Hopefully by now you understand that the idea of making money by buying stocks is huge lie. So how can you actually become very wealthy? The answer is to invest in your own company. Create your own winner. There is no other method in the world that allows you to make anywhere close to a 10,000% return on your money.
When I started my first business, I was able to make more than 10x the money I put into it. $10K turns into over a $100K. Writing this out makes it almost seem too good to be true, but to accomplish this took years of preparation beforehand where I made zero dollars a year. I also reinvested almost everything right back into the business so I could repeat this process over and over again.
There are many ways to make $15M over a long period of time, the amount of money you would have needed back in 1920 to qualify as a millionaire. While this term is still widely used in a way that suggests the same amount of wealth and success, with median house prices in major cities surpassing a million dollars you need a lot more to feel just as wealthy.
This article is for you if you are determined to amass at least $50M while still in the prime of your life. For brevity, the term rich or wealthy in this article will equate to having more than $50M.
Let’s first discuss one way you will never become rich: Selling your time. Imagine you spent eight years of your life in higher education earning a law degree, before spending eight years gaining experience in the real world. If you are extremely talented, then at age 34 (18+8+8) you may be able to command $400 an hour. Working 48 weeks a year at 50 hours a week, you will take home a salary of 960K. Unfortunately, as a wage earner you will have to forfeit half this amount in taxes. You’re left with 480K. Since you tirelessly work from 8AM to 6PM, you deserve a comfortable lifestyle. You spend $7K in total per month, including rent, food, travel, and clothing. Minus 84K a year, you’re now at 324K a year.
Without taking into account any investments you might make, after two decades of toiling away you will have saved $6.5M (or $4.3M in today’s terms) at age 54. No bueno! Because now you’re only six years away from being a senior and you’re still not very rich!
I used the example of a lawyer because they are one of the highest earning wage workers. You can only work a maximum of 70 or 80 hours a week, so there’s already a limit as unbreakable as the laws of physics. And chances are, your job will not be paying you anywhere close to $400 an hour. Now that it’s clear selling your time is not the path to wealth, let’s see what is.
In one word, it’s scale. Starting a business gives you scale as you can sell a product or service that can serve a lot of people. It also significantly multiplies the amount you earn for every hour you work. If you sell 100 hours of your time, you are only paid once for those 100 hours. You can’t continue to get paid for the hours you worked in the past, and unless you keep selling your time, you run out of your savings. The beauty of starting a business is that you will be rewarded for the time you spent creating a product for as many years as consumers keep buying it.
Scale is the reason talented musicians, actors, YouTubers and athletes make a lot of money. Why is Roger Federer rich? While he has world class skill in playing tennis, it’s not the prize money that has made him rich. Fundamentally the money comes from the fact that millions of eyeballs are on him. Therefore there are millions of ad impressions, just like advertising at the Super Bowl. It’s worth it for the brands to pay him tens of millions of dollars and in essence he is getting a percentage of the revenue the brands will make thanks to his power to open up the wallets of millions of consumers. Just like a movie star’s ability to put butts in seats at the movies. Any role that entitles you to compensation as a percentage of the box office/streaming revenue/ad revenue/sales is gold.
You become rich when you’re paid in percentages
Who could be richer than Roger Federer? The brand owner that’s writing the cheque to him. And nothing is better than getting 100% as an entrepreneur.
So let’s look at an example where you create a product that sells for $50. The retailer buys it wholesale from you at $25 (you get a big cookie if you can bypass the retailer and sell it direct-to-consumer). It costs you $10 to make. So your gross margin for this product is $15. Here’s how much you will make before taxes and other expenses. If you sell 1000 units, you’ll make $15K. Sell 10,000 units, you’ll make 150K. And if you sell 100,000 units a year, you make $1.5M a year. This already sounds promising, and you didn’t have to waste any time in college or playing office politics and doing late night favors making PowerPoints and Excel sheets.
Here's how many products you need to sell to make $1.5M in gross profit:
This is more than doable as the world population surpasses 8,000,000,000.
You could also start a service based business, as long as you are not providing the services yourself, as that goes back to selling your own time. So you can still become very wealthy being a lawyer, as long as you start a law firm. However, starting a product based business is usually easier than starting a service based business where you’ll have to hire, train, and manage many workers on a daily basis. Once you finish the time consuming and painful process of finding a trustworthy manufacturing partner, most of the hard work relating to product creation is over.
If you’re ready to make it rain, let’s go to Part 2: How to Find an Idea for Your Business.
