5 Steps to Wealth Building Made Simple
5 Steps to Wealth Building Made Simple
This is part of an ongoing series about how to build wealth. To receive the rest of the posts in this series, go to paparelli.com and subscribe.
If there is a recipe for wealth building that I’ve observed to be most successful over the years, it can be best summarized with these five steps.
Five Steps to Wealth Building
Step 1: Build a long-term business which provides cash-flow and increases in value each year.
Step 2: With the excess cash, invest in or start other businesses which produce cash and grow in value.
Step 3: Sell these businesses to other investors or companies who approach you and who want to buy them.
Step 4: Build your credibility with increased market exposure and public relations. People must conclude you are successful.
Step 5: Raise money from wealthy people who want to invest in you and your investment thesis. This will allow you to increase your personal cash-flow, take ownership of bigger deals, and realize higher dollar returns with far less personal risk.
The Beginning.
Step 1: Build a long-term business which provides cash-flow and increases in value each year.
You have to get started somewhere. And that somewhere had better provide you with cash-flow. You have to eat, have a roof over your head, and provide for your family. This is the first hurdle in building wealth.
The goal here is to start a business or buy a majority share in a business which will produce enough cash to maintain a decent personal lifestyle.
This is the riskiest stage of the wealth-building process.
You are making a personal investment of your money and time. This is your only focus as you begin the wealth-building journey. This first business has to work. It must succeed in becoming profitable, which means cash-flow positive. And the excess cash which the business creates must be enough to keep you going and growing personally and professionally.
Most business people stop at this wealth-building stage.
They don’t continue to step 2. Their thesis was to build wealth by starting and owning their own business. Once the business is up and running, the goal is achieved. They continue to work in the business and grow it over their lifetime. This business produces year over year increased cash-flow and increased value. At some point in their lives, they sell the business, thus converting their ownership into cash.
But there are other business people who proceed to the next step.
These people don’t allow the first business to become their identity. They find someone else to run the business. They move from operator to chairman leaving the day to day running of the business to someone else. They now have time to create or invest in something new, to move to the next phase, the next business in the wealth-building process.
Examples of people who did this:
Warren Buffet - Berkshire Hathaway
Henry Kaestner - Bandwidth.com
Jeff Muir - OnTarget
David Cummings - Hannon Hill Corporation
More on David Cummings in the next post in this series. To receive all of this series, go to paparelli.com.