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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: gbmp on December 09, 2013, 03:22:58 PM

Title: career advice
Post by: gbmp on December 09, 2013, 03:22:58 PM
So the background: I work at an internet startup company, make 75k/year, wife makes around 30k/year, we own a ~150k house with about 100k left on the mortgage, we've got about 20k in investments and we are both 27.

I've got a couple percent ownership stake in my company (straight up ownership, not options to buy stock) -- vesting gradually over the next 10 years.  We've grown a lot in the last 3 years as a company since we started and I am somewhat optimistic about the future -- but I feel my salary is low relative to my role in the company and compared to what I could earn elsewhere without *too much searching.

Basically I'm conflicted on the opportunity cost of accepting a lower salary (with possibility that ownership could pay off later on) vs going elsewhere, making 100-120k and saving/investing the difference. 

I'm planning on asking for more money at review time coming up fairly soon and hoping for the best of both worlds, but I'm curious how folks here would value ownership in a young promising tech/healthcare company, at what point am I just letting them pay me in lottery tickets compared to investable dollars?

Title: Re: career advice
Post by: chasesfish on December 09, 2013, 04:30:27 PM
What do you think the future equity could be worth?  Is the company currently profitable to where they can afford your higher salary request.

Don't be Nathan Flomm

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Title: Re: career advice
Post by: seattlecyclone on December 09, 2013, 05:38:03 PM
I'm planning on asking for more money at review time coming up fairly soon and hoping for the best of both worlds, but I'm curious how folks here would value ownership in a young promising tech/healthcare company, at what point am I just letting them pay me in lottery tickets compared to investable dollars?

I would take a good, hard look at the future for the company. Does it have a real potential to have a billion-dollar IPO or acquisition in the next decade? If so, you're looking at a $20 million payout (2% of $1 billion), or even more! Of course, there are only a handful of billion-dollar IPOs per year. If you don't think your company will ever be among them, what ceiling would you put on its eventual value? There's a real possibility that the company will fail and your stock will be worthless.

Do some research. Are there any publicly traded companies in a similar area of business? What are they worth? Is your company competing directly with them? How likely are you to beat the competition? How much do you expect your revenue to grow on an annual basis? If you keep up that growth rate for five years, how will your revenue compare to existing internet companies in the public markets?

It's important to remember that this equity is a gamble. It could be worth anywhere from zero to millions, depending on how well the company performs over time. If the company does well, you'll pretty much be able to retire immediately after the IPO. If it doesn't, you will have worked for a few years at a substandard salary. The upside is huge (but unlikely), the downside is bad and likely (but not terrible). The good thing is that your existing salary should be high enough to pay for your expenses and still save a respectable percentage if you live a frugal lifestyle. So even if the company crashes and burns a few years from now, you should still have had the opportunity to amass a decent stash for retirement, and you can keep building it at your next job.

It really comes down to this: how risk-tolerant are you? If the company fails you might have to work an extra few years before FI compared to if you had worked for a market salary at a more established company. Is that okay with you? Is the potential to become fabulously wealthy worth that risk?
Title: Re: career advice
Post by: gooki on December 09, 2013, 11:09:06 PM
There's no harm in looking, and going to your boss with an offer from another firm is going to be much more persuasive.
Title: Re: career advice
Post by: markbrynn on December 10, 2013, 05:04:57 AM
If you're aiming for early retirement (and not as a yacht owner), then I think it's an easy decision to find a better job and save like crazy. If the lottery ticket comes in then you could have 10x what you need to comfortably retire. How much is that worth compared to having 1x what you need to retire?

That being said, I would focus more on the non-monetary aspects. Do you like/love this job? If so, maybe it's worth it. If you think you'd be happier in a different job, then I would forget about the small chance of riches.

Not dreaming of being rich is probably the biggest lesson I've learned on this website. I think many people who read this blog still get stuck on the dream (which is, admittedly, easy to do). If you can guarantee ER in about 5-10 years by changing jobs or have a 95% chance of retiring in 20 years or 5% chance of being rich with the startup, then you need to choose which option sounds better. I know which one I would choose.
Title: Re: career advice
Post by: ender on December 10, 2013, 05:13:35 AM
That being said, I would focus more on the non-monetary aspects. Do you like/love this job? If so, maybe it's worth it. If you think you'd be happier in a different job, then I would forget about the small chance of riches.

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