13/2016 – Measuring your level of success
by Tan Thiam Hock
Saturday, 3 September 2016
MOST entrepreneurs have no idea as to how much money they should make in their lifetime. In fact, all entrepreneurs starting from zero wealth base are thankful for their first hard earned million, overjoyed that they have survived the uncertain journey of a startup and filled with optimism with the thought that the next 10 million is just round the corner.
It took me eight years of doing various businesses to make my first million and that was way back in 1993 when I was already 33 years old. I had set a target of achieving my first million by 30 so I was a late achiever by three years. For comparison, a semi detached house in Damansara Heights was about RM700,000 in 1993 as compared to RM3.5mil in 2013.
Adjusting for inflation, entrepreneurs now have to aim for a target of earning at least RM5mil to be considered that you have reached your first level of success. After all, buying a double storey terrace house in Bangsar now will set you back some RM2mil plus half a million in renovation, furniture and fittings. Money is just so small nowadays.
So how do you measure your level of success? Is it just in monetary terms? Or total assets? Or number of wives and children? Happiness level at home and at work?
If you are unsure with where you stand in terms of the wealth index, ask your private wealth banker. If you have not been assigned a RM – relationship manager, then you have not reached the high net worth individual status yet. If you have been assigned a Director level relationship manager, then you are presumed to be an “ultra” high net worth individual.
In a chat with a Director RM from a Singapore private bank, their definition of a ultra high net worth individual is a person who has a net worth of US$30mil in personal assets, a combination of listed shares, properties and cash. What is more important to them is your cash position. Do you have a free cash flow of US$3-5mil to park with them? Let them help you preserve your wealth, so they speak. For a fee of course.
Why the benchmark of US$30mil? Could it be the set benchmark of RM100mil at the old exchange rate of 3.3 to the US dollar? Adjusting for ringgit depreciation, Malaysians need to have a net worth of RM120mil now to qualify as an Ultra-man or for gender equality arguments, a Ultra-woman.
According to private bankers, their ideal customer would normally have net assets of a third in investments, a third in properties and a third in cash. Which means, out of US$10mil cash, they can invest with them US$3-5mil which is an optimum amount for a Director RM to spend his time managing your portfolio. A Director RM normally manages a pool of 10 Ultraman which means a total portfolio of US$30-100mil to ensure the fees received is more than enough to cover his salary and bonuses besides making a ton of money for the private bank.
According to the private bank’s research, Malaysia has a pool of 4000-5000 ultra high net worth individuals based on public information gleaned from Bursa Malaysia. My personal estimate would be to double their numbers in view of the large numbers of unlisted old school rich individuals/ families plus a big pool of politicians, cronies and civil servants who have done very well in enriching themselves. So if you are worth a net RM120mil, you are at the top of the heap, within the elite group – 0.0003 % of the Malaysian population.
Like the scarce Pokemons, the private bankers will eventually catch them all.
So entrepreneurs nowadays can adopt a three step wealth index strategy. First RM5mil, step up to RM50mil then achieving the ultra level of RM150mil (assuming ringgit depreciating to 5). How much wealth you will need will depend on your personal lifestyle. If you have a frugal family, US$30mil with some prudent investment will feed your next three generations. But if you decide to throw away hundreds of millions into F1 sports and English football clubs , you will need to amass a fortune in excess of a billion. Just make sure you keep RM150mil aside for your retirement needs.
In your pursuit of material wealth, never forget the people who has shared the journey with you. From your staff to your family, you owe loyalty to them. Share your wealth with them. From your suppliers to your bankers, share your profits with them. It is a much more meaningful journey for you as an entrepreneur who generates sufficient wealth to look after the community you live and work with.
Don’t be blinded with the wealth index as it feeds on your ego. There are only so many meals a day that you can eat. So many cars that you can drive. The next 100 million will not give you a better life. Unless you decide to own a jet plane and a yacht or a football club. Even than, will you ever be satisfied if you lose your family and friends?
Every entrepreneur has his own dreams. Try your very best but be realistic with what you can achieve. Be at peace with what you have achieved and enjoy your life without regrets.
As for me, come next Monday night, I will be attending my children’s get together party with their friends at myBurgerlab. I have ordered my Ultraman chicken burger topped with salted egg yolk sauce.I guess this will my closest taste of success as an ultra entrepreneur. How awesome can that be?