The Kickass Entrepreneur
  • About
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Book
  • Courses
  • Podcast
  • Resources
  • Contact
The Kickass Entrepreneur
Subscribe
The Kickass Entrepreneur
  • About
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Book
  • Courses
  • Podcast
  • Resources
  • Contact
  • Featured Top Posts

How to Become a Wealthy Entrepreneur

  • February 1, 2021
  • 4.8K views
  • 7 minute read
  • Jeff Wiener
Become a Wealthy Entrepreneur
Share
Tweet
Share

Before I begin this post on “how to become a wealthy entrepreneur”, I wanted to thank all of the people who submitted responses to last week’s request for my blog survey. The survey has 14 (mostly multiple-choice) questions, and I received quite a few responses, enough that I will compile the results and I will provide an update of all of the answers in next week’s post. If you haven’t submitted a response, then it isn’t too late … I would really appreciate your input, and it shouldn’t take more than 5 minutes.  You can find the survey here.

And now, back to regular programming …

For those who have been reading my posts long enough, and especially those who have read my book, The Kickass Entrepreneur’s Guide to Investing, you will know that I’m not a big fan of an entrepreneur working with an investment advisor.

Yes, my bias is based on my negative experience of having spoken and worked with quite a few advisors over the years, and in late January of this year, I fired my advisor.   I fired this particular advisor because I just didn’t feel she was asking the right questions (it was a fairly short-lived relationship anyway).

In the last 40 years of investing, I’ve worked with maybe four advisors, one of whom I am still working with, so it’s not like I have a long list of advisors that I’ve thrown to the curb, BUT over the last twenty or so years, I’ve had dozens and dozens of conversations with different advisors who have cold-called me to discuss their philosophy and to pursue me as a potential client.

The conversation invariably starts with me asking how their investment philosophy is any different from all of the other advisors out there.

For the most part, all of the advisors have a similar philosophy.  They each have their unique blend of stocks and bonds that they recommend, but rarely, if ever, do they view the wealth that an entrepreneur already has tied in their business as part of the overall asset allocation strategy.

The holy grail of an asset allocation strategy has uncorrelated assets that have been optimized for tax, across multiple currencies, that can produce a steady stream of annuity income, with enough cash set aside for the entrepreneur so they can take advantage of opportunities as they arise.

When I mention this to an advisor, they look at me like I’m from another planet.

The advisor makes money on assets they invest.  It isn’t in their interest to look at your portfolio holistically, including any existing real estate—or your business for that matter—and suggest that maybe you should hold extra cash because you have too much invested in equities already.  And yes, your business should be included as part of your overall mix.

Millionaire Next Door, The Kickass EntrepreneurI also suggest that if you live below your means (think of the book The Millionaire Next Door), maximize your business’s growth and profits, reinvest those profits back into your business and your own investment real estate portfolio, it is very possible to grow your wealth into the millions, and even tens of millions, of dollars. 

The average employee salary in North America is around $60,000 a year. If you manage to save $10,000 a year and invest all of your proceeds into the stock market at a 9% compounded year-over-year return, after 30 years, you’ll have $1.36 million dollars, which is definitely a decent amount.

If you have loftier ambitions that reach into the multiple millions, or tens of millions, then you have two levers that you can adjust:

  1.    Invest more
  2.    Produce a better return

Enter the Entrepreneur

As an entrepreneur, you can grow your wealth as you grow your business’s profits and improve your returns, but there’s also an extra lever you have at your disposal … the value of the business itself. This will ultimately lead you on your mission to become a wealthy entrepreneur.

As an employee, no matter how well you do at your job, unless your company offers some sort of equity arrangement, you might improve your salary and position in the business, but you’re not building wealth that can be sold.

An entrepreneur not only has the advantage of growing profits and leveraging additional team members to expand the business, but the business itself has value.  In some cases, the business has tremendous value that can make the entrepreneur an instant multi-millionaire.

Let’s say you start an elevator repair business a few years after college. You start with $30,000, and you manage to grow the business from a fledgling start-up with one employee, you, to a 20-person operation doing $5 million in revenues and $500,000 in profits by year 20.  (That’s no small feat, by the way, so congratulations if you’ve managed to get there.)

The average service business that has a large percentage of recurring revenues will have a valuation anywhere from 4 to 6 × EBITDA (earnings before interest, taxes, depreciation, and amortization), so the $500,000 in profits will value the business anywhere from $2 to $3 million. Let’s round this number at $2,500,000. For more info, you can read this post:  How to Expand Your Business Through Acquisition and Make a Killing

Enter Asset Allocation and Diversification (The Trick to Become a Wealthy Entrepreneur)

My recommended asset allocation portfolio looks something like this:

1/3 real estate

1/3 equity (business value)

1/3 cash (fixed income, bonds)

In the above example, since the entrepreneur has so much equity in the business, I’m going to suggest that they shouldn’t invest additional dollars into the stock market.  Any extra cash should be invested:

–        Back into the business to grow the business

–        In investment real estate

–        As cash on hand (fixed income investments, bonds)

Investment Real Estate (Real Estate as a Way to Become a Wealthy Entrepreneur

If this entrepreneur managed to put aside $300,000 as a 30% down payment toward a $1 million apartment building, it is possible that after 10 years, the building can be worth $2 million.  I’m not going to explain in great detail in this blog post how you can turn $1 million of real estate into $2 million, but I do explain that here and in much greater detail in my book, here.

After 10 years, the building’s $700,000 mortgage will now be approximately $400,000, so the initial $300,000 investment will now be worth $1,600,000 ($2 million − $400,000 mortgage = $1,600,000).

Assuming the entrepreneur has been diligent with putting cash aside into the third bucket, it is possible that by the 20th year, the entrepreneur is able to live off the salary provided from the business and invest the bulk of the business’s $500,000 profits into the cash bucket.

Keep in mind, I did explain that the business grew to $500,000 in profits by the 20th year, so economic fluctuations aside, the business would have conceivably produced $480,000 in profits in year 19, perhaps $470,000 in year 18, $450,000 in year 17, and so on.

Again, if the entrepreneur manages to live off the salary provided by the business and manages to invest the business’s profits into 1. real estate, 2. the business itself (for growth and acquisitions), and 3. cash, then it is very possible that by the 20th year, this business owner has a wealth formula that looks something like this:

Business Value = $2,500,000

Real Estate = $1,600,000

Cash = $2,500,000 (conservative assuming the profits as discussed above)

This business owner started the business with $30,000.  By year 20, the entrepreneur has $6,600,000 in assets (net worth), not including their primary residence and other assets. This equates to a 31% compounded year-on-year return. This business owner managed to turn $30,000 into $6,600,000 in 20 years.

Point 1:   Building a business isn’t easy.

Point 2:   Building a profitable business is even more difficult.

Point 3:   Being disciplined, living below your means, despite all of the temptations to buy all the fancy toys that come with large profits, is most challenging.

If you want to build wealth, and then become a wealthy entrepreneur, you need to focus first on point 3. LIVE BELOW YOUR MEANS.   This one is the most challenging because it requires consistent discipline.

Then, focus on point 2 and build profitability into your business.  It isn’t acceptable to forgo profits, year after year.  Your business should make at least 10% profit (as a percentage of revenue).

Then, last, focus on growing your business’s revenue.

Building wealth isn’t easy, but this is how to become a wealthy entrepreneur.

A quick reminder, once again, that if you can spare 5-minutes, I would appreciate your feedback on my blog survey.  You can find that here.

In this post, I mentioned a book, which happens to be one of my favorite business books of all time, The Millionaire Next Door.  You can get more info on that book here.

If you found this post interesting, you might like this one I wrote a few months ago:  My Response to an 18-Year-Old Who Wants to Become a Millionaire by the Time He’s 30

And this one:  Are You Really Cut out to Be Rich? The Average Net Worth to Make it Into the Top 1% and How to Get There

To your success,

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

Related Posts:

  • The Entrepreneur's Secret to How to Become Wealthy and Build a Personal…
  • Are You Destined to Become Wealthy? What Is Your Money Script?
  • A Serial Entrepreneur Who Still Doesn't Feel Comfortable in the Role of…
  • Business for Sale. I'm Looking for an Entrepreneur to Run a Business. Are…
  • How to Become a More Successful Entrepreneur
  • Should You Go to University if You Want to be an Entrepreneur?
Share
Tweet
Share
Related Topics
  • become a wealthy entrepreneur
  • entrepreneur
  • Featured
  • investing
  • return on investment
  • wealth
Jeff Wiener

Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time traveling and with his family, writing this blog, managing his real estate portfolio of apartment buildings,  overseeing his investment portfolio, investigating angel investments, coaching other entrepreneurs, and managing his private equity holdings. Jeff is currently on a couple of boards, one for profit, the other not for profit, and now helps entrepreneurs grow their business, profits, and ultimately, create wealth.

Previous Article
grow your wealth 5 step plan to building wealth.
  • Featured Top Posts

How Do You Grow Your Wealth in 2021? My 5 Step Plan to Building Wealth

  • January 31, 2021
  • Jeff Wiener
View Post
Next Article
  • Featured Top Posts

What Three Things Can a Young Person Do to Turn Their Life Around?

  • February 1, 2021
  • Jeff Wiener
View Post
You May Also Like
Protect and grow my wealth
View Post
  • Featured Top Posts

How I Protect and Grow My Wealth With These 8 Simple to Understand Concepts.

  • October 15, 2022
  • Jeff Wiener
Wealth Building Secrets
View Post
  • Featured Top Posts

14 Wealth Building Secrets You Need To Know

  • October 11, 2022
  • Jeff Wiener
Become a Decamillionaire
View Post
  • All Blogs
  • Create Wealth (Investing)
  • Featured Post for Main Menu
  • Featured Top Posts

How to Become a Decamillionaire, Grow your Net Worth to $10 Million, and Join the 1% Club

  • August 1, 2022
  • Jeff Wiener
what net worth makes you rich?
View Post
  • Featured Top Posts

What Net Worth Makes You Rich? The Average Net Worth to Make it Into the Top 1% and How to Get There

  • June 4, 2022
  • Jeff Wiener
Investing in apartment buildings
View Post
  • Featured Top Posts

How Do You Make Money Investing in Apartment Buildings?

  • January 10, 2022
  • Jeff Wiener
Entrepreneur Semi-Retirement
View Post
  • Featured Top Posts
  • Retirement
  • Selling your Business

My Journey Post Business Sale as I Sail Into a New Harbour. The Next Stage, Entrepreneur Semi-Retirement, and Life Post Business Sale

  • December 14, 2021
  • Jeff Wiener
business challenges
View Post
  • Featured Top Posts

8 Business Challenges Every Small Business Struggles With and How to Overcome Them

  • December 11, 2021
  • Monica Serreon
Sell me this pen, Wolf of Wall Street
View Post
  • Featured Top Posts

Sell Me This Pen. I Tackle the Wolf of Wall Street Sales Riddle. Do You Know the Right Way to Sell the Pen?

  • December 8, 2021
  • Jeff Wiener

Join 6,472 Entrepreneurs That Get My Business Building and Wealth Creation Posts by Email

I can teach you how to build a successful, profitable business, and turn that into millions in personal wealth.

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

We won’t send you spam. Unsubscribe at any time.

Recent Posts
  • Trucks in a parking lot 1
    Protecting Your Trucks from Unforeseen Events
    • October 4, 2023
  • Businessman leader give presentation on eco-friendly implementation in order to reduce CO2 emission and make sustainable ecology for greener future with corporate environmental regulation. Quaint 2
    How Training Improves Public Service Delivery
    • October 4, 2023
  • seo-optimization 3
    Rising Above the Digital Din: The Importance of SEO in Today’s Marketing Sphere
    • October 4, 2023
  • Maximizing Your Roofing Business with Web Design, PPC, and SEO
    • October 3, 2023
  • man using ipad 5
    Entrepreneurship 101: How Experts Recommend Getting Started
    • October 2, 2023
Featured Posts
  • Become a Decamillionaire
    How to Become a Decamillionaire, Grow your Net Worth to $10 Million, and Join the 1% Club
  • how to become wealthy
    The Entrepreneur’s Secret to How to Become Wealthy and Build a Personal Fortune
  • Most Profitable Small Businesses
    27 of the Most Profitable Small Businesses to Open in 2023
Categories
  • All Blogs (1,078)
  • Business (425)
  • Canadian Financial Products (4)
  • Create Wealth (Investing) (134)
  • Entrepreneur Interviews (27)
  • Featured Post for Main Menu (4)
  • Featured Top Posts (23)
  • Finance (115)
  • Financial and Investment Calculators and Economic Data (120)
  • Fitness (10)
  • Growing Profits (72)
  • Growing Revenues (115)
  • Growing Revenues (71)
  • Marketing (165)
  • Millionaire and Business owner interviews (3)
  • Positive State of Mind (69)
  • Real Estate Investing (17)
  • Retirement (13)
  • Reviews (13)
  • Sales (16)
  • Sell Me This Pen (8)
  • Selling your Business (13)
  • Starting a Business (1)
  • Startup Ideas (18)
  • Technology (200)
  • Top Products (4)
  • Uncategorized (62)
Follow us
Author
Jeff Wiener
Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time…

    CHECK OUT MY BLOG, AND SUBSCRIBE

    about
    The Kickass Entrepreneur

    Expand Your Business, Improve Profits, Create Wealth

    Expand your business, improve your profits, and create wealth. Each one of the three can be elusive goals. Follow the right steps, and you, too, can create financial independence. It is possible … you just have to take the right steps.
    NAVIGATION
    • About
    • Blog
      • All Blogs
      • Create Wealth (Investing)
      • Entrepreneur Interviews
      • Featured Top Posts
      • Growing Profits
      • Growing Revenues
      • Marketing
      • Positive State of Mind
      • Real Estate Investing
      • Retirement
      • Sales
      • Selling your Business
    • Book
    • Courses
    • Podcast
    • Resources
    • Contact
    TAGS
    apartment BATNA Business business failure business growth business sale Capitalization Rate CAP Rate cash cash flow Creating Wealth Discipline entrepreneur entrepreneurship excel extra cash Featured goal setting Growing Business investing investment real estate M&A marketing Marketing KPIs Mergers and Acquisitions | M&A | Entrepreneur Blog Millionaire millionaire next door mistakes MUR Peter Principle Profit profitability real estate retirement revenue Revenues sales sales management Semi-Retirement Blog | Entrepreneur Blog | Small Business Blog small business Stagnant stocks success Thomas Stanley wealth
    RECENT ARTICLES
    • Net worth percentile calculator canada
      Net Worth Percentile Calculator for Canada Including 23 Wealth and Income Statistics for 2023
      • September 28, 2023
      • One comment
    • Net Worth Percentile calculator USA
      Net Worth Percentile Calculator for The USA Including 23 Wealth and Income Statistics – 2023 Data
      • September 19, 2023
      • One comment
    • horse jockey
      Top 5 Most Successful Horse Racing Jockeys Ever
      • September 8, 2023
    • man and papers
      Active vs. Passive Investing: Which Is Right for You?
      • August 8, 2023
    • seoul
      How Seoul Internships Shape Your Professional Journey
      • July 24, 2023
    • casino
      Empower Yourself With These 5 Lifelong Skills For Success In Casino Business
      • June 23, 2023
    The Kickass Entrepreneur
    • Coaching
    • Book
    • Blog
    • Contact
    • Privacy Policy
    • Terms
    • Disclaimer
    • Facebook
    • LinkedIn

    Input your search keywords and press Enter.