It’s hard to get money if you don’t know how it works…
You have to understand — money FLOWS.
Money is always flowing. Like water, money becomes stagnant if it doesn’t flow. And like water, money becomes a powerful force when you understand and can harness the flow.
But what’s behind the flow — and how can you encourage it?
Let’s look to that water example.
What makes water flow? Gravity.
Water flows from high points to low points. It does this because of gravity.
Water keeps finding its way down, down, down until it reaches the place where it can’t go down any further — sea level. Unless it is trapped, all water that doesn’t evaporate will eventually flow down into the Earth’s oceans.
You can’t fight gravity. It’s a law of nature.
You can harness the power of water and gravity, by building a hydroelectric dam, or water wheel, or otherwise capturing that energy.
You can also channel the flow in certain directions, as humans do with levees, culverts, canals, channels, and other flow-control features.
And yet, humans will often find any attempts to significantly alter the flow of water — fighting the natural effect of gravity — often ends in failure. A river engineered to flow straight often returns to its previous meandering path, sometimes with devastating consequences to the human development in the area.
When you respect the flow of water and the power of gravity, you can use it to achieve incredible results. The world’s largest hydroelectric dam, Three Gorges, in China, generates 22,500 megawatts. That’s enough electricity to power 14,650,000 homes US homes.
The flow of money follows a different law, but its principles are much the same…
MONEY FLOWS based on PERCEIVED VALUE.
Like gravity pulls water down until it meets the sea, perceived value pulls water toward the source of that value.
I was thinking about this today in the context of government-mandated wealth distribution. While I’m all about having a society in which we support each other, I worry that this is the wrong solution to the right problem. If the government forces money to flow with disregard to value, it will have the same effect as pumping water up a mountain. It will only flow back.
Just think of the last tax rebate check you got. Can’t remember it? You don’t have it earmarked in your wealth account? That’s because that money flows. And it will continue to flow, no matter what politicians think we should do with it.
We’d be far better off teaching everyone how to create value for others, and then fostering the free-flowing of money between them.
But let’s get away from the political commentary, to a more practical application in your life.
If you want money to flow, you must create perceived value…
Let’s break that down, using an example.
The value bit should be obvious. We all know what value is, right? But there’s an important aspect to value that I don’t think a lot of people understand.
Value is a relative term. And it’s the relative value that’s important. If I make $10 per hour and something costs $100, its value to me is 10 hours of my time. But if I make $1,000 per hour, the value of that item is equivalent to six minutes.
Likewise, I may value something more or less than someone who makes the same amount of money. If I love the Hamilton musical and really want to see it, I may value those tickets at hundreds of dollars. While someone else may just not get into it, and not be willing to pay more than $10 to see it (if at all).
The important part about relative value that makes money flow is that the offer being made must be valued higher to the prospect than the amount of money being asked for that offer.
If I make an offer for an item that’s worth $1,000 to you but I’m only asking $100, you’ll buy it in a heartbeat. Because you value the item far higher than the money I’m asking.
If I’m asking $100 for an item you value at $100, it may be a much harder sale.
And if I’m asking $100 for an item you value at $10, you’re never going to buy.
This is all subconscious — or only partially conscious. We seldom say, “I think that coat’s value to me is $150, but they only want $50 for it so I’m all over it.” As marketers and salespeople we can make it conscious, but even then we’re simply making suggestions.
So that’s value, but what about the perceived bit?
Put simply, it’s all about perception. If I have money and you have something that’s valuable to me, my money won’t automatically flow to you. You have to foster the perception in my mind that I want that item RIGHT NOW for more than I want this money RIGHT NOW.
Using a random example, there are likely multiple houses in my city that on a pure cash-for-item basis, would be more valuable for me to own than the cash in my bank accounts. But I’m not on the market to buy houses right now, so I’m not even paying attention. And even if I were paying attention, someone would have to bring the value differential into my perception for me to seriously consider buying it.
Want money? You must create perceived value…
To do this, first think about who you’re selling to.
What is their capacity to spend? What is the relative value of any chunk of money in their account?
For example, the copywriting clients who I work with at $20,000 per project are very different than the ones I worked with at $2,000 per project. They were all great clients. It’s just that the clients who readily pay that $20,000 tend to be very different than the ones who pay $2,000. And, on a relative basis, the $20,000 may actually be less for that client than the $2,000 is for the other.
Likewise, for someone buying a Rolls-Royce, the value of that car on a relative basis is actually probably a lot less than the relative value of the average Kia to its buyers. Someone buying a Rolls may spend 5% of their income on the price of that car, while a Kia buyer may spend 40%.
(Note about this: if you want to sell things for higher prices, simply finding a way to serve a more affluent buyer makes that much easier.)
Next, consider how you can make them an offer that they will value for more than the amount of money you will ask for it.
I think it was Dan Sullivan of Strategic Coach who defined capitalism as a system of cooperation in which individuals profit by taking resources from a lower level of value to a higher level of value.
In other words, you buy parts at a lower price. You assemble them into a product at a higher price. You sell them to willing buyers and pocket the difference. Everyone is happy, everyone wins.
Find ways to assemble parts where the final product is more valuable than your cost to create.
Finally, do the sales and marketing job of showing your prospects how the value they will get from your offer is higher than the current value of holding onto that cash.
Again, money is flowing ALL THE TIME…
This is simply about channeling and harnessing its flow.
Did you know that GDP — gross domestic product — is actually more than the currency out there?
In the US, the M2 Money Stock is a measure of the amount of money out there, the broadest measure of money available today. It’s at about $14.8 trillion.
M1 Money Stock is considered the amount readily available for spending — the cash out there changing hands — and it’s only at about $3.8 trillion.
And yet, our GDP is $18.9 trillion.
How is our economy bigger than the amount of actual money out there? Simple. GDP measures flow. It measures the total amount of the transactions that happen in a year. So you get paid, that’s one transaction. You spend that money on gas, that’s another transaction. They pay the gas station attendant, that’s another. They spend that money on food, that’s another.
Using the M1 Money Stock to calculate, that means every dollar in circulation changes hands about five times every year.
(Like how water can rain from the clouds, flow down a stream into a lake, evaporate, turn into rain again, flow into a river and into the ocean, and cycle again and again. It’s always flowing.)
When you understand and harness that flow, you are able to make it work for you.
And increase your income.
And have more money you can spend, keeping the flow moving.
Yours for bigger breakthroughs,