How billionaires become billionaires
I studied the Forbes 400 list and found out how billionaires become billionaires
In business we're taught more is better:
Appeal to tons of different customersLots of different productsTry a bunch of new things
But is it actually true?
After combing through data from Forbes billionaires list and identifying trends, I realized diversifying isoverrated.
In other words, the most successful, wealthy people in the world are ultra-focused and specific in their businesses.
Today, I'm going to show you what you can learn about business from the richest people in the world - and how you can incorporate the same philosophes in your own business.
What I Learned from the Forbes 400 List
Warren Buffett. Mark Zuckerberg. Phil Knight.
Despite growing businesses in different industries, these three billionaires primarily earned their wealth through ONE focused channel or strategy:
Warren Buffett is worth $73.2 billion because of Berkshire Hathaway (investing)Mark Zuckerberg is worth $61.7 billion because of FacebookPhil Knight is worth $24.3 billion because of Nike
Billionaires became billionaires because they focus on the essentials.
Compare this focused strategy to common Internet advice on building a business: Appeal to lots of people, don't go too niche, try a lot of different things.
Many people assume diversity helps maximize a business, but it actually dilutes focus. Instead of doing one thing great… people who diversify too much do many things poorly.
How Steve Jobs Saved Apple
Apple started with ONE product, the Apple I, in 1976.
As the company grew, the team introduced several new brands to target different markets:
Macintosh Quadra for high-end market in 1991Family-focused Macintosh Performa series in 1992Mid-range Macintosh Centris line in 1993
These product-lines were selling nearly-identical machines at a different price point. The initial goal was to appeal to different segments. But, the results were dismal.
Three product lines in the early 90s - when computers were still not universally accepted - led to confusion because the customer didn't understand the differences
And it showed: Apple lost money every year from 1994 to 1997, including a $708 million loss in 1997. Ouch.
Desperate for help, the company brought back Steve Jobs in 1997. Immediately, Steve started refocusing the brand on just the essentials.
In 1997, before Jobs re-joined the company, Apple had 12 different computer models. In 1998, after Jobs rejoined, Apple only had four essential models:
Power Macintosh G3Macintosh Server G3PowerBook G3 seriesiMac G3
Apple became ultra-focused, and their profits soared again to $309 million in earnings. Big difference from a $708 million loss in 1997.
In Steve Jobs' own words, focus saved Apple:
"People think focus means saying YES to the thing you've got to focus on. But that's not always what it means at all. It means saying NO to the hundred other good ideas that there are." -Steve Jobs
Another example of focus is when I first started Sumo ONE goal: To help businesses grow.
When we launched, we only had three tools around email list building. We didn't complicate it with dozens of different products, options, or configuration settings…
Just three. Simple. Tools.
As our user base started growing, we ONLY added tools for two reasons:
A lot of customers asked for specific helpIt fit within our mission and focus of helping businesses grow
Even if a product idea was extremelylucrative, if it didn't fit within our focus - or our existing customer base didn't want it - we would ignore it.
Do What's Already Working
Many people are spend excessive time and energy focusing on what new ideas, or ways to expand, instead of maximizing what's already working.
For example, many entrepreneurs jump between tons of business at once. Sometimes, this works (see Elon Musk).
But most of the time the lack of focus makes all your products "meh." Focus helps you build one amazing, successful product.
Before you spread yourself too thin or invest resources into creating something, validate your business ideas:
If you're building a SaaS product, develop a minimal viable product (MVP) and test product / market fit before you throw away time or moneyPlanning to write or publish a book? Test your idea and build your audience with blog posts or anemail listUse an email list to verify your ecommerce idea (here's what to write about when you send emails)
When you validating your ideas first, you can focus on the biggest wins to grow a business - and ignore the rest.
The same principle applies to marketing and growing a business.
When I just started AppSumo, I tested tons of different marketing strategies: social media, email, content marketing, word-of-mouth marketing, and guerilla marketing.
After testing, I noticed two marketing brought the best results to my business:
Content marketingEmail marketing
Today, I pour 90% of my time in content marketing and email marketing.
I know it's tough to stick to fewer things, especially when our friends, the media, and advice we read online tells us "more, more more!" The temptation to try "the next big thing" in building or growing a business is high.
But as the Forbes 400 list of billionaires proves - plus my own experience in growing an 8-figure business - focusing on the essentials is what really works.
Noah Kagan was the 30th employee at Facebook and 4th at Mint. He has created four multimillion dollar businesses.
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