When I began my career a mentor said that you should be making a salary equal to $1,000 times your age. I graduated at the age of 24 and was content that my first job paid me $25,000. And within 5 years I was making much more then the $1 k times my age. I realized quickly that the old rules didn’t apply anymore. Even now there are many people earning millions of dollars each year. How do they do it? and more important how can you and I do it to?
Making money is a part of working. You get paid by a company because you add value and supposedly profit to the bottom line. Having started my academic career in math I quickly learned to read an annual report and a balance sheet. Rather simple really. After all, accountants basically use arithmetic to create two columns of numbers; debit and credit and ensure that the two columns add up. Balanced books means that columns are equal. A positive number means profit, a negative number means a loss. Since my first employer was publicly traded and listed on the TSE it was easy enough for me to figure out that each employee of the company brought in $250k to $350 k a year in revenue. You make money because the company makes money.
So figuring out my salary and hourly rate was basic math. Knowing how much my employer charged for my time to clients again made it very easy for me to realize that even at my salary I was under paid. Quickly, it was evident that I could make more by being independent – all I needed was clients who would pay me what my employer was charging for my time. This is easier said than done.
Ok, enough gloating, how do you make a Million dollars a year? If you are Bill Clinton or another famous person you can get someone to pay you a million dollars for a speaking engagement. Many folks that can pack a theater or an auditorium full of people to come and hear them speak, sing or perform can command fees of huge sums. Even if not 1 million for one show, they may be able to do 25 engagements at $40,000 which will earn a million a year.
If you use an hourly rate, what would you need to charge to make a million dollars a year? Well there are 8,766 hours in a year, so your hourly rate would be $ 114 per hour. While you can work 7 days a week, not many people will pay you $114 per hour to sleep. For consultants and lawyers the average billable hours in a year are 2080 hours, using this you can earn 1 million by charging $480 per hour. That’s really not unusual for high prized lawyers and other professionals. Of course the reason they make so much an hour is that there are many hours that they legitimately can’t bill, but it ‘s still not unheard of to bill $500 or more per hour and bring in one million.
You still have expenses; office space, admin assistant, car, travel, marketing and entertainment. For such hourly rates your work had better be worth it.
We talked about getting one person to pay you a million dollars, what about the reverse? Get a million people to pay you $1 dollar each. But what do they get for a dollar? Are you just begging for it, or do you have something to sell for a $ 1? And if you had something to sell how did you get it, what did it cost you to make or buy for resell?
Let’s take this premise further, we could get 20 cents from 50 thousand people and make a cool million. There are over 6 billion people in the world so conceivably you can make a million dollars a year by getting .01 cents from 100 million people. There is a reverse relationship at play the more people you can get to pay you the less you need from each person.
So there you have it. The math is relatively simple you can sell your time, work hours for an exorbitant rate or you can sell to many people something at minuscule price. Selling time is finite, in that there are only so many hours in a year that you can work and the rate has to be high to achieve your goal. Selling time can also be expensive as you need to do a lot of marketing to justify your worth. Going the alternative method you can find something to sell arrive at a price many people are willing to pay you for it and then sell away. What the product is, how much it will take to make or buy will factor into what you can sell it for. The math is the simple part, making a million dollars a year that takes a lot more than arithmetic.