The 800 pound gorilla

Summary

1. A NYT article published this past weekend exclaimed “shock” that the majority of wealth in the US is held by people who own assets.

2. The article clearly shows that one’s preconceived notions of wealth are formed by the environment in which they are raised.

3. Business ownership is the fastest and most efficient way to build generational wealth (see real client example below).

4. Steps to take if you want to learn how to become an acquisition entrepreneur.

What happened?

This past weekend the NYT came out with an article titled, “The Rich are not who we think they are. And happiness is not what we think it is, either” by Seth Stephens-Davidowitz. Link to article here.

As you can probably tell from the title of the article, the author is shocked to learn that the majority of wealthy Americans (earning more than $1.58M a year) are owners of “regional businesses, such as an “auto dealer” or a “beverage distributor.”

The author continues…

“This shocked me. Over the past four years, in the course of doing research for a book about how insights buried in big data sets can help people make decisions, I read thousands of academic studies. It is rare that I read a sentence that changes how I view the world. This was one of them. I hadn’t thought of owning an auto dealership as a path to getting rich; I didn’t even know what a beverage distribution company was.”

After reading this somewhat hilarious article from someone who is an educated data scientist, I realize that the knowledge of owning cash-producing assets for wealth-generation is not separated by wealth or by education but by lived experience.

Many entrepreneurs I know got started in business ownership because their parents or relative had a small business and was able to build a better life for their family.

They saw through their lived experience that the most reproducible method of generating wealth was in owning a business that gave value to the local community.

This was my experience. My father and my uncle both had their own businesses and were able to build more wealth and freedom than the rest of the family combined.

What does this tell you?

This tells you that now, more than ever before, business ownership is the key to building generational wealth.

So how do you begin?

You can either start a business from scratch or buy an existing one that is already making a profit. If you have been reading any of my content the past couple months, you know the latter is the best answer.

Here is a recent example from one of my coaching clients.

My client is a successful tech startup founder who recently completed a capital raise and was able to cash in some of his chips. He wanted to take some of his new capital and combine it with financing to make a couple acquisitions.

He called me and within a week we had business that met his criteria:

1. More than $500k SDE (profit to owner)

2. Service based business with little/no digital presence

3. Management team in place

4. Partial financing available for the purchase

This business was a nail salon that had amazing customer retention, very generous profit margins (45%) and had grown 50% YoY for the last 3 years.

Owners were looking to retire.

The catch? About 40% of revenues were Venmo and Cash app transactions that were not reported on their taxes (bank records confirmed numbers).

Because of this fact, the bank would only lend 60% of the purchase price since it could only lend off of what the tax records reported. That meant that the salon owner had to find a buyer that either had a lot of cash to make the difference or found an investor who did.

Needless to say, this limited the buying pool.

Bad for them, good for my client.

The structure will be: My client will put down 10%, the Seller will finance 10%, the bank will finance 60% and the investor partner will do the remaining 20%.

Year one my client will make a 350% return on his investment if the business repeats its previous year performance.

That’s building cash-flow freedom.

Want to learn more?

If you are reading this and feel the desire to build generational wealth through buying cash-flowing businesses but don’t know where to start, this announcement is for you.

I am going to be launching my first coaching cohort to help people buy their first business and start building generational wealth.

12 weeks, 10 members, 10 deals, 10 lives changed.

I’ll be making an announcement soon via my twitter @benkellyone and this newsletter. Make sure to apply as soon as I announce so 1 of the 10 slots will be yours.

More to come.