From Millionaire to Broke: How Mike Brown Rebuilt His Fortune with Cash Flow

Mike Brown thought he needed $100 million to feel financially secure. Despite building a $20 million net worth by his mid-30s, he ended up nearly broke and having to borrow money from his wife to pay taxes. His story offers valuable lessons on true financial security and redefining wealth.

The Rise: Building a Multi-Million Dollar Oil & Gas Empire

Mike's drive for wealth started in childhood, watching his parents fight about money. He vowed to make so much money he'd never have to worry about it again. After serving in the Navy, Mike started an oil and gas company in 2013 with his business partner.

Their first deal netted $1 million, which felt life-changing at the time. But Mike quickly realized it wasn't enough to achieve true financial freedom. He became laser-focused on growing the business, reinvesting profits into new deals.

"We were going all in, backs against the wall, betting on ourselves," Mike explained. "There was certainly a sense that this was a gold rush and we needed to capitalize."

By 2016, Mike's net worth had grown to $15-20 million. However, nearly all of it was tied up in illiquid assets:

• Oil and gas properties
• Commercial real estate
• Angel investments in startups
• Cryptocurrency
• Commodity futures

At the peak, Mike's oil and gas assets were generating $100,000-$150,000 in monthly passive income. He was living a lavish lifestyle, spending $30,000-$50,000 per month without a second thought.

"I was doing what I thought rich people did," Mike reflected. "I didn't have a playbook for creating safety and protecting my family. I was just going all-in."

The Fall: Illiquid Assets and a Failed Acquisition

In 2019, Mike sold his oil and gas company and got divorced, which immediately cut his net worth in half. Most of his remaining assets were illiquid, leaving him with only about $1 million in cash.

Desperate to replace his lost cash flow, Mike made a fateful decision to acquire a struggling e-commerce company for $2.3 million. He put in $500,000 of his own money, took on $800,000 in debt, and raised the rest from friends.

It quickly turned into a disaster. Within months, the company was losing $100,000 per month with no end in sight. Mike's liquid assets were rapidly depleting:

"I'm watching that last million dollars I have hurtling towards zero month after month. I got to a place where I had to borrow money from my wife to pay my taxes."

Mike was devastated and humiliated. There were days he didn't even want to get out of bed. He stayed in the failing business far longer than he should have, unwilling to lose his friends' money.

"I was willing to lose my own money, but I was not willing to lose their money," he explained. "So I stayed in this business a year longer than it made sense because I wanted to save face with my friends."

The Rebuild: Focusing on Cash Flow and Liquidity

Mike's experience completely changed his philosophy on wealth and investing. He realized net worth doesn't matter if you don't have liquidity and cash flow.

"I was a multi-millionaire on paper but I couldn't access any of my capital," he said. "You can't borrow against your venture capital startup portfolio to pay the bills."

As Mike began rebuilding, he focused on three key principles:

1. Prioritize Liquidity

Mike now aims to keep 70% of his net worth in liquid assets. He's no longer investing in angel deals or illiquid ventures.

"Now every dollar that comes in, I keep it liquid," he explained. "I'm only investing in liquid and cash flowing assets."

2. Build a Safety Net

Mike advocates for building financial freedom in stages:

• Level 1: 12 months of expenses in liquid, non-volatile assets
• Level 2: 5-7 years of expenses in liquid assets
• Level 3: Enough passive income to cover expenses indefinitely

"Liquidity is optionality," Mike emphasized. "The only way to get knocked out of the game of entrepreneurship is to run out of money."

3. Focus on Cash Flow, Not Net Worth

Rather than chasing a specific net worth number, Mike now prioritizes building reliable cash flow to support his desired lifestyle.

"I define wealth as freedom or sovereignty in four areas: freedom of health, freedom of relationships, freedom of time, and freedom of mind," he explained.

Redefining Wealth and Success

Beyond the financial lessons, Mike's experience transformed how he thinks about wealth and success. He no longer equates net worth with happiness or security.

"Money as an end is actually completely worthless," Mike reflected. "Money is just a battery, just an amplifier. If we're not using money in service of creating the life we want, then money aborts a vacuum."

Mike now focuses on designing a life he never wants to retire from. He sold his Lamborghini after realizing he barely drove it. His spending decisions are guided by a simple question: "Does this bring me joy?"

"I am using money as a battery to buy back freedom in all of those four areas," Mike explained. "Let's design a life we never want to retire from and then use money as a tool to pull that timeline forward."

He's found that many of the things that bring true happiness - like time with family and friends - don't require much money at all. Mike now sees himself as "wealthy beyond belief" despite having a lower net worth than at his peak.

"If you can't be rich now, you'll never be rich, because wealth is a state of being," he said.

Key Takeaways for Entrepreneurs

Mike's story offers several valuable lessons for founders and business owners:

1. Net worth doesn't equal financial security. Prioritize liquidity and cash flow.

2. Build a safety net before swinging for the fences. Have 12 months of expenses liquid at minimum.

3. Align your wealth with your values. Get clear on the life you want to create.

4. More money won't necessarily make you happier. Focus on what truly brings you joy.

5. Design a life and career you never want to retire from.

6. Learn from failure. Mike's setbacks ultimately made him wiser and more empathetic.

By sharing his story, Mike hopes other entrepreneurs can avoid the painful lessons he had to learn firsthand. His upcoming book "Be Rich Now" will further explore these themes.

For founders seeking to build true wealth and avoid common pitfalls, connecting with others who've been there is invaluable. Communities like Hampton offer a place to have candid conversations and gain hard-won wisdom from fellow entrepreneurs.

Ultimately, Mike's journey shows that being truly rich isn't about hitting an arbitrary net worth number. It's about having the freedom, security and fulfillment to enjoy life in the present moment.

Article created from: https://www.youtube.com/watch?v=IPHhq0IncNk