Author Topic: Did you achieve FI by starting your own business?  (Read 4054 times)

CargoBiker

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Did you achieve FI by starting your own business?
« on: February 28, 2017, 03:07:58 PM »
Just throwing up a topic to get this sub-forum going.

Who here has reached FI by way of owning a business?

Do you still run the business, or was there a sale or some other exit event?


Looking back, would you have taken the same path, or would you have worked a job instead?

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StockBeard

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Re: Did you achieve FI by starting your own business?
« Reply #1 on: March 01, 2017, 04:58:52 PM »
Kind of. My hobby generates more money than I thought it ever would, and it now represents 30% of my expected income in ER. It also contributed to a large chunk of my egg nest over the years, although how much exactly I'm not sure... 20% maybe?

Looking back: would still have done the same thing. Note it's a hobby and I still have a 9 to 5 in parallel. I love the idea that f one of these two things fails, the other will probably still be there.

Lentils4Lunch

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Re: Did you achieve FI by starting your own business?
« Reply #2 on: March 01, 2017, 05:21:15 PM »
Kind of. My hobby generates more money than I thought it ever would, and it now represents 30% of my expected income in ER. It also contributed to a large chunk of my egg nest over the years, although how much exactly I'm not sure... 20% maybe?


What's your hobby?

StockBeard

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Re: Did you achieve FI by starting your own business?
« Reply #3 on: March 01, 2017, 05:40:01 PM »
What's your hobby?
Video games. I run a website on some video game niche, with advertising. Think MMM in terms of traffic, although it's not making anywhere close to what MMM has disclosed this site makes. I guess the finance niche is where it's at :)

CargoBiker

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Re: Did you achieve FI by starting your own business?
« Reply #4 on: March 01, 2017, 09:21:25 PM »
I guess the finance niche is where it's at :)

There is always money in telling people how to make money.

A lot of times, the better business isn't doing the thing that makes money, it's telling other people how to do the thing that makes money.
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SwordGuy

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Re: Did you achieve FI by starting your own business?
« Reply #5 on: March 04, 2017, 01:12:40 PM »
I sped up my date to FI by starting a number of different businesses.

Each of them contributed in some way to increasing my income or decreasing my costs, even the ones that failed.

maizeman

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Re: Did you achieve FI by starting your own business?
« Reply #6 on: March 04, 2017, 04:52:03 PM »
It's certainly speeding up the date a bit. But the frustrating thing is that the big money, if it ever arrives, would be well after I hope to be FIRE one way or the other.
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SeattleCPA

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Re: Did you achieve FI by starting your own business?
« Reply #7 on: March 04, 2017, 06:45:31 PM »
To answer the original poster's question, yes...

But FI with a small business is weird. You have a great investment generating a high ROI... but it requires (probably) a certain amount of on-going work.

And then another weird element... Very possibly, owning your own business will be fun enough that you'll want to continue your involvement. I'm FI, but I still work because I really love the folks I work with... and the work I do.
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Jon Bon

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Re: Did you achieve FI by starting your own business?
« Reply #8 on: March 05, 2017, 10:27:54 AM »
Most definitely.

I would still be spending 50 hours a week at work and 10 hours in the car if it were not for my small business. It set me free in just about 3 years, its been one of the best things that has happened to me financially.

That being said, yeah I do work 5-10 hours a week on it, but well worth the trade as I used to spend that much time just in the car getting to work!

Also I love this new topic!

jooniFLORisploo

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Re: Did you achieve FI by starting your own business?
« Reply #9 on: March 05, 2017, 10:42:35 AM »
Yes!

Big work up front, then ongoing income, then another round of big work, then more ongoing income. I do some small maintenance every year, but this path was one of several that made all the difference. In my mind, key was achieving not only cash but *also* time and energy. Time and energy that could then be used for frugal living, etc. I would focus on setting up a business one can work "on not in" as many of the entrepreneurship books recommend.
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Knaak

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Re: Did you achieve FI by starting your own business?
« Reply #10 on: March 05, 2017, 05:48:44 PM »
I started a business with a few other people at the end of my freshman year of college.  That was my main income source from 18-32 years old.  We hit a rough patch along the way and I finally got a j-o-b shortly after I turned 32.  I kept the business going on the side after the other owners dropped out.  Now the business is doing better and I am 100% owner, plus I have my full-time job.  I'll quit the job the end of this year, at 35 years old, since I'll be FI.  I enjoy the business (travel industry), so I'll keep that going since it doesn't take much of my time, I can run it from anywhere, and I like getting free stays at ridiculously expensive resorts.

Looking back, would you have taken the same path, or would you have worked a job instead?

Same path.  The job gave me a peek into the world of being an employee and it helped me truly appreciate the lifestyle I had as a business owner.  Even though I probably could have made more money at a regular job and hit FI a year or two earlier, I still prefer the path I took.  The end of this year will conclude 3.5 years of what I'm calling the Office Space chapter of my life.  That's just about the right amount of time to get the full experience of being a cubicle monkey, develop a better appreciation for Office Space and Dilbert, and escape before I go insane.

arebelspy

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Re: Did you achieve FI by starting your own business?
« Reply #11 on: June 24, 2017, 10:18:14 AM »
Sort of.

The wife and I were teachers, which obviously doesn't pay well (first year we made 33k and 18k, respectively... final year, after 8 year's experience and adding Master's Degrees, we made about 44k each).  Yet we still retired at age 29, millionaires.

We did it via owning a lot of residential real estate.

So the reason I say sort of is that I can see the arguments why one would say "no" to the question of if we achieved FI by starting our own business.

No:
- We had normal (W2) jobs for an employer.
- We invested our way to FI (that investment being real estate).

I can also see an argument for yes.

Yes:
- We clearly didn't become millionaire early retirees before age 30 by being teachers, so it was something else that got us to FI
- The real estate investing was more like a business--run like a business, with systematic processes and time spent more like a business than an investment.

So if you consider it was our real estate business that got us to FIRE so fast, you might say yes, we achieved FI by starting our own business.

So... sort of yes, sort of no.  What do you think?  :)
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FIREby35

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Re: Did you achieve FI by starting your own business?
« Reply #12 on: June 24, 2017, 03:48:21 PM »
Well, other than not being fully fire, big time "Yes." I'm 32 with a family of 5 and 3/4 of the way there though. So, I think it's going pretty well.

I'd have to echo Seattle CPA. I imagine a small law firm is much like a small CPA firm. I've been trying to systematize and get more employees involved so that it is more a "business" than a "self-employed" type situation.** The more I get it into a good, solid, systematized, small business zone, the less I can imagine leaving - it's fun! Anyway, I'll accept that as a "problem."

As for if I'd have done it differently, definitely a "no." For one, I've made more than even the corporate attorneys in my area (that are my same age, of course). I've got a higher income potential. I also have worked dramatically less hours and had more flexibility. I get to choose my cases/causes and that is priceless. What more is there to have? Finally, I briefly worked in two different big, traditional style firms as summer clerkships and saw enough to know I'd never fit in.

**Quotes because I'm not using a strict definition. I hope the distinction between a business and being self-employed is understood by everyone.

SwordGuy

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Re: Did you achieve FI by starting your own business?
« Reply #13 on: June 24, 2017, 04:11:58 PM »
So... sort of yes, sort of no.  What do you think?  :)

Yes, absolutely.   Not a shred of doubt.

FIREby35

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Re: Did you achieve FI by starting your own business?
« Reply #14 on: June 25, 2017, 07:02:05 AM »
So... sort of yes, sort of no.  What do you think?  :)

Yes, absolutely.   Not a shred of doubt.

Agreed. Being a teacher and frugal provided you capital. Your fortune was built as an entrepreneur.

HipGnosis

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Re: Did you achieve FI by starting your own business?
« Reply #15 on: June 27, 2017, 10:41:23 AM »
my small business. It set me free in just about 3 years, its been one of the best things that has happened to me financially.
What's the business and how much did it cost you to start?!?

nara

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Re: Did you achieve FI by starting your own business?
« Reply #16 on: June 27, 2017, 08:46:13 PM »
We will be! Our business has grown slowly--but we are beginning to take more risks with more confidence. We currently employ ourselves and three other full-time employees. Our FI plan projection is currently 10 years, but we are trying to cut that in half now pretty aggressively by doubling our business size before next year. Our goal is to get out in 5 years and sell to our employees, allowing for a monthly stream of income.  I think being an entrepreneur in a good industry has to be one of the fastest ways to FI. Plus it is incredibly motivating to think of unlimited earning potential versus the 3% annual raise you might expect annually as an employee.

BlueHouse

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Re: Did you achieve FI by starting your own business?
« Reply #17 on: June 27, 2017, 08:50:47 PM »
Another sort of here. I'm an independent contractor, basically self-employed. Doing the same thing I did in a job, but structuring the business so that Im the one making the profit and keeping my overhead low allowed me to more than double my income and sock away >50k per year in my 401k. That's getting me to FI in 10 years rather than 20. Too bad I didn't start sooner! 
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JayKay

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Re: Did you achieve FI by starting your own business?
« Reply #18 on: September 20, 2017, 03:53:09 PM »
Well, one thing I can say is that I did try to do it that way!  But after many business attempts over many years, the efforts have only set us back.  And not by a small amount either.  I haven't done the math, but just thinking about it, we've probably edged into six figures just in terms of lost wages, not to mention incurred debt.

(As someone else has mentioned, my rental properties could be generously considered a business and they've done well.  But honestly, I consider them an investment, so I don't count them.)

I still believe in the "X-factor" that a small business can bring, but I now think of a business like an expensive lottery ticket and treat it accordingly:

* You must pay for the privilege of playing
* You shouldn't play if you can't afford it
* Even if you win, it may not be enough to cover your costs
* You shouldn't put more into it than you're willing to lose (both time and money)
* Don't chase your losses.  If your business is not working, move on.

As for it being compatible with FIRE, the lottery ticket analogy is accurate here too.  Yes, there are people who's retirement plan includes (or consists entirely of) winning the lottery.  But to me, such a strategy would be terrifying.
« Last Edit: September 20, 2017, 05:03:20 PM by JayKay »

elvizzle

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Re: Did you achieve FI by starting your own business?
« Reply #19 on: September 20, 2017, 08:03:09 PM »
I had an internet advertising business and I used the income it to buy rental property.  I was able to FIRE by the time I was 30.  I went to a university for Computer Science and worked as a software engineer for a few years before embarking on my own.  I would definitely do it again.  Right now, I'm a SAHD thinking about what I'm going to do once the all the kids are school age.

Finances_With_Purpose

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Re: Did you achieve FI by starting your own business?
« Reply #20 on: September 20, 2017, 08:24:08 PM »
Another sort of here. I'm an independent contractor, basically self-employed. Doing the same thing I did in a job, but structuring the business so that Im the one making the profit and keeping my overhead low allowed me to more than double my income and sock away >50k per year in my 401k. That's getting me to FI in 10 years rather than 20. Too bad I didn't start sooner!

Working to do the same.  Beautiful thing, too, is that once you're in business, you can move/adjust to new opportunities.  I'm doing a couple of things now, but have ideas to do a few others and am looking for when those opportunities arise to jump in there, too.  Any money I make simply helps us go FI.  And I'd love to continue these things even after FI.

Strick

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Re: Did you achieve FI by starting your own business?
« Reply #21 on: October 03, 2017, 01:46:59 PM »
Definitely sped up the process...The first few years I made less (like half to two-thirds) than at my admittedly unstable job (it being unstable and me having someone before I even started wanting to bring me a lot of business made it an easier leap than it probably is for most), but then it really took off and I would make 2x to 5x what the job paid, depending on the year.  Of course, my problem now is one I never would have had with my job....there's a purpose and meaning and pride and responsibility to employees I care about that makes it hard to stop...so trying to figure out how to gracefully and gently fade away now that my concerns are less about stache lasting and more about other things I never thought would be an issue....
« Last Edit: October 03, 2017, 03:52:50 PM by Strick »

FIREby35

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Re: Did you achieve FI by starting your own business?
« Reply #22 on: October 04, 2017, 06:55:48 AM »
Definitely sped up the process...The first few years I made less (like half to two-thirds) than at my admittedly unstable job (it being unstable and me having someone before I even started wanting to bring me a lot of business made it an easier leap than it probably is for most), but then it really took off and I would make 2x to 5x what the job paid, depending on the year.  Of course, my problem now is one I never would have had with my job....there's a purpose and meaning and pride and responsibility to employees I care about that makes it hard to stop...so trying to figure out how to gracefully and gently fade away now that my concerns are less about stache lasting and more about other things I never thought would be an issue....

Hey Strick - I know what you mean about "fading away" when you have "purpose and meaning and pride and responsibility to employees" that you care about. Ultimately, I've decided to fade away while creating a business the employees can basically run. If I'm the captain and they are the crew then I don't have to do most of the things I don't like, I get to hang out with people, do positive things in my job and not be tied down to something in a way that constricts me. They get steady jobs, a good work environment and camaraderie as well. All in all, I don't really see an advantage in "Retiring Early" and I see that as a concept that is most attractive to people working for big corps, government, etcetera where they can never have the type of control over their work environment that a small business owner can.

PS Once I am FI in the Mustachian sense, i.e. 4% can cover my expenses, I intend to start throwing bonuses at my team and coaching them on financial independence. I've already started with one employee by paying her to read "Your Money or Your Life," taking a significant amount of time to discus her 401k options with her (at her request) and giving her bonuses when I can. She was my first employee, so I'll make her FI as soon as I cross the finish line :) So, that's just another way of saying, "Why fade away when I can make an impact on other people so directly and at such little cost to me." Maybe that could work for you as well.

Cpa Cat

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Re: Did you achieve FI by starting your own business?
« Reply #23 on: October 04, 2017, 07:59:39 AM »
My husband had a startup that sold for our full early retirement capital. It was in 2007. So we invested it all at the height of the market and experienced the FIRE horror story of "What if you retire right before the Great Recession?"

Despite intellectual faith in the market as a whole, I decided to get my CPA and work as an accountant. By the time I was finished, the recession was basically over, which made my full-time big firm job seem pretty silly. I started my own business with the initial idea of working part time and keeping a foot in the industry so that if we got scared again, I could jump back in.

It doesn't really work that way though - my firm quickly became a full time gig. I'm not really retired anymore, as a result. But I work for fun, because we don't need my income. I'd have to sell the firm if I wanted to retire for real.

I still believe in the "X-factor" that a small business can bring, but I now think of a business like an expensive lottery ticket and treat it accordingly:

* You must pay for the privilege of playing
* You shouldn't play if you can't afford it
* Even if you win, it may not be enough to cover your costs
* You shouldn't put more into it than you're willing to lose (both time and money)
* Don't chase your losses.  If your business is not working, move on.

I kind of agree with this. The most successful businesses I've been involved with or have observed as a CPA have been low-overhead, low-start-up cost businesses. We have dabbled in businesses with high licensing costs, high inventory costs, and they weren't really worthwhile.

What does a CPA do when a big client doesn't pay their bill? Learn from it, improve billing practices, move on.

What does a small manufacturing company do when they've got all their capital tied up in inventory and a supply chain problem makes it impossible to get the inventory to market on time? They go bankrupt. We owned that business once, too. We exited, but our partners chased their losses and ultimately spent more than they could afford trying to save the company. They destroyed their financial security. It caused them to take greater investment risks to try to recover, but they lost there too.
« Last Edit: October 05, 2017, 07:15:41 AM by Cpa Cat »

Finances_With_Purpose

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Re: Did you achieve FI by starting your own business?
« Reply #24 on: October 04, 2017, 08:53:22 PM »
My husband had a startup that sold for our full early retirement capital. It was in 2007. So we invested it all at the height of the market and experienced the FIRE horror story of "What if you retire right before the Great Recession?"

Despite intellectual faith in the market as a whole, I decided to get my CPA and work as an accountant. By the time I was finished, the recession was basically over, which made my full-time big firm job seem pretty silly. I started my own business with the initial idea of working part time and keeping a foot in the industry so that if we got scared again, I could jump back in.

It doesn't really work that way though - my firm quickly became a full time gig. I'm not really retired anymore, as a result. But I work for fun, because we don't need my income. I'd have to sell the firm if I wanted to retire for real.

I still believe in the "X-factor" that a small business can bring, but I now think of a business like an expensive lottery ticket and treat it accordingly:

* You must pay for the privilege of playing
* You shouldn't play if you can't afford it
* Even if you win, it may not be enough to cover your costs
* You shouldn't put more into it than you're willing to lose (both time and money)
* Don't chase your losses.  If your business is not working, move on.

I kind of agree with this. The most successful businesses I've been involved with or have observed as a CPA have been low-overhead, low-start-up cost businesses. We have dabbled in businesses with high licensing costs, high inventory costs, and they weren't really worthwhile.

What does a CPA when a big client doesn't pay their bill? Learn from it, improve billing practices, move on.

What does a small manufacturing company do when they've got all their capital tied up in inventory and a supply chain problem makes it impossible to get the inventory to market on time? They go bankrupt. We owned that business once, too. We exited, but our partners chased their losses and ultimately spent more than they could afford trying to save the company. They destroyed their financial security. It caused them to take greater investment risks to try to recover, but they lost there too.

The old sunk costs problem.  Humans have an incredibly difficult time of letting go.  We even have aphorisms about it: "don't throw good money after bad money," but people still plow ahead. 

At a deep level, humans make decisions based upon emotion more than reason, most times.  And people really struggle to let go of something they perceive is theirs/that they own/that they expected to gain from. 

So yeah, I go low-overhead and high-flexibility, and will continue doing so.  I consider myself very good at responding reasonably to sunk costs and removing emotions from money, but I'm still human, and, as Dirty Harry said, "a man's got to know his limitations." 

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Re: Did you achieve FI by starting your own business?
« Reply #25 on: October 11, 2017, 06:49:24 AM »
I responded with a post in this thread early in the year and then haven't followed the full discussion real time... but to jump back into the fray, I really do think small business ownership is a totally viable alternative route to something that's very close to a MMM-type of financial independence. It works differently. But it can be very fast to a financial state that's pretty lucrative and that gives the entrepreneur a lot of control and autonomy.

Surely inspired by this thread (but not realizing it until just now) I blogged last week (link in sig) about the powerful financial benefits of small business ownership as compared to passive investment. But in a nutshell, it's a route that provides a fast track to form of financial independence, high high returns of return, unparalleled tax shelters, etc.

That said, like any approach there are flaws and problems with the approach. Definitely agree it doesn't work for most people. And if you are already getting a MMM-style approach to work or a Bogleheads-style approach to work, it doesn't seem to me like it makes sense to switch horses mid-stream.
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Fishindude

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Re: Did you achieve FI by starting your own business?
« Reply #26 on: October 11, 2017, 07:19:48 AM »
Just throwing up a topic to get this sub-forum going.

Who here has reached FI by way of owning a business?

Do you still run the business, or was there a sale or some other exit event?


Looking back, would you have taken the same path, or would you have worked a job instead?


Yes, owning my own business undoubtedly got me to FI, and much quicker and with a much bigger stache than if I had worked for the other guy.
Sold out about a year ago, five year payoff plan, now just help them out a little part time.
This was an opportunity I wasn't going to pass up, and now very grateful I didn't.  Learned a lot being self employed and now have multiple unrelated side gigs going for additional income streams.   At this point, there is no way I would ever work for the other guy.



FIREby35

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Re: Did you achieve FI by starting your own business?
« Reply #27 on: November 12, 2017, 07:25:48 AM »
I responded with a post in this thread early in the year and then haven't followed the full discussion real time... but to jump back into the fray, I really do think small business ownership is a totally viable alternative route to something that's very close to a MMM-type of financial independence. It works differently. But it can be very fast to a financial state that's pretty lucrative and that gives the entrepreneur a lot of control and autonomy.

Surely inspired by this thread (but not realizing it until just now) I blogged last week (link in sig) about the powerful financial benefits of small business ownership as compared to passive investment. But in a nutshell, it's a route that provides a fast track to form of financial independence, high high returns of return, unparalleled tax shelters, etc.

That said, like any approach there are flaws and problems with the approach. Definitely agree it doesn't work for most people. And if you are already getting a MMM-style approach to work or a Bogleheads-style approach to work, it doesn't seem to me like it makes sense to switch horses mid-stream.

Seatlle CPA - I read a bunch of your articles. I didn't realize it until much later but I created a hybrid business-owner/MMM financial plan. I saved up a 75% to 4% rule stash in the first 6.5 years of practicing law and then, belatedly, realized I wouldn't actually quit because I owned the business and had already created the ideal work situation for myself! I did not have the clarity of vision that your articles have about the different strategies.

Anyway, the hybrid approach has worked pretty good because now I can be a small business owner with a massive stash and that means even less worries. Now the problem is learning how much I can pull off the gas in the small business without ruining it and enjoying the ride. So far, so good :)

nara

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Re: Did you achieve FI by starting your own business?
« Reply #28 on: November 12, 2017, 10:44:55 AM »
For those of you that commented that you will not retire from your business even after FI, what are your thoughts about liability? Maybe this depends on your business type. I feel as if there are very few businesses that an owner can completely remove themselves from--as you are ultimately responsible for what your employees do and no one is going to care about your business as much as you.

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Re: Did you achieve FI by starting your own business?
« Reply #29 on: November 12, 2017, 09:11:55 PM »
For those of you that commented that you will not retire from your business even after FI, what are your thoughts about liability? Maybe this depends on your business type. I feel as if there are very few businesses that an owner can completely remove themselves from--as you are ultimately responsible for what your employees do and no one is going to care about your business as much as you.

100% agree. Thus, I stay involved enough to cover that.
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FIREby35

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Re: Did you achieve FI by starting your own business?
« Reply #30 on: November 13, 2017, 06:54:49 AM »
For those of you that commented that you will not retire from your business even after FI, what are your thoughts about liability? Maybe this depends on your business type. I feel as if there are very few businesses that an owner can completely remove themselves from--as you are ultimately responsible for what your employees do and no one is going to care about your business as much as you.

I'd say you are correct that very few business owners can completely remove themselves. Two thoughts on that. First, nothing says the business owner has to or wants to completely remove themselves. Working less? Sure. Complete removal - not necessarily the goal for most.

Second, if one did have the goal of completely removing themselves, it is not impossible - just difficult. With enough persistent effort it would happen. Any business owner who has been successful enough to build a business that took them to FI would also know that you simply try and try again until you succeed.

SC93

  • Bristles
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Re: Did you achieve FI by starting your own business?
« Reply #31 on: November 13, 2017, 09:50:36 PM »
When I originally started my core business, all I wanted to do was make enough money to go watch racing every weekend (about $100). Then I realized how great it was to have money so from then on it was all about making lots of money. I originally retired 6 years ago but it only lasted a short time until I was bored. My original business was residential cleaning, it was hard to back away and let others take over but I eventually did it. I could still own that business but as crazy as it sounds, even when I didn't need the money and I wasn't involved in the business, I still stayed worried about it all the time... so I sold it. Fast forward to my new business (selling used washers & dryers), I love this business but it would be SO easy to have it basically run itself. I have a perfect system, a marketing plan like no other and the perfect 3 workers working for me. Never any stress and I tell my workers..... it's just washers & dryers.... no one is going to die it we screw up and forget to deliver to them. I will never not be working to some extent. I tried it.... can't do it.