AI tips + entrepreneur’s insights for building wealth
In the US, the median income in 2021 was $5,809 per month. Yet, only 8.8% of people were millionaires, and 95% of all millionaires in America have a net worth between $1 and $10 million. While a higher net worth usually correlates with a higher income, it’s not always the case, and a lot of people have most of their paper wealth tied to their home and/or other illiquid assets.
With the recent surge in popularity around using AI to do just about anything, I thought of asking ChatGPT to come up with a plan for a 28-year-old person to become a millionaire within 10 years, making $5,000 per month, and looking to create his/her own business. I went with 28 years old because that’s only slightly older than when I started my business, and a 10-year deadline because I wanted to see how creative the AI could be with a short timeline. Here is the exact prompt I used:
Achieving a liquid net worth of $1,000,000 with those metrics is very hard. When you make $5,000 per month you will “only” have made $600,000 liquid after 10 years, so unless you invest money and get a bit lucky, you can’t get the cash out of your own pocket.
But if you’re looking at a paper net worth (including assets that you can’t liquidate right away), things become more realistic. If you had invested $500 in the S&P 500 every month 10 years back, you would now be sitting on $116,000. If you had invested $2,000 in Tesla in 2011, you would now be sitting on $231,742. But the best way to increase your net worth without relying too much on luck is often to create your own business, so let’s see how to do just that.
Note: The “entrepreneurship plan” part is based on 6 different parts generated by ChatGPT. Each part starts with the AI tips (in quotes), and I then add my own insights based on my experience as an entrepreneur and business owner.
1. Identify your strengths and passion
“Start by figuring out what you’re good at and what you enjoy doing. This will help you identify potential business ideas that you’re truly passionate about.”
It took me years to start working on my blog and committing to it, because I couldn’t pick one thing out of all my interests. Before starting to write online, I tried dozens of other things:
- Creating a T-shirt business — Failed
- Selling art on Instagram — Failed
- Selling trading algorithms — Failed
- Selling hand-painted skateboards — Failed
- Website coding/flipping — Failed
At least I was trying, which was a great start. But I never committed for more than 6 months to any of the ideas mentioned above. I needed to change my approach
2. Research the market
“Once you’ve identified potential business ideas, research the market to determine if there’s a demand for your product or service. Look at your competitors and see what they’re doing well, and where there may be gaps in the market.”
Around 3 years ago, I decided I needed to try my hand at something for longer than 6 months before calling it quits. In order to identify the area where I was the most likely to succeed, I looked at everything I had tried up until now and realized that a lot of these markets were saturated and/or requested a big upfront investment to get going.
- A real t-shirt business required an inventory, which I didn’t have money for (Dropshipping doesn’t require inventory but needs a lot of money for ads)
- An Instagram business requires a ton of time to build a social media following, and I’ve never been into social media. I couldn’t bring myself to text 100 people a day to promote my art.
- There were a lot of people out there much better than me at website coding, so my market was limited.
Eventually, I realized I had been writing my whole life, I loved it, and it was a great business because although I was not a gifted writer, not a lot of people were willing to put in the work. Writing one article per day every day is hard, especially when you have to do it at 6 am before leaving for work. I learned early on that hard work without talent beats talent without hard work, and so I chose writing as my next business idea.
3. Start small
“Consider starting your business as a side hustle while you’re still working your full-time job. This will allow you to test the market and refine your business model without taking on too much risk.”
Within 1 year of having started my business, I was making more money quicker than I ever thought I would, but not enough to quit my job for sure. In my situation, it wasn’t an issue because I loved my job, and as the AI recommends, it’s always better to feel things out first before going all in with a huge risk.
“Starting small” is often one of the biggest hurdles people have to overcome, specifically because they don’t see the bigger picture. They either want to be successful and make a ton of money right away, or they’re willing to try to put in the work, but the distance between where they are and where they want to be seems impossible to travel.
As cliché as it sounds, Apple started out in a garage before becoming the most valuable company in the world, and Warren Buffet started investing at age 14. Ben & Jerry’s was started out of the back of an ice cream truck, and now it’s worth $100 billion. Steady wins the race, so don’t be afraid to start small.
4. Develop a business plan
“Once you have a solid business idea, develop a business plan that outlines your target audience, products or services, and revenue model.”
I didn’t develop a business plan until over a year after I started. That’s when I started making real money, and so I looked at my options to maximize my chances of success. I decided to create a one-man company, set up a bank account for it, and never pay myself until I started making serious money. Everything I spent from this account had to be an investment in growth, and the rest would just sit there while figuring out what to do with it.
I also came up with hard targets to hit within 1 year and with a check-in after 6 months. I got this idea from the company I was working for, and it’s based on the OKR (Objective Key Results) strategy, which is made of 2 main components:
- objective: it explains where you want to go, and what the desired end result is. Once an objective is reached, another objective will replace the current one. Objectives in the OKR strategy are not technical, not measured, and usually don’t contain numbers. They should be as easy to understand as possible.
- Key Result: unlike the Objective, the Key Result should be as precise, technical, and measured as possible. It is used as an indicator of whether or not the Objective is being worked on. Key results should be time-bound, often quarterly or annually.
The key of the strategy is that it focuses on the actions needed to reach big overarching goals rather than short-term goals, minute details, and daily tasks that can seem boring, unmotivating, and sometimes unrealistic. Here are a few target examples I set for my blog.
Optimize my marketing funnel to increase my conversion rate from people reading my article to becoming newsletter subscribers.
Key Results A
Revamp the sign up landing page to make it more appealing, and write clearer bottom article CTAs.
Release a 50-interview productivity guide by the end of the year
Key Results B
Reach out to 100 people, select the best 50 interviews, and put together the guide
Make money from my own digital products
Key Results C
Release a premium version of my interview guide (with 75 interviews instead of 50) and promote it on my website, right after people download the free version
5. Leverage technology
“Use online platforms to market your business and engage with potential customers. Set up social media accounts, create a website, and consider investing in search engine optimization (SEO) to help your business show up in search results.”
Especially as an online writer, investing in technology that can help me increase my reach has always been paramount. I’m not big on social media so I tend to stay away from it, and I’ve used paid Google ads before without too much success. In general, I find that the tools I get the most value out of are either cheap or free, and the highest returns on investment I get are almost always from hard work. For instance, I wrote a google top-ranking article on Ticktick that gets me thousands of visits to my website every month. Of those visits, a few convert into sales.
Here is a quick overview of some of my favorite tools I use and how much they cost me per year:
- Mailchimp — $2,000 (email marketing)
- Zapier — $712 (automation tools)
- Revolut — $330 (bank account)
- Sendowl — $230 (digital product sales)
- Elementor — $100 (website building platform)
6. Reinvest profits
“Instead of taking all of your profits out of the business, consider reinvesting them back into the business to fuel growth. This could include investing in marketing, hiring employees, or developing new products or services.”
2 years after having created my business, I still haven’t paid myself a dime in salary or even a bonus. Sure I’ve spent on gear, stuff I enjoy using, and that’s rewarding too, but I never took cash out of the account.
That’s another upside of keeping your job for the first few years: all the money you make from your business is a bonus, and so even a few hundred dollars per month can stack up very quickly. Even though I sometimes spend a lot of money on new gear and/or equipment, I rarely spend more than what I make every month:
At the end of the day, even if you can build a business that consistently generates $100K per year for 10 years, you won’t get to $1 million in cash after taxes and expenses. Why then include the $5,000 salary metric? Because again, keeping a job on the side will let you keep the business money in the business account, and reinvest it into growth.
The truth is, a business is only worth what someone is willing to pay for it, and lucky for us entrepreneurs, investors invented an indicator to estimate how much they would want to pay for any business in any industry. It’s called EBITDA, and it’s pretty awesome.
“EBITDA is an acronym that stands for earnings before interest, tax, depreciation, and amortization. EBITDA is an indicator that is often used by investors or prospective buyers to measure a business’ financial performance. — Source
When looking to put a price on a business, potential buyers look at the EBIDTA and multiply it by a number based on which industry your company fits in. Here are a few examples:
A blog/writing business would fit in the “Online Services” category, which has a multiplier of 15.88. Based on that number, here is the business value based on how much it makes:
This means that if your business can make $8,333 per month ($100K per year), if you find the right person to sell, and you’re good at showing value, you can technically sell for $1 million+.