Yesterday I said “start a business to create wealth” and I shared at least one of my concerns about starting a business.
The question is: why is STARTING a business such a wonderful way to create wealth? The answer is (drum roll, please): because you create something from nothing!
Obviously, if you have a successful business, you will also have more money to invest and buy more assets. Wealth is determined by assets, not income! And all of us can do with more income.
But a good business is also an asset! Consider this: you read this, it makes sense and you decide that you want to give it a try. And you start thinking about the type of business you can start (more about that in a next post).
You start a business selling widgets. And best of all, you don’t have to spend a single cent to get started. The business grows and the profit increases. I am not going to put a figure to the profit, but consider this: as a rule of thumb, or as a working hypothesis, a business sells for about 2 times net profit. Imagine STARTING a successful business, making money and selling it for 2 times net profit! That is creating wealth big time.
But remember this, you cannot invest the money you make from selling to give you the same income! That is why I am always sceptical when people SELL a business. And why you must think carefully before you sell your business. And that is why there is a saying: let the buyer beware (caveat emptor).
But there are valid reasons for selling – people simply get tired of what they are doing. Or you get to the limit where you can take the business. Or you want to start a totally new business.
Just imagine what you could do in terms of investing with an extra R2 000 per month. What about R10 000 per month? And there are people who do better than that with part-time business!
Next time we look at types of business and the skills needed.
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