It’s Easier to Make $3M than $300k
Quote For This Week:
“One is the loneliest number that you'll ever do. Two can be as bad as one. It's the loneliest number since the number one.”
- Three Dog Night
Key Takeaways:
Making $300,000 is the hardest due to the Rule of 3s and 10s. What worked at a multiple of 3 won't work at the next multiple of 10.
Instead of settling at $300k, entrepreneurs should aim for 10X growth to $3 million, which is easier than going from $300k to $1 million.
Income follows assets, so focus on building valuable business assets that generate income independently.
Maxing out retirement plans and investing in real estate can starve the business of capital and time needed for growth.
Follow the Entrepreneurial Wealth Codex: create a 10X growth path, pay less tax, increase certainty, invest in your business, master business assets, and enjoy income growth.
RULE OF 3s AND 10s
The hardest amount of money to make is $300,000. Unfortunately, I see super talented entrepreneurs work their guts out and then stop once they make about $300,000 a year.
In today’s Commentary I’m going to talk about why and what you can do to prevent it.
But I am 100% serious when I say that making $300,000 is the worst.
It’s too easy to make $100,000 in the US today. If you are reasonably talented and able to dedicate yourself, you can work your way to $100k. Showing up is half the battle to $100k.
To get to $300k, well that takes serious work. You have to be more than talented and dedicated. You have to be exceptional. You have to go all in.
$300k sucks because it takes more than full-time dedication to make that kind of money, but it’s not quite enough money to really be free.
At $300k, you are stuck between a rock and a hard place.
There is an old adage founding business owners all come to understand after they become a little grizzly from time and experience. It’s called the Rule of 3s and 10s.
As you grow your business, anything that worked at any multiple of 3, will not work at the next multiple of 10.
Everything changes and so the business has to change. What got you to $30k in revenue will not get you to $100k. And what got you to $100k, won’t get you to $300k. $300k to $1M. $1M to $3M. $3M to $10M and so on. Basically, at each new level, the wheels fall off.
Even if you manage to scale through these ceilings, you will quickly realize that scaling profit is not the same as scaling revenue. It’s even harder to scale profit. There is not a linear association.
And the worst ceiling is going from $100k to $300k. Like I said, between $100k and $300k, you are stuck between a rock and a hard place. You have enough work to keep you more than full time busy (rock), but not quite enough revenue to hire A player talent to take the burden off of you (hard place).
So, what’s to be done?
10X IS EASIER THAN 2X
Without knowing about the rule of 3s and 10s, the mistake that entrepreneurs often make is believing that all growth beyond $300k will continue to compound the pain they are currently feeling. So, they settle into long hours, an upper-middle class lifestyle, and then turn to “Investing” to bail them out.
They lower their expenses until they are saving above the average, say 20% or about $60k per year, and then turn to Wall Street. They resign themselves to believe that investing in other people’s businesses is better than continuing to invest in their own.
The only hope for them now is that 20 years of saving and diversifying pays off & they have enough saved to take their beloved business behind the woodshed, put it down like Old Yeller, and retire. Retire worn out and exhausted.
"2x is exhausting and soul-defeating. 10X isn’t about more. It’s about LESS."
- Ben Hardy
Knowing that the $300k mark is a waypoint, not a destination, you should double down on yourself and your business.
I challenge you to not just think in 3s and 10s, but in 10X.
And what you will find is that going 10X is not 10 times harder. It’s actually easier going from 3 to 10.
I had the good fortune to meet Ben Hardy at a mastermind where he taught me, along with a few dozen other entrepreneurs, how to go 10X. When he drew this on the whiteboard he silenced the entire room. A true mic drop moment.
Going 10X starts with asking a much better question. The worst question is how to grow from $300k to $1M. There are literally thousands of ways to do that. That goal doesn’t provide enough focus. Instead, a much better, more powerful, more focusing question is what would your business have to look like to go from $300k to $3M or 10X what you are currently doing. There are probably only a few paths you can follow to get you there. Maybe only one. That’s focus.
Next, Ben reminded us of the Pareto Principle - 20% of what we are focused on today is producing 80% of our results.
So, option 1 of hitting your 10X goal is to double down on the 80% that is currently working. The 80% that got you to this level. Then ignore that I already told you that 80% will not get you to the next level. Here comes the proof.
80% of your efforts is generating 20% of your results, but that 80% is comfortable and part of your identity (because it got you to your current level of success after all). So to get from $300k to just $1M (one 3s and 10s jump), you’d have to work 10 times harder.
Here is the math:
20% of your efforts are producing 80% of your results = $240,000.
80% of you efforts are producing 20% of your results = $60,000.
Desired increase: $700,000 ($300k to $1M).
If you double down on the 80% you’ll produce another $60,000. You’d have to do that 11 times to get your profits up to $1M. Have fun.
Or you can believe Ben and Vilfredo Pareto ****and **** focus your efforts on the 20%.
Well, actually, you first stop doing the 80% and now you get all that time back and your profits only drop $60,000. Then, to make up the $760k gap, you only have to replicate the 20% that is working to produce the remaining $240,000 three more times.
Thus you’ve hit your profit target with only 80% of the effort it was taking you to do $300k.
A much better route than buying into the lie of Wall Street or working yourself to death is to recognize that your business is your greatest investment. The ceiling you hit is there because you lack the assets to break through it - not work ethic, or hustle or even luck.
Assets is what you lack.
INCOME FOLLOWS ASSETS
As I explained in Issue 2 of the Commentary, once assets are in place, generating income gets significantly easier. Exponentially easier.
With assets, the revenue you can create per person in your business (RPP) increases exponentially. This is why tech companies, especially SaaS companies sell for crazy valuations. It’s the income the underlying asset can create that is appealing.
This is also why banks will lend on real estate all day long and turn up their nose at businesses (until those businesses have assets). Real estate is considered good collateral because of the income it produces. It’s also why an employee with a W-2 can get loans so easily. They are the asset that is producing income in someone’s business. They become the collateral.
If you want a wake up call about whether you’ve built real assets, try getting a loan to fund the level of growth you desire in your business. It’s especially difficult for service-based businesses. Banks recognize that there aren’t any assets, thus no collateral and thus no loan. Compare that to requesting a loan to fund inventory or a piece of equipment - banks are willing to use those assets as collateral because they directly produce income.
THE WRONG WAY
Here is the typical path. Most entrepreneurs grow a business to about $300k take home. They are told by their CPA or financial advisor that they are “behind” because everyone that went and got a job started saving in their retirement accounts a decade ago (cause you know, compound interest and what not).
Feeling guilty and irresponsible, you get sold on maxing out every qualified retirement plan on the planet to try and catch up. This feels good in the short run because you start to have some tangible proof that you are building a little wealth.
Or you are told that rich people buy real estate, so you stop growing your business and instead, you take your discretionary time and now you are looking at markets, securing financing, dealing with property managers, etc.
But what your CPA and certainly your Wall Street salesman of a financial advisor can’t see is that all this “investing” begins to starve you and your business of capital and time.
Without that time and capital, you can’t invest in the assets your business needs to really grow. You are now stuck in 2x thinking - working to fund your retirement accounts and provide that capital to other business owners who are growing their businesses. Have you ever really stopped to ask why giving your money to another business, which is what you do when you buy stocks, is better than putting into your own business? Food for thought and a topic of a future Commentary Issue…
Those who do this don’t understand assets and they don’t understand true wealth building.
All those efforts are 2X, not 10X.
THE RIGHT WAY
Step 1: Create a Growth Path to 10X. That can be revenue or profit or a combination. Most business owners don’t know how to do this and CPA’s can’t tell you.
We will soon be doing a “Scale Your Profits” workshop where we will teach our clients how to create business models, projections and proformas for their businesses so they know exactly what has to be done in their business to 10X their profits. Members of our CWO ONE program will be coming for free and our CWO Syndicate get tickets at cost. If you’re not in one of those programs, but would be interested in an event like that, respond to this email and we will add you to the waitlist if there are any free seats.
Step 2: Pay Less Tax. At $300K the average business owner, even with a “good” CPA, is paying $48k more in tax than they need to. If the average business owner making $300k has 20% margins, saving $48k in taxes is the same as increasing top line revenue by almost $250k - without having to deliver for a single additional client, hire another employee or pay for marketing. That’s a 10X move. Start here and let’s have Uncle Sam fund your growth.
That number is not a guess. It’s the average we save our CWO clients in year 1 of implementing my DTOM (Don’t Tread on Me) Business Tax Strategy.
Step 3: Decrease Chaos by Increasing Certainty. This is by far the #1 overlooked step. As entrepreneurs we are hardwired for chaos. We think in order to get more results we have to do more of what got us results to this point. (2X thinking, remember?) Instead, what if you were to take a moment here and protect your business profits by digging a moat around you and your business with capital that is 100% liquid, but also protected from all market shifts, inflation, bank crises, taxes and lawsuits - the chaos around you would go down. You could be more focused, present and intentional in making your next 10X move.
Step 4: Don’t Invest. “But wait Brad, I thought you helped entrepreneurs to invest?” Yes I do. And I believe I am the only one who teaches it correctly.
“If you see fraud and don’t say fraud, you are a fraud.”
- Nassim Taleb
Wall Street, via its salesmen disguised as experts, has twisted the term “investing” to assume that the investment is external to you or your business. False.
Step 5: Become a Master of Business Assets (MBA). You have to make the switch to building assets. Take that liquidity from Step 3, along with your new found certainty and clarity, and go to work creating assets that will be valuable without you.
"Entrepreneurs and business leaders all over the world have come to think that income is correlated with sales and marketing activity, but this is short sighted. Income is inextricably linked to the underlying assets. If you want more income flowing through your business, develop new assets, improve the assets you have or buy asset that someone else has created, resisting the urge to keep focusing on lead generation, sales conversations, and hustle."
- Daniel Priestley
Step 6: Enjoy Exponential Growth in Your Income. Nuff said.
BOTTOM LINE:
If your business take home goes from $300k to $3M, you more than 10X your savings. Your ability to spend the money that comes in has diminishing marginal returns. The more you make the HARDER it is to spend it.
At $300k you are barely covering a comfortable lifestyle. Rather than going Dave Ramsay and taking a vow of celibacy, you should increase your means.
If at $300k you are saving a healthy 20% - or $60k per year - when you make $3M, even if you were to TRIPLE your lifestyle to $720k per year, your savings would be $2.280M or a 38X increase.
How fast could you invest and create financial certainty with $2M+ per year to invest rather than $60k?
In fact, to 10X your profits, all you’d have to do is raise your income from $300k now to $840k (to 10X your current $60k of savings you’d add to your current $240k lifestyle, $600k in savings)
Once you master 10X in your business, the biggest upside here is that you can generate the increased profits with the same or less input. With that much capital, you don’t have to take as much risk or invest in super complex investments. You can make simple secure investments.
In fact, in a secured investment earning a fixed 8%, you only need to invest $3M to replace your original $240k per year lifestyle. If you were able to 10X your take home from $300k to $3M, That’s one and a half years of saving to fully replace your Business Income with Asset Income.
Or you’d have to invest $9M to replace your new $720k lifestyle. That takes just 4 years to accomplish.
See why the Wealth Codex is so powerful? It’s your true path to 10X. When you recognize that your business is your greatest asset, you focus on lowering taxes and increasing certainty (liquidity), then investing becomes the easy part.
This is much better than grinding for 20 years, saving into retirement accounts, riding the roller coaster of Wall Street, hoping that your retirement accounts the Fed Chairman deliver. Or worse, swinging a hammer on the weekend trying to become a real estate mogul.
Don’t fall for it.
Be an entrepreneur instead. Master Business Assets and build wealth using the Wealth Codex.
Brad Gibb
The Sovereign Entrepreneur
P.S. If you want to get your own personalized Wealth Codex built, email me the word "CODEX" at brad@sovereignentrepreneur.com and we'll put you on the waitlist to be notified if spots open up.