Why You Aren’t Rich Part One What Ratios? Vs. Ratios!

I have to admit, I wrote this article on the 9th but I didn't want to publish it for fear someone would steal my ideas...then I remembered that about 10 people actually read my articles so here it is.

...

OK so I don’t promise to make you rich if you read this article and if you really think about my points you already know them. I’m going to write them down anyway because most of the articles I have read about making money have stupid points; yet millions of people are still like me, not rich. Maybe if I keep telling myself to actually follow these points some day I’ll make it into the millionaire club and beyond…some day.

Let’s start out with a point I made in another article about why most celebrities don’t make "too much money". All of us work for someone, if we are actually working anyway, but that is another article in itself. Most of us work for a single employer or maybe two employers. Then there are people that are “on their own” and work for people or businesses in general. These people are normally called the “self-employed”. I have found myself working for a single employer many times and like most of you I absolutely hated it. Here’s a few reason why you should take a serious look at your current employer and maybe even your current profession.

To figure out how much you are missing out on figure that you make $10 an hour, your employer’s expense to employ you is $30 an hour and your employer charges their customers $100 an hour for your services. Your employer’s expenses include your share of the building you are in, the electricity, the secretarial, legal, accounting and other expenses your employer incurs. I use these numbers for simple math; your employer makes $70 an hour off of your services. Obviously your employer is getting rich faster than you are …yet you are doing the work. Some employers give bonuses but these bonuses rarely include 100% of the profit after a certain point…yet you are doing the work.

Your employer, in this case, is a celebrity. Your employer can draw the attention of more people than you can and, therefore, may deserve the $70 an hour they are making off of you. If you are a computer repair specialist you would be hard pressed to average the $10-$30-$100 ratio on your own. Wouldn’t you?

Well actually…probably not. At the $10-$30-$100 ratio for your employer you are making about $20,040 a year. Who said you had to maintain that same ratio once you go out on your own? After re-reading my articles I know I didn’t say that. Now that you are working for yourself, your ratio doesn’t have the same middle man. You were the $10 and that is part of the $30 expense. You are now the $30 in a $30-$100 ratio. Think about it for a minute. Yep, I’m right. Now you are pocketing $70 an hour instead of $10. You have to work just 1/7th of the time you normally had to work in order to make $20,040 a year. Instead of having to find work for 2,040 hours a year you can afford live the same lifestyle and work for just 292 hours (about 2 months) a year. You don’t have to draw such a large crowd any more! Congratulations, you are now a celebrity. You can now either find your niche and stick with it until it fizzles away or work more than 292 hours and use your new found wealth to develop your status and enter new fields.

Sounds simple doesn’t it. Yes and no. Some professions don’t have the same ratios. If you bag groceries, for example, it is not too likely that you will be able to find the 292 hours at $100 an hour to make bagging groceries on your own worth while. I doubt you’ll find even one hour at $100 an hour. If your profession doesn’t have the right ratios you’ll need to find a profession that does have the right ratios.

Another set of problems with the ratios are that just because your employer charges $100 an hour that doesn’t mean you will be able to and just because your employer’s expenses are $30 an hour that doesn’t mean your expenses will be $30 an hour. Some law firms, for example, are able to charge large sums of money an hour because of their name alone. Maybe you can only charge $70 an hour.

Don’t let this discourage you without thinking about it. Charging $70 an hour, your ratio is still $30-$70 and you only have to work ¼ of the time or about 501 hours to make the same $20,040 a year. What you do with that other ¾ of your time may make the difference.

If you are a professional printer your employer had to invest a lot into a printing machine and is able to do that by distributing the entire cost of the machine over many employees for as long as it takes to pay off the machine. Your employer then may have $20 an hour spread out over 10 employees that each make $100 an hour for the employer. On your own your expenses would be $200 an hour and you could only charge $100 an hour.

Don’t let this necessarily discourage you either. Assuming you can find a way to buy or lease a printing machine, figure that your expenses are $200 an hour but you can charge $100 an hour. You only have to have 2 employees plus yourself to start making money again. Your ratio would look something like $220-$300. Expenses would be $220 because you have to pay your 2 employees at least as much as you were paid. You are making $80 an hour. Making $80 an hour means that at most you only have to break even for 1,790 hours and make $80 an hour for 250 hours to make your original $20,040. Remember that during that year you are employing 2 people that are making $20,040 a year. At least you can take comfort that when your employees start working the ratios they will see that they are only making as much as you are and not strike out on their own.

There is so much more to think about before you go out on your own. Legal issues are usually enough to scare the “celebrity” out of most people. People are sue happy and eventually you will encounter some legal issues. Hopefully I’ll be able to tell you how to deal with legal issues soon without having to experience any more myself but for now I just say do the right thing every time, be careful who you work for and what you promise, swallow the fear and jump off the cliff. It may take a while but eventually you’ll adapt and learn how to fly. If you don’t adapt and end up hitting the ground, pick yourself up and work for someone else until you find a new ratio. Most self-made millionaires failed multiple times before they made it big.

I didn’t say this would be easy and I definitely didn’t promise that you would be able to sleep every night and/or not have to worry about money ever again. You’ll have to sacrifice and you will have hard times (if you don’t at least tell me the ratios you found, I told you about the ratios in the first place remember?). It would be smart to think about all of this before you start affecting an entire family. If I have said it once I will say it another thousand times, when you are on your own, you are on your own and no one is to blame but yourself. You will rarely find someone that will be there to bail your business out when you fail. Nothing this good is easy though and just imagine if you could cut your work time down by just 1/8 of the total time you spend working now. What would you do with that month off? Your answer will probably tell you if you are ready to become a celebrity or not.