.

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