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How to make 7 million in 7 years …

My $7 Million Dollar Journey …

I am a little shy, which is one of the reasons why I write semi-anonymously. It’s also so that I can share specific (and, highly personal) financial information, so that you can travel a similar road, if you are so inclined …

But, some of you want to know where I came from? How is it that I could amass such a large amount ($7 million) in such a short time (7 years)?

Fair questions.

So it is for YOU that I humbly outline my $7million7year journey

I count my 7 years as starting in 1998:

By then I had resurrected a defunct family business as a sole proprietorship (I was $30k in debt and living off $50k a year) and started a new one that had real potential but was draining all the cash from the first business (and then some … combined the businesses were losing about $5k a month).

We owned our own home (well, the bank owned most of it) but had zero other investments.

I was what you would call “broke … with prospects”.

1998

Since I had no idea how to fix the situation, I did what any self-respecting person would do: I lucked upon a book!

The book was called The E-Myth Revisited by Michael Gerber and I bought it to help me get out of the hole that I was in …

… not, the financial hole – I had NO idea that the book (or any book!) could help me with that – rather the personal hole (more like hell) that I was going through working in my businesses rather than on them.

[AJC: This will be the subject for another post, but I was the classic control-freak entrepreneur (I sure as hell didn’t feel like an ‘entreprenuer’ … I was just a guy seemingly out of his depth) trying to do EVERYTHING myself … therefore, achieving NOTHING]

No, the epiphany came when I did the very first exercise in that book (and, that’s why I suggest that EVERYBODY reads it … just for that chapter) and learned the most important lesson of my financial life:

My life wasn’t about my business (or my money) … my business was there to support my life.

You have NO idea how important that was to read … and, how scary it was when the book then went on to show me how to cost that life.

You see, I realized that for the life that I wanted … actually, needed … I had to be ‘wealthy’ [AJC: damn, why couldn’t I just ‘need’ to live on a kibbutz?!].

The problem was, I had no idea how to calculate wealthy.

Fortunately, soon after I happened to go to my first ever financial seminar, and the presenter told me two things (that I simply took on face value at the time) that changed my whole life’s financial outlook:

1. To live ‘wealthy’ (nice house, cars, schools, lots of travel … no work) you need at least $250,000 a year (1998 dollars) in passive income, and

2. You need to multily that number by 20 to determine the size of your nest egg.

There you have it … $5 million … my new (first!) goal … oh sh*t!

First, the problems:

i) My businesses were small / niche businesses with limited growth potential; I calculated that I would need almost 100% penetration of the largest business prospects available in order to achieve my new goal

ii) I had just LOST my second largest client, so now I was losing $300k a year!

iii) Year 2000 was approaching and my software was no longer supported nor was it Y2K compliant.

2000

I got over the last problem by rewriting my software, which gave me the opportunity to fully internet-enable it … this enabled me to totally change by business model, and we (accidentally) ended up with one of the world’s first complete eLogistics systems.

All of a sudden, the business that was losing money MADE money and we added new clients (thus getting over the second-last problem) and soon became profitable.

2001

However, as soon as we became profitable, I bought a building for over $1.25 million, on the advice of my accountant of all people … this was very scary because:

Business 1 + Business 2 + Building 1 = break-even again!

However, the businesses (now, both) started growing and soon became reasonably profitable … $10k – $20k a month by 2002 … I still only took $50k a year in salary.

Our Net Worth was now the equity we had built up in our home and office property, plus whatever residual value our businesses had; probably $1 mill. to $2 mill. In fact, an overseas listed company made us a $2 million offer for Business 2, but we rejected it (at that time) … so, our Net Worth could have been as high as $3 Million if we sold, or if somebody else would ever offer us the same.

When it comes to businesses, do you ever know your true Net Worth until you sell?

2003

We made it all the way to $7 million over the period of 2003 to 2005 simply by:

1. Repeating the process: generating profits in the business, and

2. Retaining as much of the businesses’ profits as required to maintain the businesses and grow, and

3. Ploughing as much as possible into real-estate, and

4. Keeping a lid on personal spending and maintaining zero-personal (i.e. consumer) debt other than the house [AJC: which, as I mentioned before, we eventually paid off … not that I would recommend this strategy any more … see an upcoming post for more on this].

But, we did pump as much as we could back into the business and bought a number of smaller, residential investment properties (one condo @ bought 2003 for $145k now worth about $300k, one quadruplex bought 2005 for $1 million now worth $1.75 million, and paid off our own home eventually sold for $800k, plus the office building recently sold for $2.5 million).

If you think about it, these are the EXACT SAME STEPS that every PF blogger writes about (debt free, save, reinvest) … I just multiplied the scale and was VERY CLEAR on my cashout $ and time.

But what about my opening comment:

I deliberately chose a provocative title for my blog … whilst partially true, I chose it … well … because it sounded good!

Why only “partially true”?

Well, I did make it to $7 million in the seven years between 1998 and 2005 –  and, by then, my other assets probably had Net Equity of: Business # 1 ($2 million … $1.5 million in cash + whatever value the business could sell for); Home # 1 ($650k); Office ($1.25 million); Residential investments ($1 million).

So, that period sets the scene for our [more than] $7 million 7 year journey, made the good old fashioned way (grow an income stream or two, live frugally within reason, and invest, invest, invest) … and, provides many of the lessons that I had to learn the hard way, but you no longer need to.

But, ‘partially true’ because my journey has an unexpected (but, pleasantly surprising) postscript …

2006 – 2008

I had totally miscalculated the earning potential of my two existing businesses [AJC: actually, three, by then I had started a small training company with a partner, Business # 3]: post year-2000 reengineering, Business # 2 on its own was now capable of producing (and did) $1,000,000 a year net earnings (2006), almost all reinvested in some unexpected new ‘opportunities':

You see, way back in 2002 I still didn’t know the potential of the new eLogistics-driven business model, yet I still had a $5 million bird to catch …

… so I had already put in train a parallel set of actions that saw me close a deal in 2004 to open two overseas offices (commencing in 2005) – both as ‘no money down’ joint ventures – unfortunately, there went my profits (yet again):

Business # 1 + Business # 2 + Business # 3 + Business # 4 + Business # 5 + Properties # 1 thru’ 4 = Break-Even again!

I was still only taking a $50k salary … my wife still had to work … don’t I EVER get to spend anything??!!

Finally, I sold something: Business # 2 in 2006 for more than 3 times what I was offered in 2002.

… and, the next 3 years sets the scene for an unbelieveable set of negotiations, opportunities, and manoueverings tied to Business # 4 and Business # 5 (which was the reason why we moved to the USA) selling both after only 2 years of operation, more than doubling our net worth again …

… and, funding properties # 4 ($2 mill … paid cash) and # 5 ($4mill. … churned #4 + paid cash) as well as now being able to fund my retirement at age 49.

I kept Business # 1 as well as Business # 5 (although, I soon plan to ‘gift’ my share in that one to my hard-working partner): they both run well and profitably in another country, with separate staff in separate locations, and without me … Michael Gerber taught me how – and why – to do that, too!

But, this period is not the subject of this blog:

Whilst entertaining – and, it might teach you a trick or two about negotiating (I sure as hell learned something!) and/or running a business ‘hands free’ – it hardly counts as Personal Finance, so I might just save the details of that story for ‘the one-day book’ :)

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42 Responses to “ My $7 Million Dollar Journey … ”

  1. Q says:

    Good work.
    I enjoy reading your blog, and think that your (101, 201, 301) series is excellent. I only can hope that maybe someday I can make 7M in 7 years. Keep up the good work.

    Q

  2. AJC says:

    @ Q – Thanks! And, can I have an Aston Martin DB7 with bullet-proof windows, machine guns in both headlights, and an ejector seat … oh, and a Martini … up … shaken, not stirred? 007.

  3. Alex Le says:

    Now you said that, I wonder why I did not have any questions regarding your 7-year-7-million claim. I realize I know this is more than possible, especially in the Tech-field. The Start-up School trips I made last year and this year opened my eyes to a new, much wider horizon. For the first time in my life, I realize that becoming wealthy is not something out-of-reach, it is a goal and if I am smart enough, work hard enough, and lucky enough (there’s always some luck and chances in life) I can be there sometime. Maybe not 7 years, not 7 million, but I know I WILL find a way to get there.

    And I don’t doubt other people. I get my own conclusions from getting to know more about that person. I try not to get judgmental and I think this is extremely important to build up a relationship with anyone.

  4. AJC says:

    @ Alex – I think you have to judge the information on its merits; when you meet the person, then you will eventually judge them, too.

  5. Thomas says:

    Now, it seems that your businesses were your greatest money makers. However, do you think that you got “lucky” with the real estate because you bought during a time of great appreciation in prices?
    When you purchased real estate, how did you value it? Did you try to break even on cash flow by renting it out, or what method did you use for valuing the real estate you bought?

  6. AJC says:

    @ Thomas – Good questions, but, Real-Estate actually played the largest part in the first $7mill/7yr part of the journey.

    As far as the real-estate goes, my problem was, I had no real ‘valuation’ strategy at the time (I learned those later) so just followed my ‘gut’ and waited for appreciation. Not great, but if you buy OK in a good area and are willing to hold, real-estate can be very ‘forgiving’.

  7. Thomas says:

    Thanks for the response and clarifying your real estate “strategy”. :)
    The valuation of real estate is what I struggle with the most because the area where I’m live, real estate doesn’t appreciate that much, so I have to watch cash flows more carefully. I just don’t want my real estate investments to become a constant cash sucker.
    Keep up the good work here. Even if your story were not true (you wanted to be challenged) :), you have some great ideas that further my own thinking about how to approach the wealth creating process.

  8. AJC says:

    @ Thomas – I agree, the ideas are MUCH more valuable than any story. I have developed some criteria on real-estate (as you now know, by learning the hard way!) that I will share.

    But, for residential property (that you don’t intend to live in) you really need to go for an area that will/can appreciate as it can be very difficult to get them to cashflow-positive on a reasonable deposit (say, 10% – $20%).

    My main real-estate criteria, is simple: what can I get by investing in the bank (7.5% offshore)? What can I get by investing in stocks (15%) … so, what do I need to put my money into real-estate? (somewhere b/w the two on the cash that I put in) … then I get to hold the propery forever and not care about the appreciation (which, of course, will eventually come).

    I’ll eventually stretch this out to a full post ;) but you have the guts of it right here.

  9. moom says:

    Which country did you come from? What’s your net worth now?

  10. AJC says:

    @ Moom – You’re about 3 days too late … I had my Net Worth posted on NetWorth IQ for the world to see for the first four months of this blog, raising a few eyebrows over there. But, I just decided to delete it … one reason, as I mention in this post, the PF lessons come from the journey to the first $7 Mill. as that is entirely repeatable – to a greater or lesser degree – by others who choose to increase their income and invest the proceeds (instead of spending them) following the principles that I outline in these posts.

    Another reason is the need for semi-anonymity; hence, I don’t disclose my real name (it’s not AJC, country of birth, business/industry, etc.) – The numbers, however, ($$, Age, etc.) are all accurate, as without those, there is no $7m7y ‘story’ to tell!

  11. blogrdoc says:

    Needless to say, this was a real treat to read, AJC.

    I’m curious to know if you had always known you’d be an entrepreneur (which I suspect to be true since your family had a business), or did it just ‘sort of happen’? How did you develop your business acumen to begin with? It seems everything you’ve touched has turned to gold!

  12. AJC says:

    @ Blogrdoc – Actually, no … the ‘entrepreneurial light’ literally suddenly switched on in my brain at about Work Year 6. I had no idea ‘how’ to become an entrepreneur … so, I guess I should also post on that part of the ‘journey’ at some stage.

  13. Brip Blap says:

    Really excellent read, AJC. I think one of my takeaways from that was that your “instant success” was the result of a lot of work that very suddenly paid off. I think too many employees and contractors (like myself) think they need to have a steady, constantly increasing stream of income in order to become wealthy, when one of the keys may be to make the “big deal” or have the big idea. Then you work hard at it and bam – you’re an “overnight success.”

    Great stuff – keep on giving us as many details as you feel comfortable with!

  14. Nice to read some more details regarding your MDJ, and I look forward to reading through all your posts eventually. But I don’t think your MDJ is quite as reproducible “by anyone” as you seem to think. For example, I’ve been a wage earner for 25 years, and although I toy with the idea of starting a small business, I’ll probably just stick with being a wage earner. I can manage my investments and the odd rental property, but I lack the confidence to even start a business. It’s highly unlikely that I have hidden entrepreneurial skills that would be required to be a successful businessman. Most small business start ups fail within the first few years, and I don’t think that they would all succeed if they just read this blog and followed your example ;)

    Willingness to “have a go” is a necessary but not a sufficient condition to make a fortune running your own business.

  15. AJC says:

    @ BrBl – Actually, the first $7m7y part was done the old-fashioned way: two small businesses earning $0 – $150k (give or take $50k) through most of that period. After drawing only $50k salary … I simply ploughed the rest into investments. Anybody with a salary of $50k – $200k, should be able to do the same … give or take a few million/years.

    No point me blogging if what I did isn’t repeatable, that’s why I focus on the first $7m7y …

    @ [It’s Never] Enough Wealth ;) – I tell you HOW to grow your wealth (yes, ‘even’ a poor wage-earner can do it!), but never WHAT to invest in, because there are infinite paths to wealth. The minute you try to play “Simon Says” you fail anyway … you have to find your own path … but, I can at least show the way!

    But, I will say this: a business of some sort has the greatest potential reward, which is why you should try it … part time at first to limit your risk.

  16. […] by Adrian J Cartwood, whose revolutionary blog $7million7years chronicles his own journey from $30k in debt to $7million in the bank in just 7 […]

  17. […] some people just see me as a guy who ‘got lucky lucky in business’ (AJC: most of my $7m7y Net Worth actually came from investments … my leter/additional Net Worth came from selling some […]

  18. […] stated objective is to make 7 of you as rich as I am (or was when my 7 year journey ended … I didn’t exactly stop increasing my wealth there … perhaps you won’t […]

  19. […] That’s what kicked off my $7 Million Dollar Journey. […]

  20. […] for you … I can only share why it was probably the most critical thing that I ever did on my journey to $7 million in 7 […]

  21. […] as investing in stocks and real-estate (you can read about my $7 million dollar, 7 year journey here), so I don’t really know enough about making money the ‘new fangled way’ … […]

  22. […] you’ve read my $7 Million Dollar Journey you will know that, because I found my Number, I made […]

  23. […] you’ve read my $7 Million Dollar Journey you will know that, because I found my Number, I made […]

  24. […] Don’t believe me? It’s exactly what I did in the two years following my own 7 million 7 year journey […]

  25. […] these rules, largely by coincidence, for most of my successful working life (i.e. during my 7 year journey), when I chanced upon a book that I had never heard of, written by a guy I had never heard of, who […]

  26. […] think that I’ve mentioned before about my father who started a little finance company in his 60’s after being […]

  27. ChangeForA20 says:

    Just throwin’ it out there…at the beginning of this post you refer to someone with the tag ‘Blogrdoc’ and provide a link to his “blog” which is a website entitled “Brutal Teen Movies”…

  28. Adrian says:

    @ Change – aaah … thanks for picking this up!

    I have been in touch with the ‘good doctor’ and he is no longer blogging due to other commitments. I have updated the post to delete the link.

  29. […] … that’s how I made $7 million in 7 years! […]

  30. […] … well, you know the rest: it’s how I went from $30k in debt to over $7 million in the bank in just 7 years. […]

  31. Bryan says:

    Great blog! You were the first blog I’ve added to my blogroll as your content is that good. I’ve read enough to know when to not waste my time. :-)

    At the moment I’m chronicling from start my entrepreneurial journey. I’m in year 2 of my first business purchase and hope within another 5 to rival your story.
    Best regards, Bryan

  32. Adrian says:

    @ Bryan – And, so you did! Thanks :)

    BTW: Looks like you have a great blog for aspiring and current entrepreneurs. If any of my readers are interested in taking a look, here’s the link:

    http://ethicalbusinessbuilder.com/

  33. […] How I made $7 million in 7 years, then click here, […]

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  36. […] by Adrian J Cartwood whose revolutionary blog $7million7years chronicles his own journey from $30k in debt to $7million in the bank in just 7 […]

  37. Drew says:

    I’m a bit late to this post, but glad I found it! Great info AJC!

    Question-
    What were the terms of your first $1.25 million building purchase in 2001? You mentioned you had been in debt and had been losing money in your business until sometime in 2000 when you began to turn a profit. You had to have had a lot of profits quickly to put together the down payment for the building and be approved for a loan in such a short time period after years of money losing operations. Thanks!

  38. […] in point: Drew asked a question about my 7 Million Dollar Journey : What were the terms of your first $1.25 million building purchase in 2001? You mentioned you had […]

  39. Hotelier says:

    My $7 Million Dollar Journey …- 7million7years inspires me, i just want to say thanks for the inspiration, Hotelier

  40. […] I can, from a position ‘protected’ by semi-anonymity, remind our readers that my $7 million journey represents a 7 year ‘slice’ of my financial life from when I started $30k in debt in […]

  41. I just want to say thanks for this interesting thread about My $7 Million Dollar Journey …- 7million7years! Regards, Alexa Beratung

  42. […] all that changed when I started investing actively, and built up my first $7 million (in 7 years) fortune […]

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