By Mike Johnson
Today, if I taught math, I'd be the kids' favorite teacher.
This confidence is not based on any addition of teaching skills, but on mastering the magic of multiplication.
Because I shield myself from the devil’s work schedules, you’ll never see me hired for a classroom.
So let me take a stab at it right here, right now.
I started dabbling with this magic math accidentally, in fifth grade.
I got a morning newspaper route.
Going from no work, to daily work, was a big change.
But I soon acclimated and it became my new normal.
I was earning about a dollar a day.
Not hugely impressive.
But I was earning a dollar EVERY day.
Repetition over time, squeezed out a tiny odor of magic math.
During sixth grade, the most popular candy was “Spree,” which was basically a sugarcoated SweeTart.
The packages captured attention with their cool, full color photos.
They cost 10 cents at the store but I saw kids selling them at school for a quarter.
One kid seemed to be selling about 10 packs a day.
That was more profit than my paper route!
Interesting.
Another whiff of magic math.
I’m embarrassed to admit I didn’t really start harnessing magic math until 1990.
Ironically, it involved a route and candy.
Wife and I started a side-hustle snack business that provided honor-box treats to office breakrooms that were too small to provide a mechanical machine.
We just bought the treats at wholesale and doubled the price in our boxes.
We built the company up to 50 accounts then sold the business for twice what we’d invested.
It earned income from its operation and earned a nice windfall when sold.
This taught that we could create an income-earning system and sell it for more than the sum of its parts.
Now we were catching on to magic math.
The key phrase was “income-earning system.”
It took us many more years of trial and error to fully understand that magic.
It turns out that businesses are valued at a multiple of annual net-operating income.
The multiple is highest when the owner has the most freedom from doing the work himself.
A business with lots of shifts worked by the owner might be worth two to five times annual net operating income.
For every dollar of new profit, the business sale value increases by $2 to $5.
While you’re already keeping the income from daily operations.
A multi-unit residential rental property with the owner paying a manager to run things, is worth 10-15 times annual net operating income.
For every dollar of new profit, the income property’s sale value increases $10 to $15.
While you’re already keeping the income from daily operations.
This is magic math in its full glory.
It massively multiplies the returns you gain for your efforts.
But it doesn’t just multiply your income.
It multiplies your TIME.
If your operation is large enough to pay a manager, you just manage your manager, which takes just a few hours a week.
Now you're free of work schedules forever.
You don’t have to start these businesses from scratch either.
You can just BUY them.
You avoid all the start-up risks by purchasing an existing, proven income stream.
Suddenly, thanks to magic math, you step right into financial and time freedom with just one transaction.
Once successful, you greatly increase your returns by buying fixer-uppers.
Like restoring damaged furniture, many people buy damaged income streams and restore them.
Repaired furniture sells within a fixed range, but income properties sell for a MULTIPLE of profits.
Magic math.
Our best magic math came from buying, operating, improving and selling trailer parks.
After earning enough, we valued time and a clear mind more than money, sold the parks and early-retired.
But just writing about this magic math gets me excited enough to imagine jumping back in.
They don’t teach magic math at school.
At least the teachers don’t.
I first sniffed it from those kids selling candy, who were earning financial Spreedom.
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More:
How These Snacks Created a Wealth Feast
The Amazing Power of Income Property Math
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