Your brand is more valuable than your salary

February 29, 2020

Tom Brady may be football’s greatest all-time player. He has six Super Bowl wins, nine Bowl appearances, and over a dozen other significant records.

But you wouldn’t know it from his salary. Brady was the NFL’s 18th-highest paid quarterback in 2019, earning less than half of the Seattle Seahawks’ Russell Wilson. His total earnings barely cracked the Top Five of Boston-based athletes. Brady says that’s fine because by giving the Patriots room in the salary cap, he has “a competitive advantage” to put “a lot of good players around me.” 

Like Michael Jordan, who earns $145 million per year and is worth $1.9 billion two decades after retirement, Brady knows that his team’s success is more valuable to his long-term brand earnings than any salary. There are two major reasons for this.

The first is that Super Bowls are unattainable if all you have is a great quarterback. Brady didn’t win Super Bowl LIV. That was Patrick Mahomes, whose team was in the Top Five last year for total offense, passing, and defense against the rush. Brady, meanwhile, struggled all year with poor receivers, a weak offensive line, and slightly reduced skills.

The successful CEO likewise will find, attract, and develop the right team to win regular season, then playoff, and finally Super Bowl-level contracts. There may be some hiccups, challenges, and failures along the way, but the company will thrive under leadership that knows how to create follower-leaders.

The second reason comes from the first: winning creates immense brand value. By reinvesting salary cap space to the rest of the roster, Brady and the Patriots kept winning Super Bowls. Brady stayed healthy enough to break all sorts of records.

The business version of this is done by the world’s top CEOs. Warren Buffett earns $100,000 per year, and Twitter’s Jack Dorsey earns just one dollar per year. But they both invest heavily in their companies’ successes through tomorrow’s stock options and other earnings opportunities. Their delayed gratification strategy has turned their company’s brands into their personal brands – just like Brady is much more than just the Patriots’ quarterback, and Jordan is more than just an aged former basketball player.

Small business owners can begin this delayed gratification strategy on Day One of their company’s life cycle. This has a number of benefits to the company’s long-term success:

  • The company will have little or no debt.
  • Cash reserves will be high for planned and unplanned purchases
  • “Salary cap” space can be used to build the right team.
  • The company is protected from slow seasons and recessions.
  •  There is room for mistakes like hiring the wrong person
  •  The CEO has an emotional cushion to focus on long-term strategy instead of worrying about next month’s payroll.

For the disciplined and successful business owner, this patient discipline will pay off over time. A modest salary now could turn into a much larger salary several years into the company’s life cycle. Or, for the classic small business like an inn or restaurant, the owner’s financial windfall may happen when he or she sells and retires.

This message may be most important for entrepreneurs under the age of 35, who have grown up watching people like Facebook’s Mark Zuckerberg become wealthy before the age of 30. However, one study found that the average self-made millionaire doesn’t reach that lofty perch until they have worked for 32 years. Stop Acting Rich…And Start Living Like A Real Millionaire author Timothy Stanley wrote that his mid-aughts research showed the average self-made millionaire reaches that status in their mid-forties.

Jordan made about $90 million as a player – he’s worth over 20 times that now. Brady is on that same path to success. The small business owner can emulate them by using modest salaries to set the stage for much larger payoffs later.

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