How to be a Millionaire in 5 years

By: Nicola Cairncross

What is the definition of a millionaire?
The official definition is someone who has more than 1 million in assets, after taking all liabilities (debts) into account. You must also consider how much that debt is costing them - how much does it cost to service it.

How to Become a Millionaire in 5 Years
Business is the way many of the wealthiest people in the world have made their money. Once they make money, they then often put their money into property. So what would it take to become a millionaire from the business Lane of the Wealth Highway?

You have two options

1) Option 1 - How to Become a Millionaire in 5 Years
Build a Business to Generate long Term Value
Create a business that can pay you, your yearly expenses (the amount you need to live on) and $1 million over five years.

  • For Living expenses, you need $60k yearly
    Your business would have to pay $60k x 5 = $350,000
    Plus another $1 million (or $200,000 per year).
    In total you need $1,350,000 (1.3mil)

Now that nasty thing tax kicks in again.

  • If you want $1,350,000 out of your business but you are on 40% tax again, that $1,350,000 represents 60%, so you will need to be paid $2,250,000 in total over the five years or $450,000 per annum gross.

I worked this out by dividing the amount you want to take home by 60 then multiplying it by 100 to get the gross, after 40% tax has been deducted.

If you calculate that a business can afford to pay 10% of it's profits to it's founder, then in order to pay you $450,000 gross per annum, then it must be making $4,500,000 ($4.5 million) per annum in pre-tax profits.

Now all you have to do is figure out which business to start that has that potential, and start building it.

2) Option 2 - How to Become a Millionaire in 5 Years
Build a Business & Sell it
The other, more attractive way, is to build up a business and sell it after 5 years. Usually for a multiple of turnover or profit since each industry sector is valued differently. Sometimes businesses are valued and then sell for x 5 annual turnover or x 10 annual profits for example.

So for you to pocket $1 million within five years, you need to enter a sector with good high valuations on sale, and then build your business to the levels when it becomes attractive to a potential purchaser.

If you are in a x 10 multiple of profit kind of sector, you need to build your turnover to profits of $100,000 per annum. Other factors are a good database of customers, repeat business ideally on some kind of automated marketing system and they really don't want the business to be dependent on you being there!

So that is How to Become a Millionaire in 5 Years

How To Grow Wealth
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