Wealth Creation: Part 2
If you are an entrepreneur, you may have read my post on about income and thought, “this does not apply to me cause I’m building wealth by building my business.”
Well, I actually am talking to you too! Just replace the word income with revenue. The sentiment is the same.
Entrepreneurs who believe that increasing revenue in their business is the game they need to win in order to become wealthy, may be playing a losing game. Let’s explore.
Did you know that it takes most businesses three years to start making money? If you are a business owner, I think you would agree that income is one of the things you sacrifice in the first three years to get your business to profitability. So, not much wealth accumulation happening in the start-up years.
Did you also know that most businesses start to decline at year eight and a half? And what do most business owners do to try to save their declining businesses? They pay themselves less or worse, reinvest everything they have to save their business. Tough to hang on to wealth this way.
These averages mean that most business owners have five and a half years to build and retain wealth from their business. But, what do most business owners do in these key years? Most reinvest in the business to push revenue even higher.
Do you see a trend here? If a business owner doesn’t pull significant money out of their business to create wealth during the bad years, nor the good years, then, when do they do this exactly?
You could argue that a business owner becomes wealthy when they sell their business right? True. This happens. But how often? A lot less than you think.
In fact, according to the International Business Brokers Association (IBBA), up to 90% of businesses never sell at all.
Now, I’m not saying you aren’t special and you won’t beat these odds. I am definitely not saying to give up on entrepreneurship or that you should not start a business.
I have owned over thirty companies and have done well for myself. However, it may surprise you to learn that increasing revenue has not been the key to any of my significant wealth creation.
So now that all of us non-entrepreneurs and entrepreneurs are in the same boat, tomorrow we can explore how to play a different game so you can start winning at wealth creation.
