A quick story about the interesting coincidence between my salary and the value of my business:
I owned and ran a marketing agency for 15 years, starting in 2002 with very little money in the bank and no clients. The first year was tough, the second better, and onwards it went. From the early days I wanted to build the business to sell, but what I thought would take me five years (young and arrogant) ended up taking 15.
Only recently did I notice an interesting relationship between what I earned as a salary and what I earned from the sale of the agency. In my first year of business I managed to scrape out a salary of R5,000 (roughly $350) a month, and it thankfully improved over the years as I won more clients, hired more people, and created more profit. By the time I sold and left I was earning over R100,000 (roughly $7,000) a month.
Here’s the strange coincidence: the money I made from selling the business was almost exactly the same as my combined 15 years of salary. I got paid my total 15 years of salary AGAIN. Every hour of work I put into the business was eventually paid for twice – the first payment for the time effort and the second for the asset value of the business (the collective effort of all the work).
The correlation is mostly coincidence and the sale prices of agencies isn’t based on the owner’s salary – mine happened to work that way which highlighted the lesson in creating asset value in a business that sells time.
While I always knew I wanted to sell the business, I can’t claim to have understood the importance of “being paid twice” based on the asset value of your time until fairly recently. Being paid for your effort is brilliant, but being paid twice is incredible, and it’s such an obvious lesson in making sure that while you’re working hard to earn a salary from your business, you should always be adding to the asset value of the business.
I want to write more about “how to do this” but I need to spend more time thinking about it, and to solicit feedback on how to achieve this beyond my experience. If you have thoughts on this please do contribute.