Of everything you own from properties to mutual funds, which offers the most significant long-term wealth creation opportunity?

It's your business.

Forget the 78% house price inflation since the year 2000. Forget the 3-4% annual you might get on your developing market mutual fund. Forget not stocks, bonds or securities as well.

Your business is the most lucrative investment there is. Which other investment vehicles do you decide the future direction of? Right now, small business assets represent 34% of non-financial family wealth. Done right, that percentage could be a lot greater.

In this article, I'll cover:

• Your business as a wealth creation vehicle principles I value the most and pass on to my clients
• What attitude you should take towards debt in using your business for wealth creation
• How investors and lenders view debt and what motivates them to take a risk on you
• What investors look for and how they can supercharge your business as a wealth creation vehicle

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Why wealth creation principles are better bets than property or mutual funds

You are far more likely to achieve your financial goals by scaling up your business, no matter what any financial advisor tells you.

So, when I coach my clients on how to build valuable businesses, what do they do that helps them achieve their long-term goals?

• Something deeper than the need to accumulate money drives them. Once your business has passed the point of survival, don't make the accumulation of money your solitary goal. Having lots of money is nice but it's not what life is all about. Have a bigger purpose in mind that's separate from the combined value of your cash and assets.
• Find continual ways to add value to customers. When you overdeliver, you add value to the lives of your stakeholders. When things get better for them, they get better for you.
• Have the courage of your convictions. People rarely accumulate wealth by following the crowd. Don't be told by others what you can and can't do. The road less travelled is a far more interesting, rewarding route.
• Approach everything with passion and energy. Don't succumb to negativity and never lose your passion. The wealthiest people direct their passions toward a particular area of life or business.
• Remain disciplined. There are millions of little steps that you have to take to accumulate wealth. Choose the most productive steps to focus on and make them part of your daily routine.
• Save money and invest in yourself. Keep repeating this cycle.
• Don't be flash. Some people, a vanishingly small minority, might be impressed by conspicuous displays of wealth but why would you want to impress them anyway?
• Use OPM(ore). Don't sell your hours for time. There are never enough hours in the day. Try to use other people's money, tech, time, connection, knowledge, systems and more.
• Don't underestimate the value of support. "No man is an island, Raquel". The journey you're on is hard and requires focus, persistence and consistency sometimes seemingly in the face of what others define as reality. Your personal and professional connections matter and they want to be on your journey with you.

Does debt belong in your wealth creation toolkit?

Yes. In my experience, debt, whether as a loan or the dilution of your shareholding, is vital to wealth creation and can accelerate it quickly. Many people's belief systems lead them to have an opposite view, one that slows their growth down and leaves them trapped.

Debt is not inherently bad. The world's largest companies use debt to manage cash flow, scale up marketing campaigns, purchase strategic, upcoming competitors and so on. Debt helps save struggling companies and it grows businesses. Better still, this productive economic activity generates interest and other types of returns that pay people's pensions.

Debt is, in fact, a force for good and I ask you respectfully to clear your mind of any negative connotations you have about it.

How debt can set you free and build longer-term value

What if you're turning over £3m a year and the vast majority of your cash comes in at the very start of the month from clients on direct debit?

On the seventh of every third month, you've got to pay your VAT bill off. You have enough cash left in your bank account to meet your fixed costs but not a lot left over. You've found, that as revenues have grown, your financial commitments have grown in parallel.

You're stuck for the rest of that month. You can't invest any more in marketing to take advantage of your momentum. Growing a business always takes longer and costs more than you budget for anyway so there'll be other unexpected surprises like the landlord requiring you to contribute to the upgrading of the building you occupy or a vexatious lawsuit from a competitor.

There is also an element of displacement theory where small incremental re-investment actions do not have the required power or force to make a significant difference to your growth. It takes larger amounts of capital to deliver impact that shakes the market and outside investment is the only option for businesses to get that level of momentum.

If you can show a causal relationship between marketing spend and revenue generation, this is exactly what lenders and investors want. Many business owners attitude to debt changed with the availability and distribution of covid recovery loans. Admittedly at very low interest rates and long term repayment plans but the ability to spend the equivalent of twelve months marketing budget in one month creating many multiples more leads or double their inventory purchases accelerated growth for many business owners.

What if, using that funding and normal cash flows, you could double marketing spend for that year and treble the size of your company like in the example above while either:

• Maintaining current net profit level before debt repayments
• Improving them through economies of scale?

What makes sense to investors and lenders?

If access to cash could take the value of your business from £5m to £10m, how would an investor see it?

Let's say that you want to raise a £1m investment to spend on marketing and your company is worth £5m.

Seeing this, an investor might put in £200,000 of their own and raise £800,000 from elsewhere to find the money. Sometimes they get the extra from other investors and sometimes from short-term loans.

If, for whatever reason, the value of your company drops by 20%, the scale of their personal loss will be £40,000.

However, if your value doubles because your turnover has doubled or trebled, the value of the investment (including their own money) is £2m, a £1m increase in their capital.

The upside is maximised and the downside is minimised. These are exactly the types of investments that return the greatest income.

How business growth experts like me work with entrepreneurs in raising funds

Clients first need to find the courage I speak about earlier in this article to embark on such a step. Does it accelerate their growth plans?

It's harder for those with a negative opinion of debt and for those resistant to share dilution (often because they have to sacrifice some control, promise greater financial visibility or both).

Getting you and your company ready

First, we need to work to get the company into an investment or lendable state. The most important part of that is you. If you're spending too much time working for your business and not on it (as most clients are when I find them), you have to be released from this.

If that's you, you'll likely be the type of person that gets overly focused on smaller, insignificant tasks and minutiae problem fixing on a daily basis. People lose sight of their ambition when they have other responsibilities taking up their time. Your thinking is currently boxed thinking, constrained and short term but I need to move you to cathedral thinking, ambitious, expansive and long term.

When you foster and develop your ambition, this always leads to an expansion in creativity, innovation, better performance and a feeling that, finally, you're getting somewhere.

Ambition, when well-balanced and targeted, reveals greater aspirations that have been hidden and locked in your subconscious for a while. They did not surface previously because, emotionally and mentally, your mind wasn't ready to present them to you yet.

When you're in a better place, clearer on the value drivers in your business with greater systematisation, it's now time to start looking for cash.

Getting your company ready for investors

For early-stage businesses venture capitalists need to see how you intend to scale up your business. It needs to be a credible plan and this is what I work on with you.

Venture capitalists (VCs) want big profits and short-term wins to get the massive returns they seek.

They're only interested in a business that can match or exceed their minimum rate of return (the so-called "hurdle rate"). This is to reduce risk and to make up for losses they've incurred when they invested unsuccessfully in other ventures.

They set a high bar but a lack of ambition and thinking small here will not make you an attractive proposition.

For larger more established businesses you need to give confidence that you can make capital and interest repayments much like a mortgage or that you can show where an equity investor will see a significant return on their investment as you grow the valuation of your business through accelerated sales growth, joint ventures or mergers and acquisitions.

Thanks to my experience, I know what investors want from seed to IPO and I can help use this as a tool for valuation growth. As soon as we get your business to an investible state to take to them, we can start the process.

Turning your business into a wealth creation vehicle

If you're not happy with your current direction or growth rate, you need to start thinking bigger. Are you one of those people who sets a low bar and achieves mediocre results or will you bring together wealth creation principles and business scale-up expertise to build a highly valuable business?

To get to where you want to be, you need to create an investable business, an asset that you can sell for eight figures one day. For that, you need to understand the approaches and behaviours that deliver success and incorporate those into your daily routines to create the maximum value.

Start investing in yourself. Reach out to us and turn your business from a slow growth, energy-sucking entity into an investor-worthy proposition that will give you the springboard you need to push into the next tier of businesses. To get in touch, please click the "Contact Me" link in the footer and send me details about yourself. I look forward to finding out more.

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