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CHAPTER 9 GROWING YOUR BUSINESS EMPIRE

research and develop new products, open new offices, advertise
and so forth.

There are four main ways you can get the cash to fund your
growth. 1) Reinvest your profits, 2) Get investors to inject
capital, 3) take a bank loan or 4) franchise your business.
Let’s explore these options in detail.

1) Reinvest Your Profits
This is the safest and most conservative strategy of all. Instead
of taking out your profits, reinvest a portion of it back into the
business. Use this money to fund your expansion. The only
drawback of growing organically like this is that your growth
will be slower than if you were to use the next three options.

2) Get Investors to Inject Capital
If the re-invested profits are not enough to fund your expansion,
you may have to turn to new investors to inject capital into
your business. First, you have to find out the dollar value of
your business using a method like discounted cash flow. To
find out more about this, read my earlier books ‘Secrets of
Self-Made Millionaires’ or ‘Secrets of Millionaire Investors’.

However, a very rough gauge of your business’s value is to
take a multiple of five of your company’s annual net profits.
In other words, if your business is making $500,000 a year
in net profits, it will be valued at $2.5 million. So, if you want
to raise $500,000 from an investor, you may have to sell him
20% of your shares (i.e. $500,000 $2,500,000). Of course,
the downside to this approach is that you dilute your own
stake in the business and would have to share part of your
future profits with your new investor.

However, if you could use his $500,000 of extra capital to

266 SECRETS OF BUILDING MULTI-MILLION DOLLAR BUSINESSES