Is Kanye West a Billionaire? | How to Determine How Much Your Business is Worth & How to Determine Your Net Worth?

Show Notes

Canada’s Highest Rated and Most Reviewed CPA Josh Spurrell joins us to share how to determine your net worth, what your business is worth, and whether or not he believes that is Kanye West a billionaire or not?

How to Determine Your Net Worth?

1. Determine the Fair Market Value of the Real Estate Minus Any Loans:
2. Determine the Fair Market Value of Your Investment Accounts
3. Add the Cash in the Bank 
4. Itemize the Fair Market Value of Your Vehicles 
5. Determine the Value of Personal Effects (10 Cents on the Dollar)
6. Determine the Other Loans That You Have (Student Debt, Credit Cards, etc.)
7. Determine Taxes Owed
8. Add in the Value of the Business

AMPLE EXAMPLE: $3,000,000 revenue x 20% profit = $600,000 annual profit

1. $45,000 to replace the owner with a manager

AMPLE EXAMPLE: $5,000,000 revenue x 25% profit = $1,250,000 annual profit 

1. $200,000 to replace the high-skilled owner

Knowing your net worth can be essential for entrepreneurs to effectively plan retirement or obtain business and personal financing from a bank.  I know your goal Clay is to mentor millions. Your goal is to help the everyday entrepreneur achieve time freedom and financial freedom. One of those everyday entrepreneurs who is struggling right now is Kanye West. I think Forbes is unnecessarily hating on Kanye saying he is worth a mere $240 million. I think we need to come together right now, you out in Oklahoma with your guns and your gold and me here in Edmonton Alberta Canada with my igloo and public health care and we need to help Kanye defend his billionaire street cred. If we don’t help Kanye Clay who will?

Calculating Net Worth

1.   Look at real estate
   1.   Determine the fair market values for each piece of real estate. What you paid for it is irrelevant when considering net worth, we have to use fair market value.
   2.   The value of the real estate alone will overstate your net worth, you have to consider the loans against each property
   3.   Deduct the balance owing on any mortgages against the property
   4. We also deduct any lines of credit secured by the real estate
   5. Then we are left with the equity in the real estate and this is added to your net worth.
   6.   Kanye bought a house in the Hidden Hills of Southern California in 2014 for $20 million.
   7.   Normally I would say we need to get a property like this appraised Clay to get the fair value. However, in Kanye’s case his mother in law, Kris Jenner, already valued it at $60 million on Twitter 4 years later.
   8.   I don’t know about you Clay but if my mother in law values one of my properties on Twitter for a 300% return 4 years later, that’s the value I’m going with. If Forbes is insisting on an appraisal, that’s basically like Forbes saying they are anti-family.
   9.   Then Kanye has 2 different ranches in Wyoming worth $14 million each and a Miami condo also worth $14 million.
   10.   Although Kanye hasn’t called me back yet to confirm the mortgages on these properties, I have seen multiple episodes of million-dollar listing. Based on that alone I think we can assume that these real estate purchases were all cash deals, no financing, thus the combined equity in these 4 properties is $102 million.
2.   Look at investment accounts
   1. Again, we need the fair market value for each account. What you invested is irrelevant.
   2. Clay, Kanye has not called me back yet, so I had to make some reasonable estimates here.
   3.   He’s on record saying he’s considering changing his name to “Christian Genius Billionaire Kanye West”. I figure anyone who is serious enough to change their name to include the word billionaire is probably maxing out their 401k and roth IRA accounts since he got his big break producing for Roc-A-Fella Records in the year 2000.
   4. However, he did open a string of Fatburger franchises starting in 2008.
   5. The Fatburger venture eventually failed and was shut down in 2011. I heard he wasn’t holding morning huddles, he wasn’t doing group interviews, and he wasn’t holding people accountable to the checklists so the business failed. It can happen to anyone, even to Kanye.
   6.   Although I can’t confirm this, I believe he burned through his 401k and Roth IRA accounts during this time.
   7.   However, immediately after that business venture went south he started re-contributing. I think it’s safe to assume that if Warren Buffet is getting an 18% return historically on his investments then so could Kanye. So I estimate his 401K and Roth IRA accounts at about $1 million.
   8. This would put our running total up to $103 million
3.   Look at cash in the bank
   1.   We recommend that people have at least 2 months worth of income saved in cash.
   2.   Kanye made $150 million in 2019. Again he takes his finances seriously so I think we can assume he has 2 months or $25 million in the bank.
   3.   This would put our running total at $128 million
4.   Look at vehicles
   1.   Again, we look at the fair value of vehicles minus the loan amounts
   2.   Unfortunately, vehicles depreciate far faster than most other assets.
   3.   From what I can tell Kanye has about 20 different luxury cars from Lambo’s to G-wagons each with a cost well into six figures. However, these things depreciate significantly so if we take 20 times $100,000 each we get $2 million.
   4.   Now I’m going to make a special allowance for Bugatti. From what I understand that thing could go for as much as $2 million all by itself.
   5.   That would put the cars at $4 million and the running total at $132 million.
5.   Then we look at the personal effects
   1. This includes items such as clothes, electronics, jewellery, artwork, ATV’s boats, etc
   2. Most people drastically overestimate the value of these personal effects because we look at what it would cost to replace them.
   3. However, most items in this category would sell for 10 cents on the dollar in a liquidation situation.
   4. Kanye has more style than us Clay. He’s always wearing a fancy chain, he’s got artwork in his house, and has a bunch of ATVs on the ranch.
   5. I’m going to assign a 5-million-dollar value for those things so that brings us up to $137 million.

6.   Then we look at other loans
   6. This is where we deduct things like unsecured lines of credit. These are credit lines not attached to real estate. I think Kanye has all these paid off. He’s likely carrying around a stack of hundreds.
   7. We also deduct things like family loans or student loans here. He took painting at Chicago’s Academy of Art and switched to English at Chicago State University. He only went to school for a year and dropped out at the age of 20. It takes an average of 19 years to pay off student debt, he’s 42 now so he probably got those knocked out a few years ago.
   8.   It’s at this point I recommend doing a credit search for yourself. Most business owners get busy and it’s not uncommon for business owners to end up with amounts owing they didn’t know about showing up on their credit report. Sometimes they are fraudulent amounts, sometimes they are just things we have forgotten about.
   9. I know Kanye likes to develop properties and because he has not sent me his credit report yet, I’m just going to go ahead and assume he owes $1,000 on one of those Home Depot don’t pay for 24 months specials that he signed up for at the entranceway of the hardware store. That brings his net worth down to $136,999,000.

7.   Taxes owing
   7.   You have to deduct any taxes you owe at this point.
   8.   Unlike R. Kelly who owed about $5 million a while back. I hear Kanye is up to date.

8.   Business
   8.   Again, most people overestimate the value of their business. They look at public companies that are valued at 15 times earnings or so.
   9.   Most small businesses have a much higher degree of risk. One bad break and they can get wiped out and that’s why most small businesses will sell for 3 to 5 times normalized earnings.
   10.   Most of the time normalized earnings are less than the earnings on the financial statements because most of the time normalizing earnings involves deducting a fair value salary for the owner who is often doing the work of 2 or 3 people.
   11.   However, Kanye is somewhere between a small business and a public company. He has 1.5 billion in revenue. He’s not going to get a valuation based on 15x earnings like a public company but it’s conceivable he would get more than 5x earnings for his company.
   12.   Now again I have to make some assumptions here. I caution everybody that myself as a very white Canadian I’m going to have to try to interpret hip hop slang.
   13.   However, Kanye said he had a single “$890 million dollar receipt”
   14.   I hear receipt I think about the $242 receipt for the fancy steakhouse here in town that Sandra and I just went too but I’ve never gotten a receipt for $890 million at the steakhouse.
   15. Now I’m not living large like Kanye’s bottle service lifestyle, but I don’t think he’s talking about a conventional receipt I think that’s hip-hop slang for a professional business valuation.
   16.   Unlike the house, the mother in law did not give this valuation on Twitter so I have to assume this a valuation was done by a professional.
   17.   Valuing his business at $890 million isn’t that far fetched.
   18.   Although I haven’t seen any audited financials, at this point Kanye seems like a good Christian claiming $1.5 billion in revenue.
   19.   By comparison, Nike is doing $36 billion in revenue. Nike operates at roughly a 10% profit margin and trades for 36x earnings.
9. FUN FACT – If Kanye is doing $1.5 billion in sales and he operates at the same 10% profit margin as Nike, he could make $150 million from the business and a valuation of $890 million is roughly 6 times earnings. That’s above the 3-5 times that most small businesses get sold for but far below the 36x earnings that Nike is currently selling for. Thus a $890 million dollar valuation is not out of the question.
10.   If we take $890 million and add it to the rest of the net worth, we get a net-worth of $1,026,999,000. As soon as he gets that Home Depot loan cleared up we can round it up to $1,027,000,000.