Nov 10, 2024
Nearly 22 million Americans — roughly one in 15 people — have a net worth exceeding $1 million, according to the UBS Global Wealth Report 2024.
For those looking to enter this club quickly, multimillionaire and “Shark Tank” alum Kevin O’Leary has some advice.
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“The fastest way to make a million dollars is to make the first $10,000,” he said in a video posted to his YouTube channel. “That’s really how it works. But really, it’s not about anything else except focusing on what people want and how to solve their problems.”
In other words, his advice for anyone looking to build wealth quickly is to launch a business. “Successful businesses solve problems for people and [customers] want to pay because it saves them time and money… people don’t want to walk around in bare feet, so they buy shoes.”
He added, “Try to find a pain point that you know everybody has, and then provide a product or service that solves that.”
Here’s why working for yourself may be the quickest way to enter the seven-figure club, but is not necessarily the best way.
Fast track
O’Leary’s comments about making that first $10,000 and solving a “problem” implies starting a business and making it profitable. Over time, a profitable business could scale up and generate wealth for the owner.
Indeed, headlines are often dominated by the overnight success stories of innovative entrepreneurs.
Artificial intelligence search engine maker, Perplexity AI, was launched in 2022 and is already valued at $3 billion as of June, according to CNBC. That created a massive windfall for the company’s founder Aravind Srinivas.
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However, you don’t need a groundbreaking business idea to make a fortune. According to a study by JPMorgan Chase, 8.9% of small businesses successfully scale up to $1 million in revenue within the first five years of their existence.
Sure, it’s not the experience for the majority of small business owners; however, this statistic suggests there’s some truth to O’Leary’s belief that it’s a quick path to millionaire status. That being said, it doesn’t indicate how likely — or even risky — that path is.
An estimated one in four new businesses fail within their first year of operation, according to LendingTree’s analysis of data from the U.S. Bureau of Labor Statistics (BLS). In addition, 48% of businesses fail within their first five years.
Put another way: if you launch a business today you’d have a 8.9% chance of scaling it up to $1 million in revenue by 2029 — but a 48% chance of failing in that same time period.
The failure risk is significantly higher. With that in mind, most people would be better off picking a slower, but less risky, path to millionaire status.
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Slow track
Your chances of accumulating $1 million could be higher if you simply find a well-paying job, save a meaningful amount of money every month, and invest it wisely. At least, that’s according to The National Study of Millionaires by Ramsey Solutions.
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According to the survey, 75% of millionaires said that regular, consistent investing over an extended period of time is the key reason behind their success.
The most common professions that resulted in millionaire status were teachers, accountants, lawyers, managers, and engineers. Only 31% averaged $100,00 a year over the course of their careers. Instead, most of their success came from investing wisely.
As of 2023, the median annual wage for a lawyer in America was $145,760, according to BLS data.
Saving just 15% of that and investing it in a low-cost index fund, such as Vanguard’s S&P 500 fund — and using, as an example, a compounded annual growth rate of 13.33% — could help you accumulate just over $1 million within 16 years.
Granted, 16 years is a long time, so this definitely isn't a quick way to enter the seven-figure club. But your chances of success at hitting this target is likely significantly higher than launching a small business, making it profitable, and scaling it up.
If you’re looking to build wealth, both paths are entirely valid. You could choose either path depending on your appetite for risk, level of patience, and aptitude for business.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
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