Millions of Ways To Make Millions of Dollars
There are a million ways to make a million dollars in this world. While some methods may be more common than others, it is best to choose the method that is most conducive to your strengths If becoming a millionaire is your goal.
Research on the Top 1% and Millionaires
A common statistic used in research is that most millionaires were self-made business owners. Statistically, if you want to rank in the top 1% of wealthy people in the United States, being in a position of owning a large share of a profitable business that churns out dividends each year is your best bet.
Surprisingly, not many people believe this to be true because we were told that the best way to become a millionaire is by proper saving and investing through one’s working life as an employee until they retire. However, only 20% of all millionaires in the United States have gone through the traditional employee retirement path. The remaining 80% of millionaires were either self-employed or were business owners. Therefore, you are four times more likely to become a millionaire as a business owner than an employee is.
So does this mean I should start a business right now?
Not necessarily, some people have more of an entrepreneurial spirit than others do. Those with a strong entrepreneurial spirit and have a stronger appetite for risk may benefit more by investing in a small business than investing in the financial markets to gain their wealth. However, this small business venture must be done intelligently and under the right conditions for it to work.
Remember there is a lot of risks involved in owning a business and it is in your best interest to learn how to manage this risk as a business owner (that is a whole other article to be published in the future).
We also have to remember that risk is not two-dimensional. Someone with an entrepreneurial spirit may have the perspective of thinking it is risky to work for others when they look at these “millionaire statistics”. They also realize that there is a risk of getting laid off, fired, the company going out of business and being passed over for promotions.
Another key factor in business ownership is that this newfound autonomy will come with more hard work than being an employee. As a business owner, you have unlimited upside and it is in your best interest to maximize your productivity to increase business profits. Despite having to work more, many business owners have reported having more job satisfaction than employees do.
In addition, the chances of you becoming a millionaire depend on the type of business you start. If you select a business that does not have a competitive advantage (i.e. Software companies compared to a restaurant) then it is going to be very difficult to grow to a large scale. Typically, the dull, difficult and normal companies tend to make bank compared to the fun and sexy companies like bars and coffee shops.
You can still make millions form being an employee
Sometimes being the #20 person at an F100 company will make you richer than owning a business.
Some people have the traits and personalities to run large corporations and enjoy the institutional structure.
For example, Goldman Sachs CEO says he is an “Institutional Guy” and wants to affect the business world on the largest scale possible.
There is nothing wrong with wanting to an employee and try to rise through the corporate ranks. This may be the best option for you if you enjoy the institutional structure and have what it takes to become a corporate titan.
This is why it is important for you to always be self-aware and play to your strengths.
What does this mean for you?
Being a business owner is not a silver bullet to wealth. What you need to do is evaluate your strengths and personal situation. If you are unsure of which route to take, I would suggest doing the dual prong approach. This is running the corporate game with your entrepreneurial game. This is the least risky way of trying to become a business owner and one of the most common ways.