How I Shifted My Perspective on Wealth Creation

For a long time, I struggled to understand how to make a billion dollars. My first thought was that I needed to earn a billion dollars each year. It sounded right to me back in high school. I was naive, yet it felt like the only way to achieve that level of wealth. Then, I matured a bit.

I realized there was another way to think about becoming a billionaire. I told myself that if I could take home a billion or two before taxes over my lifetime, then I would be set. This seemed more feasible than my initial idea. Yet, even after this insight, I still missed a crucial point.

Now, I am in a different phase of understanding. I learned that you don’t just make a billion dollars. You have to own something worth a billion. That’s a big shift in my thinking. Let me share an example to illustrate this concept.

Imagine you start a business that makes ten million dollars a year in revenue. If your profit is half of that, you would earn five million dollars. Now, let's say your business is valued at ten times its earnings. After some math, you'd find that your company is worth fifty million dollars.

Now, consider this: if the profit increases by one million dollars, to six million dollars, it may not seem significant at first. At first glance, you've only added a million bucks to your bottom line. But here's where it gets interesting.

If your business is still valued at ten times its earnings, your company's value jumps to sixty million dollars. That’s a ten million dollar appreciation. The catch? You didn't pay taxes on that increase in value. You only took home an additional 500 thousand after taxes that year, but your net worth grew by ten million dollars.

This was a vital realization for me. Wealth creation is more about owning assets than merely earning money. I kept thinking about how to be an entrepreneur in the world of Facebook, Airbnb, or similar success stories. These innovators didn't hustle on the side. Instead, they focused all their energy on building their businesses.

Mark Zuckerberg didn't flip houses while working on Facebook. He dedicated himself to the growth of one project, and it paid off. I realized that if I were to become a billionaire, I should spend my time obsessing over my primary income sources.

Ask yourself: if you have a business that's making five million dollars in profit, what would happen if you dedicated all your efforts to increasing that to six million? Suddenly, you've added ten million dollars to your net worth. That kind of thinking shifted my perspective on wealth creation.

Let’s look at numbers. A billion-dollar business often earns between 80 and 100 million dollars in profits (or EBITDA). To become a billionaire, your business should ideally make around 70 million dollars in EBITDA. This might mean generating around 300 million dollars in revenue annually.

When I started thinking about how possible that is, I reflected on how far I've come in the past five years as an entrepreneur. The goals I had back then seem small compared to where I am today.

So why should you aim for more than a billion? Well, if you set your sights on ten billion or even fifty billion, you're opening doors to opportunities that can transform your life. You shouldn't limit yourself to a cap of 100 million a year.

Challenge yourself to think of business opportunities that aren't limited by time, serve a large market, and possess high gross margins. That's when you can really start thinking like a billionaire.

The way we set our goals matters. When I hear someone say their goal is to make six figures, I see them restricting their potential. They often break it down into tiny units. What if instead, they aimed for ten million dollars? This larger figure prompts a different thought process.

To earn ten million, I just need to sell a thousand ten-thousand-dollar products. That equates to selling three products a day. By thinking in these bigger increments, I begin to see a path. But if I can’t find a ten-thousand-dollar product, I might need to discover something worth a hundred thousand dollars to someone else.

The bottom line is value. Understanding how to provide value will determine your financial success. Big financiers know how to leverage their connections and wealth. They know how to cut deals and generate profits.

For example, if a financier takes a billion dollars and makes a modest ten percent return, they earn a hundred million dollars. This sounds appealing, but still, only a fraction of the potential exists. If they know nothing about capitalizing on investments, they miss out.

The key lesson is, you don’t just make money; you build wealth through ownership and value creation.

Let's revisit that example of owning a business worth fifty million dollars that generates five million in profits. If you grow your profits