Where is the real value in your business?

The other day I was talking with my wife Claire about the secret of the rich; that the amount they are worth is disproportionate to the amount they earn. Think about, if you have a small business with a small team making $250K profit per annum, then you probably have a business worth a multiple of 1-2x so you’re worth between $250K and $500K.

If you invest in the business and increase the profits to $2M per annum over a three year period, then depending on your industry that business is now probably worth a multiple of 4-7x, so you’re now worth between $8M to $14M.

So what you’re worth is far more than what you’ve made.

If you just focus on what you’re dropping out the bottom right now then you are in danger of missing the real value that your business can be worth in the future.

That’s why the rich get richer disproportionately; they focus on longer-term value not just shorter term wins.