Outspoken entrepreneur Richard Branson has become one of the richest people in the U.K. through five decades of savvy business dealings. Branson's net worth of $4.9 billion makes him almost 10 times wealthier than Queen Elizabeth II! (Her personal net worth was estimated at $510 million in 2012.)

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Richard Branson became a billionaire by understanding the power of brands Photo: Wikimedia Commons.

Branson has owned parts of dozens of major businesses over the years. Yet that's not the real driver of his wealth.

The secret to Branson's success is the Virgin brand, which he has gradually built into one of the most recognizable brands in the world since launching Virgin Records in the early 1970s. In recent years, Branson has turned the "Virgin" name into a cash cow that makes money without requiring much effort at all.

Building a brand
Branson began building his empire in the music business. In 1970, he launched a mail-order discount record business. The next year, he opened up his first Virgin Records store in London, and in 1973 he launched a record label to complement his retail business.

By the end of the decade, Virgin Records had become a significant force in the music industry thanks to its early involvement in the punk movement. In 1979, the company opened the first Virgin Megastore: a massive record store that later spawned a global chain.

In 1984, Richard Branson demonstrated the power of the Virgin brand by launching into a completely new industry: airlines. Virgin Atlantic became a major competitor to British Airways on a number of key long-haul routes from London, winning market share through superior customer service and innovative touches designed for premium travelers.

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Virgin Atlantic is one of Richard Branson's most iconic businesses. Photo: Wikimedia Commons.

Since then, Branson has put the Virgin label on a wide variety of businesses. Today, Virgin-branded airlines in Australia and the U.S. complement the flagship Virgin Atlantic. Virgin Media is a major U.K. cable operator. Virgin Money has become a major financial services company in Britain as well. The Virgin Mobile wireless brand exists in many countries.

The brand is the key
It's interesting to note that Richard Branson has built his $5 billion fortune even though many companies bearing the "Virgin" name have had uneven financial performance -- some have gone under.

Virgin Megastores have disappeared due to the rapid decline of physical CD and DVD sales. Virgin Cola made a big splash in the U.S. and the U.K. but could not compete with the soda-industry heavyweights. Virgin America has lost nearly $400 million over its first seven years in business. Branson's flagship airline, Virgin Atlantic, has also racked up big losses in the last decade.

So how did Branson become so wealthy? The secret to his success is his control of the Virgin brand. In fact, Virgin Group has full ownership of only a few businesses in the Virgin empire. Quite a few companies bearing the Virgin brand have no relation to Virgin Group other than licensing the name.

In 1992, Branson sold his record label to EMI for nearly $1 billion to raise capital for Virgin Atlantic. Branson also disposed of the Virgin Megastore chain in 2007, two years before it folded. In 2000, Branson sold a 49% stake in Virgin Atlantic to Singapore Airlines for nearly $1 billion. It was good timing: Delta Air Lines bought that 49% stake for just $360 million in late 2012.

All of the companies bearing the "Virgin" moniker that are not wholly owned by Virgin Group must pay royalties for use of the brand name. These fees can amount to millions of dollars annually for each business, and represent risk-free income. Thus, even money-losing companies like Virgin America are still building Branson's wealth.

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Virgin America pays royalties to Richard Branson for use of the Virgin brand. Photo: Virgin America.

The rise of Virgin Media in the U.K. also showcases the power of the brand. Cable company NTL: Telewest bought the U.K. Virgin Mobile business. This added wireless services to its offerings -- but more important, it gave the company access to the Virgin brand. It quickly rebranded all its offerings as Virgin Media.

Branson got a windfall in excess of $300 million last year when Virgin Media was sold to Liberty Global. Moreover, Virgin Group still receives about £10 million in annual royalties from Virgin Media.

Lessons for investors
A little more than 40 years ago, Richard Branson was the lowly owner of a single record shop. Today, he's worth more than twice as much as Paul McCartney, Mick Jagger, and Elton John combined!

It just goes to show that while talent is one way to riches, another path to long-term wealth is to capitalize on the power of great brands. Numerous companies in the Virgin family are happy to pay millions of dollars a year to Virgin Group just to benefit from the halo effect of the Virgin brand.

Plenty of other companies out there enrich products just through brand power. For example, think about the price premium Starbucks gets for a bag of coffee just by putting its brand on it.

By investing in companies with this type of brand power for the long haul, you also can build your long-term wealth. Just don't expect to make enough money to buy your own island in the Caribbean.

Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool recommends Apple, Liberty Global and Starbucks. The Motley Fool owns shares of Apple and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.