Most people think they need investment capital to start a business. The reality is that there are three types of capital, and financial capital is the least important.
Mental capital allows you to create value for others and can simply be defined as what you know. This could include your skill sets, education, experiences, insights, or any other type of knowledge. And it almost always involves specialization. No one can be an expert on every topic, but you can be a foremost expert on one topic. We strongly recommend that you add to your mental capital every day by spending time learning about your area of expertise.
Relationship capital is people whom you have a connection with, create value for, or who know and trust you. This is created by helping people solve problems, being of service, and therefore building relationship equity, or goodwill. High-value people are protective of their relationships, and they typically don’t hang around people who don’t add value. Important relationships should include mentors, teachers, and others who are contributing to increasing your mental capital.
You’ve heard of OPM—other people’s money—and this is certainly part of relationship capital. But it also includes OPN (other people’s networks), OPT (other people’s time), and more. You don’t have to rely on your own money, connections, time or energy. You can build relationships with people who personally own or have access to the resources you need.
Financial capital is just as it sounds—money you have access to. Financial capital expands based on creating more value than you consume. It’s a byproduct of how effectively you utilize your mental capital to create value for people.
And remember: financial capital doesn’t have to be money you personally own. It can be owned by others with whom you have relationship capital. As my 5 Day Weekend collaborator Garrett Gunderson says, “You are only one relationship or one idea away from your next level of prosperity.”
As you are able to increase your three forms of capital simultaneously, they will have an exponential effect on one another. This will enable your capacity to create value and therefore bolster your reserves and capabilities even further. Simply put, the more you have to offer, the more you are able to receive in return.
If you’re struggling with money, it’s not a money problem. Instead, you don’t have enough or the right mental or relationship capital. In short, your Value Equation is broken. The Value Equation looks like this:
Mental Capital x Relationship Capital = Financial Capital
If you want more money (i.e. financial capital), you have to increase your mental capital, your relationship capital, or both. You’re always just an idea or relationship away from a major breakthrough.
Secure your copy of the “5 Day Weekend” book. 5 Day Weekend: Freedom to Make Your Life and Work Rich with Purpose [Nik Halik & Garrett Gunderson]
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