This is probably the most important topic that I’ve yet to ever discuss in any of my financial writings: 100% profit growth does not lead to the same results for every type of business.
Let me give an example: Let’s say that over a century ago, you were Mr. Pemberton, and you started Coca-Cola. When you were growing your soda business, you were doing a magnificent thing because you were the owner of a business that could be capitalized at thirty, forty, fifty times profits.
Every time you doubled your profits, you were getting significantly richer. If you made $100,000 in soda profits, you could sell it for $3,000,000-$5,000,000. But if you doubled your profits quickly, say within the next three years, you could rapidly increase the wealth you could create by selling out. Suddenly, those $200,000 profits could be sold for $6,000,000-$10,000,000 (sadly, Pemberton sold Coca-Cola to a pharmacist … Read the rest of this article!