How to Use Other People’s Money Wisely in Your Business

Using Other People’s Money (OPM) wisely is a strategic approach in business that involves leveraging external funding to finance growth, development, and expansion projects. This method allows businesses to undertake more significant or more ambitious projects than they could with their own resources alone. Here, we’ll delve into how to identify opportunities to use OPM effectively, explore various sources of OPM, and examine real-world case studies of businesses that have successfully leveraged OPM.

Identifying Opportunities for Using OPM

To effectively utilize OPM, it’s crucial to identify opportunities where this approach can maximize returns while managing risks. Here are guidelines to spot such opportunities:

  • High ROI Projects: Look for projects with a high potential return on investment (ROI) that significantly exceeds the cost of capital. OPM is best used when the returns are predictable and justify the interest or equity given away.
  • Expansion Initiatives: Whether entering new markets or increasing production capacity, expansion often requires significant capital. OPM can provide the necessary resources without depleting your reserves.
  • Innovative Product Development: Developing new products can be capital-intensive. Using OPM for such projects can help mitigate financial risks while pursuing innovation.
  • Leveraging Business Cycles: In industries with predictable business cycles, OPM can be used to scale operations up during peak demand periods without permanently committing your capital.
  • Strategic Acquisitions: Acquiring competitors or complementary businesses can be an excellent way to grow. OPM can finance these acquisitions, allowing for strategic expansion.

Sources of OPM

OPM can come from various sources, each with its advantages and considerations. Here’s a comprehensive list:

  • Loans: Traditional bank loans, lines of credit, and specialized financing (like equipment financing) are common sources. They require repayment with interest but allow you to retain full ownership of your business.
  • Investors: Angel investors and venture capitalists offer capital in exchange for equity. This option is suitable for high-growth potential businesses willing to share ownership and profits.
  • Crowdfunding: Platforms like Kickstarter and Indiegogo allow businesses to raise funds from a large number of people, typically in exchange for early access to products or other rewards.
  • Government Grants and Subsidies: Some government programs provide funds to businesses in specific industries or for specific purposes, like innovation or exporting.
  • Partnerships: Strategic partnerships with other businesses can provide capital and other resources. In exchange, partners may seek a share of profits or a say in business operations.

Case Studies of Successful OPM Use

Tesla Motors: Tesla Motors’ use of government loans is a notable example of leveraging OPM for growth. In 2010, Tesla secured a $465 million loan from the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing program. This loan was crucial for financing the development of the Model S sedan. Tesla’s ability to repay this loan nine years early, in 2013, underscored the successful use of OPM to accelerate product development and company growth.

Pebble Technology: Pebble Technology, the company behind the Pebble smartwatch, showcased the power of crowdfunding as a source of OPM. In 2012, Pebble raised over $10 million on Kickstarter, significantly exceeding its initial $100,000 goal. This funding allowed Pebble to launch its product without traditional investor funding, demonstrating crowdfunding’s potential to kickstart innovative projects.

Airbnb:  Airbnb provides an example of using investor funding to scale a business rapidly. Starting with seed funding from Y Combinator in 2009, Airbnb has raised multiple rounds of funding from investors. This influx of OPM has fueled its global expansion, transforming it from a small startup to a dominant player in the hospitality industry.


Using OPM wisely requires a strategic approach, focusing on opportunities with high growth potential, leveraging various funding sources, and learning from successful examples. By identifying the right opportunities, understanding the sources of OPM, and studying real-world case studies, businesses can effectively utilize OPM to fuel growth, innovation, and expansion. The key is to balance the pursuit of ambitious goals with the prudent management of financial risks associated with using other people’s money.


Understanding Other People’s Money and the Float – An Introduction

In the world of business and finance, two concepts that often come to the forefront are OPM (Other People’s Money) and the float. Both these strategies, when understood and applied judiciously, can offer businesses significant leverage and operational advantage. Here, we delve into what OPM and the float mean, their historical context, and the blend of opportunities and hazards they bring to the table.

Definition and Basics

OPM (Other People’s Money)

OPM refers to the use of borrowed funds or investment capital from external sources to finance operations, investments, or acquisitions, rather than using the company’s own funds. The fundamental allure of OPM lies in its ability to magnify investment returns and fund growth initiatives that would be unattainable with limited internal resources alone.

For example, consider a real estate investor looking to purchase a property. Instead of using entirely their own money, they might put down a 20% deposit and finance the remaining 80% with a mortgage. This allows them to control a significantly larger asset and benefit from its appreciation and income potential, illustrating the power of leverage that OPM can provide.

The Float

The float refers to the time difference between when a business receives payment and when it actually needs to disburse cash for its expenses. In essence, it’s the use of money that doesn’t belong to the business yet. This concept is often leveraged in businesses that collect payments upfront before incurring the cost of goods sold or services rendered.

Insurance companies are classic examples of businesses that operate on a float. They collect premiums upfront and may not need to pay out claims until much later. This interim period allows them to invest the premiums to generate additional income, effectively using their policyholders’ money to create profit.

Historical Perspective

The use of OPM and the float is not a novel concept but has been refined and leveraged more strategically over time. Historical instances, such as the use of investor funds in the building of the American railroads or the development of major industrial enterprises, underscore the significant role that OPM has played in economic expansion and innovation.

The concept of the float has similarly evolved, particularly within the insurance industry. Legendary investor Warren Buffett, for instance, transformed Berkshire Hathaway’s business model by aggressively investing the float generated from its insurance operations, leading to unparalleled growth and investment success over decades.

Benefits and Risks


The primary advantage of using OPM is the potential for higher returns on investment. By leveraging other people’s money, businesses can undertake larger projects, expand more rapidly, and potentially realize higher profits than would be possible using only their own funds.

The float offers the benefit of working capital efficiency. Businesses can use the interim funds to earn interest or invest in short-term opportunities without dipping into their own cash reserves, effectively turning a timing difference into a profit-generating strategy.


However, with greater potential returns come increased risks. Reliance on OPM increases financial leverage, which can amplify losses as much as it can magnify gains. If investments funded with borrowed money fail to produce expected returns, it can lead to financial strain and even insolvency.

The management of the float also entails risk, particularly liquidity risk. If a business misjudges its cash flow timing and is unable to meet its obligations when they come due, it can face serious financial distress. Furthermore, aggressive investment of the float can lead to significant losses if those investments perform poorly.


OPM and the float are powerful tools in the arsenal of business and finance professionals. When used wisely, they can significantly enhance a company’s growth and profitability. However, they require careful management and a clear understanding of the associated risks. Businesses that master the art of using other people’s money and effectively managing their float can position themselves for success in the competitive landscape.