The Magic Formula of Business Growth:20/20/60
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| Truly Rich Club |
Napoleon Hill wrote the book, Think and Grow Rich.
By the time he died, he sold 20 million copies. (Since the time he wrote the book it has been a perennial bestseller for the past 70 years.) Today, that book is one of the top 10 biggest bestselling books of all time. Look at any financial guru’s list of “must read” books, and you’ll find Napoleon Hill’s Think and Grow Rich as one of them.
And that wasn’t his only book. He wrote five other books and published his own magazines. He was also an in-demand speaker.
But here’s the irony about Napoleon Hill: It’s possible that he died not very rich. (There’s a controversy as to how much money he had during his death. Some reports say he didn’t even own an inch of real estate. Some reports say however that he had money but bequeathed it to his foundation.) There’s a difference between income and wealth.
And that wasn’t his only book. He wrote five other books and published his own magazines. He was also an in-demand speaker.
But here’s the irony about Napoleon Hill: It’s possible that he died not very rich. (There’s a controversy as to how much money he had during his death. Some reports say he didn’t even own an inch of real estate. Some reports say however that he had money but bequeathed it to his foundation.) There’s a difference between income and wealth.
Income is how much you earn.
Wealth is how much you keep of what you earn.
The Most Important Financial Question
When people ask, “How rich is that person?” they usually mean, “How much is that person earning?” That’s an important question, but it’s not the most important question. An even more important question is, “How much is that person’s wealth?” Think about it.
If you added all the money that you’ve ever earned in your entire life, you’d be shocked at the amount that has passed through your hands. Millions! But that’s the problem. It just passed through your hands. That’s why I believe that what you’re learning from the TrulyRichClub is priceless.
The Secret Sauce
A friend told me he was setting up a business. He presented me his business plan and I liked it. He and his partner were going to provide nursing services to clients. After discussing the details of his business—especially about marketing—I asked him, “What will you do with the profits?”
As I suspected, he said, “My partner and I will split the profits 50/50.” “Wrong move,” I said. “My mentor taught me that you should divide the profits by 20/20/60. It’s the magic formula for growing a business.” “Please explain that to me,” he said. “Twenty percent of the profits go to the owners of the company. That’s you and your partner, am I right?” “Yes,” he said. “So divide the 20 percent between you and your partner—every year.”
As I suspected, he said, “My partner and I will split the profits 50/50.” “Wrong move,” I said. “My mentor taught me that you should divide the profits by 20/20/60. It’s the magic formula for growing a business.” “Please explain that to me,” he said. “Twenty percent of the profits go to the owners of the company. That’s you and your partner, am I right?” “Yes,” he said. “So divide the 20 percent between you and your partner—every year.”
“Every year? Gosh. Can’t it be more frequent? My partner has a job, so he’s okay. But I’ll be fulltime in this business and will need it to survive,” my friend said, chuckling. “I need to eat, you know,” tapping his tummy. “If you’re fulltime here, pay yourself a tiny salary,” I said. “That’s cool.
What’s the other 20 percent?” “Twenty percent goes to the management team. Who will manage the business?” “I will,” he said. “My partner is very busy with his job and can’t be hands-on. So I’ll be the man on the ground. But I’ll be hiring a few other guys to help me.” “I suggest you get eight percent. And divide the remaining 12 percent to the other managers of your business.
Or share it with all your employees. Some type of profit sharing at the end of the year.” “Great. What do we do with the 60 percent?” “That’s the secret sauce. That’s where the growth of the business will come from. You reinvest it.” His eyes bulged. “Reinvest? Why?” he asked. “To expand your business. To build new branches. To go into new businesses.
Or to reinvest it in paper assets.” “Wow. That’s unbelievable. I never thought of that before.” “So that you and your partner will keep growing. That’s why many businesses don’t grow. They take all the profits off the table every year.”
Why My Businesses and Wealth Are Growing
I’m wealthy today because of two magic formulas. One is the magic formula for personal income. And the other is the magic formula for business income. Do you remember my personal income formula? For personal income, I teach people the 10/20/70 formula. Ten percent is a tithe that is offered to God.
Twenty percent is “reinvested” into paper, business, or real estate. (Personally, I encourage people to reinvest in paper assets—such as our SAM Stock Market investments—because it’s much easier than the others.) And 70 percent is spent on daily expenses. As your income increases, you’ll have to adjust. Perhaps the 10/20/70 will become 20/30/50 or 20/40/40.
Twenty percent is “reinvested” into paper, business, or real estate. (Personally, I encourage people to reinvest in paper assets—such as our SAM Stock Market investments—because it’s much easier than the others.) And 70 percent is spent on daily expenses. As your income increases, you’ll have to adjust. Perhaps the 10/20/70 will become 20/30/50 or 20/40/40.
For example, I have a friend whose income is so big, his formula is 40/40/20. He gives 40 percent to God’s ministry, reinvests 40 percent of his personal income, and spends only 20 percent for his daily expenses. But business income formula is 20/20/60. Twenty percent for the business owners. Twenty percent for the management team. And 60 percent reinvested into the business or other investments.
Imagine the compounding effect on that 60 percent year after year. That’s what will make you very wealthy. Know these magic formulas. Apply them. And become wealthy.
May your dreams come true,
Bo Sanchez
PS. No matter where you are, I can still guide you in your financial life wherever you live—here or abroad. How? Join my TrulyRichClub now. Once you become a Gold Member, you’ll receive my twice-a-month Audio Power Talks, my twice-a-month Wealth Strategies newsletter, and a collection of my E-books brimming with practical wisdom. Including my powerful E-book, My Maid Invests In The Stock Market… And Why You Should Too!(you can get this copy for free on my recommended e-book pages)
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