Marty - Hey, Dr. Needham, how are you today?

Dr. Needham - I am doing great, how're y'all doing today?

Marty - I am well, Dr. Needham. Thank you for coming back to the show.

Dr. Needham - Oh I look forward to it.

Don - Don Johnson, how are you? Are things heating up in Alabama so far?

Dr. Needham - It is heating up in Alabama. It has been a great year. It is nice and warm down here already.

Marty - That's fantastic. Dr. Needham, I think a great place to start is if you can explain to our listeners what you mean by Wealth 3.0?

Dr. Needham - Well, Marty, that's a great question. You know as I, like many Americans, were looking at the summer of 2008 and realizing that times were changing, we needed to plan for what might happen going forward in the future. I was reading some history on why in fact and I was looking for a quote that I heard partially about on several different shows and I finally found this gentleman's name is Alexander Kittler. He is a famous historian and he wrote mostly about the Athenians but he has an interesting quote and I would like to begin by explaining Wealth 3.0 by reading that quote. It says a democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largely from the public treasury. From that moment on the majority always votes for the candidates that most benefits from the public treasury and with the result the democracy always collapses over loose physical policy, always followed by dictatorship. The average age of the world's greatest civilizations has been about 200 years.

Great nations rise and fall. People go from bondage to spiritual truth and then from great courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy and from apathy to dependence and then again from dependence back into bondage. And to me that was like a huge revelation of what was going on with the American economy and so being an emplaced as I am, I went back and took a look at our history as a country and about 500 years ago there were a lot of brave people in other foreign lands looking to come to this country because they were living under kings and dictators and they wanted to own something. They wanted wealth.

They wanted a chance at their dream. And so on Wealth 1.0 people flee their countries, came to this land and they were seeking land ownership and that is what Wealth 1.0 was all about and if I had land that had trees on it, I sold timber. If I had land that had animals on it, I sold meats and furs. If I had land that I could grow crops, I sold those crops. And that was the wealth in this country for about 200 years. And then we went through a revolution in this country. We had a freedom revolution that gave us our country but then we went through another revolution called the industrial revolution and that gave rise to Wealth 2.0. And in Wealth 2.0 (GOES BLANK) power to the few and came here we have power to the many. We moved into Wealth 2.0, we were moving into another cycle where the power would go back to the hand of a few as big business and big government began to rise and what is interesting about that in Wealth 1.0, 90% of the people worked for themselves and only 10% were employees.

But in Wealth 2.0 because of the industrial revolution and the rise of big business we bought a dream that said we would own partial ownership for these companies. For many people that meant stock. And so as a result we, over the last 250 years, went through a process of transitioning from 90% ownership in business down to 10% today and the remainder of everybody else works for somebody else if you think of that Kittler quote we became very focused on ourselves if you will. And of course we became very dependent on 401K's and all that. Well, as we all know the story, come September/October of last year, we saw the 401K become a 201K as the systematic dismantling of the American financial dream.

Don - What is interesting about this book, Marty, it's Wealth 3.0, Saving America One Small Business At A Time that just came out recently. It really is what he started to talk about obviously. It is from a historical viewpoint and when he comes back on it seems like really what is his motivation for writing the book because we've come full circle with that quote he said earlier and what has happened throughout the world but especially our country recently. More so than ever this story needs to be told right now so Dr. Needham looked at it from a historical viewpoint. Now is the time for Wealth 3.0 and for more people getting back to owning their own business.

Marty - That is a great history lesson. I am going to have to have my students actually listen to that first part. It was very interesting. Talking about in the beginning, you know 1.0, and then jumping into the 2.0 - the production era which is something I talk about all the time in my marketing class. Talking about the different areas of business and things like that.

Don - What is nice about the book in order to explain what he feels America has to do to get back on course, it has to all be backed up by facts and just a whole plan based on what has gone on in history.

Marty - What is interesting is he has talked about the 401K, you know becoming a 201K. I see Dr. Robert has called back in. Hey, Dr. Robert, we lost you for a second it looks like.

Dr. Needham - Sorry about that. Where did I lose you guys?

Marty - I think we were on the 201K. Where were we, Don?

Dr. Needham - Oh, the 201K. That was probably a conspiracy. They didn't want me to talk about it anymore after that. Just kidding. I had a great speech going there so I guess I go back and catch up with it.

Marty - It was excellent. Don and I were echoing your words, Dr. Needham, so absolutely.

Don - And this is your motivation. I mean it has come full circle now. And what you are proposing with Wealth 3.0 right now, so with what happened with America and that was a great quote you gave before because obviously it does make a lot of sense. America has to get back to more people owning their own business and your book Wealth 3.0, Saving America One Small Business At A Time, you look at it from a historical viewpoint and then tell the world what you think is the solution for it.

Dr. Needham - Absolutely. So this concept of becoming very agile and not fragile like big businesses is the direction of what Wealth 3.0 is about and we will get into more of those details as I guess we talk about the book (GOES BLANK)

Marty - I think we lost him again, Don.

Don - You think he is playing a joke on us?

Marty - I don't think so. This has never happened before. One of the next questions I have for Dr. Robert when we can get him about is talking about...I don't know if you noticed in Chapter 2 - Lessons Learned From A Rocket Science.

Don - Right. He will love to talk about that. He has had an amazing history but right before that on page 18 in the book he gives some facts from the US Census and the SBA and I just want to go over this. It says small businesses employ 50% of all workers. That is pretty incredible. You know? That's why during the political campaigns they are always talking about helping small business. Unfortunately, I don't think there has been enough done. Especially during this rough time. It says, Marty, small business creates up to 80% of net new jobs. That is an incredible stat. 80% of all the new jobs created come from small business.

Marty - That's incredible.

Don - Small business hires over 40% of all technology workers, 52% of small business are home based now. That is just a quote that has gone up so much I imagine in the last 20 years.

Marty - I think Dr. Robert is back. Are you back?

Dr. Needham - Yeah and I am doing it on a different telephone.

Marty - Okay, I see that. Sorry about that, this has never happened before. Don was just going over some facts from the book. One of the things I noticed in Chapter 2 of the book - Lessons Learned From A Rocket Science - as a former NASA rocket scientist, can you share with us some of those parallels to business?

Dr. Needham - I would be happy to. You know in small business, it is all about momentum. I had the privilege to study under the people who actually did Mercury, then Gemini and Saturn and was able to be there for the first 14 space shuttle launches and it became very clear, you know, that there is a principle in rocket science which is "the thing that takes you up is the thing that takes you down," meaning that if you don't shed off some of that weight after the rockets are empty, it will drag you right back to the ground and so we learned that you have to have good guidance point. So a plan on the direction of where you are going so you need to develop a good plan and most business start-ups fail because of the lack of a good plan and the lack of capital. So the first thing is you have to have a direction in which you are going or what we call guidance form. So next you have to learn energy management.

You have to know when to expend your money and in which environment you're operating your business so you can maximize your success. Third, you have to stage. You have to know when the initial momentum that got you started has taken you far enough and you need to change your business direction to adjust to the current economy. And of course, the last thing is that you learn from lessons learned. The failure to learn from history has caused us then to repeat it. In this case, in rocket science, failure to learn from your mistakes equals death and often this happens in small businesses if they don't learn from their mistakes, they run out of capital, their plan fails, and of course they stop. That's why, by the way, I think franchising is an excellent form of business development because you get those 3 things. You get a proven brand, you get an excellent business system and third you get the training that most people just don't have when they start their own business.

Marty - Interesting analogy.

Don - Yeah, it is. Taking a scientific viewpoint to business is interesting. Dr. Needham, can you explain the 4 classes of people in wealth creation and the 7% solution please?

Dr. Needham - Today there are 4 classes in America. In Wealth 2.0, according to the Social Security Administration (because they have been tracking the statistics through the last part of what 3.0) 97% of Americans retired at age 65, they had their brokers still working and only 3% have achieved financial success. So the first class, the upper class or the wealthy class, they represent that 3%. And what that means is they learned to take their income and make income with it. The remaining 3 classes make up the 97% and that works out this way: the middle class is defined as those who have income greater than their expenses. But they have an income risk because you know we have seen it happen, especially in these last few months, those of us whose income kept going up and up and up, we were buying bigger houses, bigger SUV's, we were thinking we were accumulating assets but when the income fell off, we were stuck with those high payments and that is why we have such high foreclosure rates in America today.

The third class, the working class, their expenses are greater than their income and they are the folks who are up walking the floor at night, watching those commercials about how to get out of debt. There is a better class in America today and they represent, by the way, a very large portion of society. And then the last is the welfare class. They are the ones who have already become dependent in that Kittler's fatal sequence that we talked about. They have already become dependent. In fact, there are generations now of folks who just decided to live off the government. And that's okay too.

I mean the poor will always be with us as the bible promises but that's the way it is. Interesting in these 4 classes, there has been a recent scientific study released that said "in the world that we live, if we have what's called a significant emotional event" (now for some people, for example, who might be smokers and they find out they have lung cancer, that would be an example of a significant emotional event). Certainly this economy has been a significant emotional event. It says that 90% of the people when faced with a significant emotional event will not change their behavior. So that says that only 10% will change. So what I proposed is if 3% have already achieved financial security, there is a magical 7% (21 million Americans) that are looking for the new opportunity in Wealth 3.0 to achieve financial independence. And if they do so and if we can help them with concepts like this book, then we will generate the tax revenue that it would take honestly to support the other 90% who won't change.

Don - Kind of a sad number, isn't it, that 3% Dr. Needham? It's just incredible how many people...

Dr. Needham - After 200 years, only 3% have made it. It is a sad number. They don't even teach us how to balance our checkbook in school so why would we expect that we would know how to grow wealth. But see the wealthy have had a plan from the beginning. They hire wealth coaches. They got people involved that helped them teach them how to maintain those assets and they don't spend their assets on Madison Avenue drains.

Don - We are speaking with Dr. Robert Needham, author of Wealth 3.0, Saving America One Small Business At A Time. In Chapter 4 you talked about the wealth equation. Maybe tell us a little about that?

Dr. Needham - Sure, you know it is interesting. If I said to you right now "I have an equation that if I told you, it would make all your dreams come true, would you want to know about it?" and I think everybody would say "yes." And over the last 22 years of being a business consultant we developed this equation because we think it really does define what it takes to be successful. If you have a set of dreams that you want to accomplish, you have to choose a vehicle to help take you to those dreams. And for many people in Wealth 2.0, of course, that had been the stock market, the banking systems or even possibly real estate. And they had chosen those as their vehicles. But what I have learned is those vehicles are multiplied times a fraction and this is where the secret lies. At the top of the fraction is time. We all have 24 hours a day and if you get a chance to read this book you will realize I have done a great time study to show you that we really do all have enough time to make our dreams come true. We just don't think we do by the way we manage our time today. The second element on the top is money. And most people think that money is not available. But, Don, as you well know, money is available if you just package yourself and plan yourself correctly, there is money out there that can be borrowed, there is people who want to invest. Business is growing even here in 2009. Business continues to grow. That's an opportunity side vs. that danger side of that...

Don - that's right, Dr. Needham, we discussed that in the first segment. Right.

Dr. Needham - So if you take this...if you remember back when we were kids, if the number on the top of a fraction is bigger than the number on the bottom of the fraction, you get more. So if our time plus our money is large enough, we win because we multiply that times our vehicle and we get our dreams to come true. But what's important is what's in the denominator. What is underneath that time and that money. And this is the dream thief. This is the thing that steals most people's dreams away and keeps it from coming wealthy. And this is called distractions. And the truth about distractions is that they are all equal. It doesn't matter whether you have to go watch your garden hose unroll or whether you have to be at your kid's baseball camp. If those things are keeping you from achieving the things that you try to do in your life, then they are distractions and they keep your dreams from coming true. So the answer, the secret to wealthy creation in this country is to minimize your distractions to maximize your wealth potential.

Don - And the 7% solution I know you have the rule of 72 which is very interesting.

Dr. Needham - Right. The rule of 72. If you take the rule of 72 and this is a well-to-do concept...and this still flies today...you take the number 72 and you divide it by the interest that you are receiving (and this becomes real important when you analyze vehicles). So, for example, let's take a bank account that might pay 4%. You take 72 and you divide it by 4, you are going to get 18. And the average person's working life is about 40 years. So if you divide 18 into 40, we get a little over 2.

So we use new math and call it 3. What that means then is if you are planning to grow your business and you are using the bank as your vehicle then you start with a $1,000 and you're getting 4%, then you are going to get about 3 doubles in your lifetime. Which means 1 becomes 2, 2 becomes 4, 4 becomes 8. So you are going to make about $8,000. That $1,000 becomes $8,000 over 40 years. And I know that's exciting to everybody but if you go and compare that to what the bank has been making. The bank has been taking 72 and they have been dividing it by 18 because that is what they charge people's credit cards. So that gives you 4. If you tie 4 into 10, I mean if you divide 4 into 4, you are going to get 10 doubles. So in the same time you are making 8, the bank is making over a million dollars. And now we understand why they have marble floors and we have linoleum.

Marty - In Chapters 5 and 7, Dr. Needham, you discuss 7 principles and 7 realities of owning a business, would you share a couple of them with our listening audience?

Dr. Needham - I sure will. You know there are 14 total, there are 7 principles and 7 realties. I think that maybe the first one we will talk about is principle #1. Have them into work. The wealthy have well proven that if you have a great plan and then you have a mentor that helps hold you accountable to that plan, for them it's their attorneys, their lawyers, their accountants, their strategists. Then if you have that and you have a mentor that can hold you accountable then your plans come true. Just to quickly to review the other principles by name, you have to overcome debts, to have to plan for emergencies, you have to create a worship to allow to you go build your train, you have to learn how to compound that capital then diversify your risk and of course then plan to transfer that legacy to your family.

Going down to the realities. There are 7 of those too. The first one of those is get rich quick is always a scheme and you know that is absolutely right. There is no perfect business, there is no perfect pill that you can take to give you absolute success. We live in an instant coffee, instant success society. Everybody wants a pill to solve the problem but the truth is it still takes work and effort. You have to invest that time and that money. In that reality, we take the time and explain that. But some of the other realities that you have to know is you have to learn how to manage your desire and your action. You have to become excellent in small things. You have to learn to manage the risk. You have to develop the principle the harvest which means you reap in a different season than you sow. You have to learn the law of the increase and of course you have to have the faith to get started. So those are just a quick review of those. They are excellent principles and realities and if people study those, they give them the great core for how to get this business going.

Don - There is no short cuts.

Dr. Needham - Right. There is no short cuts.

Marty - When you say develop a wealth plan and a wealth coach, did you want to talk about what you mean about that?

Dr. Needham - You know in modern business you have to develop your plan based on what the current environment is. So if you except that we are in a 3rd phase of Wealth development in our country, then you have to have plans that are based on that and they are not stuck in some other old strategy. The first thing you need to understand is what makes the difference in the new environment and so in this book, by the way, we show how to develop a plan and we also give them a set of forms to help them complete their capital analysis and stuff to know what they can go forth with and what is just a pipe dream. But once they have established a plan to own a small business which is going to be my recommendation, then they need to get themselves a wealth coach. If they need a professional for them to do, they can certainly call our firm and we will help them find a wealth coach in their local area but you can also just get your best friend to be your wealth coach. It has to be somebody who is going to be tough on you. They can give you the knowledge skills and ability to do what you need to do in your plan and then they will hold you accountable.

You think about a business, it is kind of like working out with a fitness coach. You go there and you know that really working out alone is not going to do it, you have to also diet and so you have to learn to eat less and move more. There is nothing that changes that. It does not matter what diet you call it, that is the fundamentals of that deal. Well the same thing is true with starting a business. You have to learn to spend less and save more to get those assets where your income becomes starts earning the income for you just like the wealthy do. So you need a plan and you need a wealth coach to help you get through that.

Don - And of course Dr. Needham, Marty and I have read the book. What I love about the book is just over a little of a 100 pages. There is no fluff in this book. It is all information. This is the type of book that people are going to be reading a couple of times and then read it again down the line a little bit. A real solid resource and we feel, obviously, very important for somebody opening up a business, they really need to read this book.

Dr. Needham - I appreciate that, Don. We purposely made it short. We made it 8½ x11 so it can be used as a resource. It is not a story. It is a fact, step-by-step on how to become wealthy.

Don - Maybe you can talk a little bit more about Wealth 3.0 and what you are proposing. In Chapter 8 you went into more on that.

Dr. Needham - As we started looking at what would be the right decisions going forward, we took a look at a variety of different options. We went back 5 years and we actually pulled the research and we compared bank CD's to the stock market to real estate and to small business. When we got dropped off I heard you giving the quote and statistics about how strong small business is to the economy right now. Well we took a look at those numbers and what was very interesting was first of all, if you take a look at the bank...if you started with $100,000 and deposited it in a CD, and we pulled the data directly from bankcd.com, got the information directly from them. If you can take advantage of the highest possible interest rate in the CD over the last 5 years and moved your CD every year which is kind of difficult to do to get those high rates. But if you managed to do that, your $100,000 would become $124,000 and change. That's not bad.

In 5 years, you make 25% more on your money. If you went to Wall Street, unfortunately, if you took a look at the Dow Jones industrial average while in the 4th year, your number would have been $132 and by the end of the 5th year because of the this change in power that is taking place, it dropped to $85,000 so you actually lost money. When you go to real estate...the beautiful part about real estate is you can leverage. So you took your $100,000 and you borrowed $500,000 through the real estate because you can leverage 80/20. And so looking at real estate and we pulled up the National Association of Realtors data and they actually had averaged the cost of all the houses in America and despite the news reports that the sky is falling, the reality is with the exception of 5 states, America did real good in real estate over the last 5 years and that $100,000 with the growth and equity after you sold it would have made you $93,000 so your value would be $193,000.

When you come back and compare that to small business, there really is no comparison. As we get to talking about the magic of compound in businesses in Chapter 9 and this strategy it is just going to be amazing what those results will be. Want to go to that next or are we going to a break?

Dr. Robert Needham

Franchise Interviews meets with franchise expert Dr. Robert Needham

Dr. Needham - As Don had shared with you earlier, America's small business is responsible for 50% of all the workers, 80% of all the new jobs, 40% of all the new technology and 97% of the employment in this country. It is hard to imagine when we hear about those big businesses, those big fragile giants that are having trouble today. We think of them as being the great employers but the truth is, it is small business. That is where the employment is taking place and it is coming from places you don't expect. I mean minorities are getting in business, woman are getting into business. In fact, those are some of the greatest growth segments. So be encouraged out there, woman and folks. If you think that the opportunity is dead in corporate America, it is alive and well in small business. I would just like to make a couple of comparisons. I took an average small business.

The original perfect business as we talked about before, there is no perfect person that runs such a business so I am going to give you just a simple example. If you took a typical business and we invested $50,000 in getting that business opened and we only made $25,000 profit from that business which there are many hundreds of businesses in this country in which you can do much better than that. But let's just take that example. Going back to the original example we talked about where we invested $100,000. In this case, we can buy 2 small businesses. And if we did nothing but just take the income off those businesses for 5 years. So if you take a look at those 2 businesses, each generating $25,000 profit. That would be $50,000 a year times 5 years, it would be $250,000. So it beats real estate, it beats the stock market, it beats the bank. But if you compound businesses like you used to compound interest in the rule of 72, you get some very interesting outcomes. For example, if we take a growth and income strategy where we take the same businesses still making the same profits except we now when we have enough cash we buy another business each year and we just let it continue to compound and we hold and reserve the difference, well if we started with 2 in the first year, in 4 years at taking $50,000 a year, interestingly enough we can acquire 4 more businesses. At the end of that 5 years, not only we will have raised our $100,000 in business assets to $300,000 but believe it or not we would still have an additional $300,000 of cash flow that we could have taken from the business. That is a beautiful strategy when you can look at raising your assets 3 times and making more than any of the other strategies could have produced and yet you still started with the same $100,000. We have an exciting strategy where we show folks how to take $100,000 and through taking no money out of the business but rather plowing it all back in and maximizing the full potential, it is possible with just averaging ordinary strategies of good businesses that are stable in this economy that are recession resistant to take $100,000 all the way to believe it or not more than $1,000,0000. So there is great opportunity in America today using Wealth 3, picking the right businesses that have a good business plan and a good strategy, getting a coach to help you get through the process and then staying on the plan with a near horizon (5 years)...by the way, we work with folks that have less than $100,000 as well. We help them get in to what we call Target 1, up to the first $100,000 then we hyperleap them up to go over $1,000,000. And then folks who have at least $1,000,000 we take into multiple millions. That is the beautiful part of this strategy.

Don - What I also like about the book is that you are using actually statistics to show people that really the best option of all the investments is business ownership. But like you said, you have to choose wisely. That is where mentors and advisors come in and to not only choose the right business or franchise but to have multi-units or multi-businesses. That's really the key here.

Dr. Needham - Exactly, multi-unit or multi-concept. We are teaching people that have become their own CEO to stop ruining their lives and start taking ownership of it and to become their own CEO and own multi-concepts. Hire a lot of people, create jobs. This is good for America. It is good for them. It works. And they don't have to work 100 hours a week. This is a business that if you have your plan well designed you can actually work in it as little as 14 hours a week and you don't even have to leave your job because you are afraid to leave your job. You don't have to. We can show people how to become what we call passively-reactive in the business, but we call it pactive.

Don - We know a lot of people, and Marty & I doing this show for a couple of years, don't move forward with a business or a franchise because they are just nervous. But that is where a specialist, a consultant, an advisor, mentor coming in to just really review everything about there options and about themselves. That you could start up a business even if you don't have that much. You don't always need a couple of hundred thousand to start up a business but you do have to choose a right type of business and I think the main message of this book is what I really like and what you did in Chapter 10, Are You Ready for a Revolution? Maybe you can talk about that a little bit, please.

Dr. Needham - I would be happy to. You know fear is exactly the paralysis of most Americans like you say we have been sold a wrong train. We believed in benefits and those types of things when in reality we can replace those for as little as $10,000. We do not need to be held captive anymore and so I propose...in fact, we have 2 websites. www.drneedham.com, they can get the book for $20, freight included. So there is a way to get your plan started. And then we created a new website wealth3-0.com and that is where I am going to be blogging and continue to coach people who want to join this revolution. It is free to start up and I encourage people to go there and do that. What I propose is if we can take that 7% that those group of people who still have a dream in their heart, who still want to be wealthy, who still want to accomplish what America can give and they can join us and we can create a system of wealth coaches in this country and even some of them will become mentors to help other people in their communities by having Wealth 3 group meetings in their areas.

We can help each other. We can build a system...it is like the book Fahrenheit 451, I use that as the example in Chapter 10. In that book, people had to memorize books because the government was burning books and each person had a responsibility to learn a book and they passed that on to the next generation. I say to you to the 7% in this country who want to achieve wealth in their lifetime, you can do it. If you memorize systems like Wealth 3.0 and you'll get behind and get yourself a good strategy or good company, often a franchise is one of the best ways to go and you will get yourself a mentor, somebody who can keep you on path in as little as 5 years you can have your dreams come true. And so I ask them to join me in a passive revolution to safe America one small business at a time.

Don - It is a great message because obviously something has to give in what is going on with our economy. There are too many jobs being lost, the declining company loyalty. All our people have to own their own businesses and this revolution is a great way to go. It is creating jobs and building wealth. It is a perfect message.

Marty - I want to thank you again, Dr. Needham, for coming on our show. You are always an incredible guest and again, Don and I are going to have to have you back in the near future.

Don - Dr. Needham, you are 2 for 2.

Marty - Still my favorite guest, absolutely. I am still taking notes. Thank you again.

Dr. Needham - Thank you.

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