How to give something of value in order to raise networth and cash

When starting a new business venture entrepreneurs need to focus in delivering value. Many people talk about "give value and you will recieve money". But they usually think on a low scale. What I want to introduce you to today is how to create massive value and recieve a billion dollar status and also recieve cash in your pocket that you can then put into your savings account (and then live of the interest for the rest of your life).

Before we can get a billion dollar valuation and a lot of cash to put in the bank, we need to define what kind of value our venture can offer an investor. If you have positive net cashflow then you have a great advantage. You can then offer this cashflow to the investor in return for a P/E valuation of 10X earnings. In return for that value you ask the investor to buy only a small piece of your company. The smaller the part, the higher the valuation. Say you can offer $400,000 a year in income from the company and you ask for a P/E valuation of 10, you could then recieve $4 million in cash (tax on it and put it in the bank and live of the interest).

As mentioned in previous posts on this blog you probably know the valuation system at this point. But let us tell you again. If you sell 1% of the company for $4 million, then the entire company is worth $4 million /1% = $400 million. If you own 99%, then you would be worth $396 million. But this is on paper of course. Unrealised capital gain as they call it. You need to sell it in order to spend it or save it in the bank. But this number still bear a value to your personal balance sheet. The fact is, you have created a company, a value, that an investor has seen being worth $400 million. Be proud.

It's like Microsofts investment in Facebook. They paid somewhat like $240 million for 1,6% of Facebook. Not because of the money or the dividents etc, but becuase they where promised exclusive control over the banner advertising space on Facebook. That "value" made Mark Zuckerberg, the 24 year old a multi billionaire on paper. The "valuation" is just a bi-product of the value you give. And as you can see with the Microsoft-Facebook connection, money is not always the best value. If you have a website that has a lot of well defined visitors, you could probably find an investor willing to purchase a little piece of your corporation in exchange for exclusive banner advertising control on your website. That could equal a cash payment for you as the owner of the shares sold and a new and higher valuation of your company. hence raising your personal networth a lot.

You really need to look at it this way in order to become super rich. And have more money in your savings account, earning you income interest for the rest of your life. Never needing to think about making a living anymore.