The Money Mustache Community
Learning, Sharing, and Teaching => Entrepreneurship => Topic started by: bunchbikes on February 27, 2017, 11:55:44 AM
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Long time blog reader, new poster here.
I see a lot of threads in this forum about the ins and outs of investing.
People debating how to squeeze out one percentage more from this or that investment.
That's all well and good, and it's important from a wealth maintenance standpoint... but it's really not all that helpful for wealth creation.
After reading the first posts on this blog years ago, I decided to aggressively pay down debt. I hustled on the side for an extra thousand here or there. I sold our 2nd vehicle. These were all good things.
But then I stopped.
I realized that by paying down student loan debt, I was only earning 4-6% max guaranteed returns (in the form of not having to pay that interest). If I decided to invest, it wouldn't be much better.
But, if I started a business, my returns would have no ceiling. The sky was the limit.
So I stopped paying down my loan debt, and I put every extra dollar to a business selling widgets online. 2 years ago, I started with a $100 investment for an initial order of product, and then proceeded to roughly double my investment every 30-60 days.
I now have the business for sale for a mid 6 figure price.
The fastest way to generate wealth is by owning a business, and I think that there should be more discussion about this.
Any other current/former business owners out there?
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I agree this forum should include an entrepreneurship/small business category (this has been requested but I'm guessing the demand isn't too big).
I disagree with your general premise though. Starting a business can be very risky, time consuming, and requires a lot of creative energy. It isn't for everyone. Putting your earnings in an index fund is simple and easy. It truly IS for everyone.
I think the most value that you can add as a business owner posting on here is telling your story. Share your highs and lows, what worked for you and what didn't. A snapshot of your financials. Stuff like that. There are many people here who have started businesses and it'd be great to have them share more.
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Starting a business worked great for me and I'm also way happier and love the extra flexibility. However, I've also seen a lot of people try to do exactly what I did and fail at it. Heck, I failed the first time I tried to start a business.
I think the best people to go down that route are those who are already independent and not eager to work for "the man". It takes a good amount of internal drive and motivation and the ability to be comfortable with a much less secure approach than doing X for Y salary.
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The fastest way to generate wealth is by owning a business, and I think that there should be more discussion about this.
Running a failing business(which isn't that uncommon) is also one of the fastest ways to lose wealth.
Not saying it is not a viable way to wealth. however though I haven't seen the number I would venture a guess that if you were to compare the amount of people that succeed using the passive investment advocated around here to the percentage of new businesses that succeed that your odds at the former to achieve FI are better using the former, though smaller odds of becoming excessively wealthy are higher with the latter.
Since MMM is a large advocate for frugality rather than excess the people drawn to that message are likely to choose the better odds of achieving FI through a safer, but potentially less lucrative way through "relatively" safe investing and achieving frugality rather than through taking the higher risk for a higher potential return involved with starting a business.
I also believe that a large portion of people are not well equipped to handle being self employed and self guided and that these kinds of people would be all the more likely to fail at starting a company. You can tell anyone to invest in a small number of diversified funds and they won't need to put that much effort in. However the drive and work put towards starting a company are much higher and riskier.
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Here are some statistics to consider:
https://www.sba.gov/sites/default/files/SurvivalRatesAndFirmAge_ADA_0.pdf
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Here are some statistics to consider:
https://www.sba.gov/sites/default/files/SurvivalRatesAndFirmAge_ADA_0.pdf
Thanks for looking up the numbers. I would say if there was a 50% chance that your investment would completely be lost within 5 years(as in putting all your money, time and effort in a business instead of the market) this would be a rather bad option.
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I agree this forum should include an entrepreneurship/small business category (this has been requested but I'm guessing the demand isn't too big).
You know, I looked through all of the subforums looking for just such a category 3 times, before making this post. I can't believe this sub-forum doesn't exist.
I disagree with your general premise though. Starting a business can be very risky, time consuming, and requires a lot of creative energy. It isn't for everyone.
This isn't everyone though. The readers of this blog, in general, are way more resourceful and knowledgeable than the general population. If you're smart enough to engineer your own early retirement in 5-10 years, you're smart enough to start a business.
It's only as time consuming as you let it be. I started this business with a newborn in my lap, in the evening after I got home from my day job, talking to Chinese suppliers from 11pm-2am.
Let's not turn this into an "excuses for not starting a business" thread.
I think the most value that you can add as a business owner posting on here is telling your story. Share your highs and lows, what worked for you and what didn't. A snapshot of your financials. Stuff like that. There are many people here who have started businesses and it'd be great to have them share more.
My story:
I side hustled flipping cell phones and electronics on craigslist 4 or 5 years ago to pay down debt. Made an extra $700 a month or so. I tried to scale up by buying inventory in bulk and got burned, and scammed out of $6,000. I quit that hustle.
I decided to buy low-priced websites on Flippa after that.
1) I bought a niche clothing site for $300, that made me a few grand, before I sold it as it was a flash trend.
2) I bought a sub-contracted snow plow business in Ohio for $1200, that made me a few grand, before I learned that the previous owner had burned all his sub-contractors, and was under multiple lawsuits. I sold that business.
3) I bought a web-design company for $5,000, with outsourced contractors in India, only to find that all of the traffic data was fake, there were no customers, and that my $5,000 was gone forever. Scammed again.
Next, I started an appliance repair company two summers ago. Fixing/flipping washers/dryers on Craigslist. When I decided to scale, and bring on a full-time employee, quality control went to crap, and I really wasn't making much profit, and I was beat down by the end of the day. I decided to return to teaching.
My daughter was born, and I knew I had to start a business that worked, because my day job was going to keep me from spending time with her. So, on my three month maternity leave, I started the business that I mentioned in the OP with a $100 bill, re-invested 100% of the profits for a year and a half, and am now selling $70,000+ a month of XXXX products.
Does business have risk? yes. Will your first business fail? probably. But, if you get it right the 4th or 5th time, it still seems far preferable to me than sticking with a job and putting an extra $xxxx a month into an index fund.
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Starting a business worked great for me and I'm also way happier and love the extra flexibility. However, I've also seen a lot of people try to do exactly what I did and fail at it. Heck, I failed the first time I tried to start a business.
Every entrepreneur has failures. Or as I see them "lessons learned". But, if you start one on the side, with extra money that you were going to invest in something else, what's the risk, other than potentially losing out on 4-7% annual interest on that money you put up?
I think the best people to go down that route are those who are already independent and not eager to work for "the man". It takes a good amount of internal drive and motivation and the ability to be comfortable with a much less secure approach than doing X for Y salary.
I'll agree with this. I'd argue that most of the members of this forum are pretty independent, however. Wanting to escape "the man" is a helpful motivator, for sure.
Day jobs aren't always as secure as people like to make them out to be. I watched my industry get gutted with full-timers being moved to part-time or let go altogether. All of my friends in the petroleum industry are always looking over their shoulder, wondering if this will be the month they get let go. I like the security of being in control of my destiny.
Again, if you start it on the side, while keeping your day job, the risk is zero.
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I agree that this would be a good choice for a new sub-forum / category. And I'm one of the people who have little to no inclination to start a business!
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It would seem as though this goes against the golden rule of investment - diversification.
If you're putting every cent into your personal business, which is also your (presumably) sole source of income, what do you have to show for it if your speculation fails to deliver?
You're out of a job and all your investments are for nothing.
I can certainly see the rewards of starting a business as a side hustle, but relying on it as my sole source of investment income and a paycheck/salary is just tooooo much risk for me to take.
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There's plenty of businesses these days that require more time than money in terms of startup capital. And for the big ideas that do require plenty of capital, you should be using other people's money. No one should be using tons of their own money unless they already have plenty of it to fund a business.
It's not really a matter of "don't invest" as much as "you should take on more risk and work harder", which is what starting a business requires. Regardless of how much risk you take (in terms of capital or time expenditure), you will be putting in tons of work. So, that's why not everyone is suited for, nor will everyone ever start, a business.
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Just because this forum contains folks with a better than average financial skill set, does not mean that the same folks have better than average small business building skills.
You also seem a bit myopic in your views. Why is it one only needs a few hundred to 'start a business'? Should everyone start resale operations? Does everyone want to work in resale?
Otherwise, if someone is going to enjoy their business, or leverage skills they might already have, they may also need to invest more money to get that off the ground.
It isn't just a little risk of losing 4-7% interest in a year. Its not even close. Its the potential to lose 104-107% of that future value seed money value PLUS potentially a whole lot of lost labor.
Obviously, many people do fantastic with their own business. If one is pretty risk tolerant, has an abundance of energy, and a very shrewd business mind/skillset, have at it!
Suggesting that to the average person is probably a disservice though.
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Long time blog reader, new poster here.
I see a lot of threads in this forum about the ins and outs of investing.
People debating how to squeeze out one percentage more from this or that investment.
That's all well and good, and it's important from a wealth maintenance standpoint... but it's really not all that helpful for wealth creation.
After reading the first posts on this blog years ago, I decided to aggressively pay down debt. I hustled on the side for an extra thousand here or there. I sold our 2nd vehicle. These were all good things.
But then I stopped.
I realized that by paying down student loan debt, I was only earning 4-6% max guaranteed returns (in the form of not having to pay that interest). If I decided to invest, it wouldn't be much better.
But, if I started a business, my returns would have no ceiling. The sky was the limit.
So I stopped paying down my loan debt, and I put every extra dollar to a business selling widgets online. 2 years ago, I started with a $100 investment for an initial order of product, and then proceeded to roughly double my investment every 30-60 days.
I now have the business for sale for a mid 6 figure price.
The fastest way to generate wealth is by owning a business, and I think that there should be more discussion about this.
Any other current/former business owners out there?
How many hours a week do you spend on your business? Has that been continuous, or was there more hours upfront, but less now that things are up and running?
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Running a failing business(which isn't that uncommon) is also one of the fastest ways to lose wealth.
Sure, if you're highly leveraged for some reason. If you don't take any debt, the most you can lose, is what you put in to start it.
Not saying it is not a viable way to wealth. however though I haven't seen the number I would venture a guess that if you were to compare the amount of people that succeed using the passive investment advocated around here to the percentage of new businesses that succeed that your odds at the former to achieve FI are better using the former, though smaller odds of becoming excessively wealthy are higher with the latter.
Since MMM is a large advocate for frugality rather than excess the people drawn to that message are likely to choose the better odds of achieving FI through a safer, but potentially less lucrative way through "relatively" safe investing and achieving frugality rather than through taking the higher risk for a higher potential return involved with starting a business.
Good points. For some with an MMM mindset/lifestyle like me, starting a business was just a shortcut. I don't need the excessive stuff, which would come from running a business for another 7-10 years. I just need enough to get to FI and time with my family. The potential for an upside is much higher, if you're willing to stick it out.
I also believe that a large portion of people are not well equipped to handle being self employed and self guided and that these kinds of people would be all the more likely to fail at starting a company. You can tell anyone to invest in a small number of diversified funds and they won't need to put that much effort in. However the drive and work put towards starting a company are much higher and riskier.
I would argue that most people who read this blog are well equipped enough. If you're self-guided enough to pursue an alternative FI lifestyle, and convert to a mustachian lifestyle from your previous wasteful lifestyle, then you're self-guided enough to start a business.
Followers of this blog shouldn't shy away from hard work. Every other MMM post is about working hard.
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Here are some statistics to consider:
https://www.sba.gov/sites/default/files/SurvivalRatesAndFirmAge_ADA_0.pdf
Haha, I was waiting for this post.
Look, most people who start a business, start a business like they run their lives. Full of extravagance and wastefulness, and without any real thought put into it. Yes, they fail.
I had 3-4 failed businesses before I had a successful one. Every successful business owner I know has a similar story.
If you're a die-hard mustachian, and run your business like a die-hard mustachian, I think your chances of success are much higher.
It's at least worth thinking about, if it could potentially get you to FI 5-10 years faster.
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It would seem as though this goes against the golden rule of investment - diversification.
When my business is sold, and I have enough capital, I will be investing in real estate, funds, stocks, everything else to preserve that wealth. We're talking a fairly short time period of having a mono-investment vehicle for wealth creation, not preservation.
what do you have to show for it if your speculation fails to deliver?
The freedom of not having to report at 8am for a day job, for one.
You're out of a job and all your investments are for nothing.
In the age of the internet, and easy access to $4/hr Filipino employees, and contract labor, you don't need to quit your job to start a business.
Failures are not for "for nothing", they are lessons learned, that you'll improve upon, the next time around.
I can certainly see the rewards of starting a business as a side hustle, but relying on it as my sole source of investment income and a paycheck/salary is just tooooo much risk for me to take.
I only invested $100 total from my paycheck ever. Everything from that point forward was funded 100% by profit from the business. I kept paying off debt and paying bills with my paycheck income, as normal.
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There's plenty of businesses these days that require more time than money in terms of startup capital. And for the big ideas that do require plenty of capital, you should be using other people's money. No one should be using tons of their own money unless they already have plenty of it to fund a business.
It's not really a matter of "don't invest" as much as "you should take on more risk and work harder", which is what starting a business requires. Regardless of how much risk you take (in terms of capital or time expenditure), you will be putting in tons of work. So, that's why not everyone is suited for, nor will everyone ever start, a business.
Of course there's exceptions to everything and every business is different. I'm just offering rebuttals to the excuses put up by people responding to this thread. If I was out to create a company with nation-wide retail distribution from month one, yeah, I'd get outside investment, and give up equity in the company to do so.
There are ways of using other people's money, without going into debt. Taking out a bank loan, to start your dream restaurant is a terrible idea, and is a great way to destroy your wealth as @prognastat mentioned earlier in the thread.
"don't invest" was just a click bait title to get people to read the thread :) Of course you can do both at the same time. Just depends on how all-in you want to go.
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Followers of this blog shouldn't shy away from hard work. Every other MMM post is about working hard.
Not really. Most are about optimizing whatever you choose to do and spending less so you don't HAVE to work hard.
But some people enjoy working hard.
I am skeptical that you aren't providing any details to this wonder business of yours. Is it a MLM? If it is, you are just making money on the backs of others, which isn't something I would be comfortable with.
My husband is an entrepreneur. I work the stable job so that he can take the risks that are likely to make his business more profitable in the end. There is room for both in an FI world.
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How many hours a week do you spend on your business? Has that been continuous, or was there more hours upfront, but less now that things are up and running?
There were more hours upfront. Figuring out the product details/branding/marketing/advertising, learning how to use amazon, create an ecommerce website, etc. There was a learning curve. After a year, things were pretty much on auto-pilot, and last summer I took the family to live in Sweden for 2 months, and the business stayed steady at 4-6 hours of work a week, and I was making sales while we were on the beach or biking around.
It can still run and maintain at 4-6 hours of work a week. Any work I do beyond that, is generating growth. Like, learning new methods of advertising, developing more products to sell, or creating new marketing. I don't really work more than 20-25 hours a week tops, though.
In the age of the internet, nearly everything process in a business can be automated or outsourced. I haven't touched my product, or packed an order, in close to a year.
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I'm a little disheartened by all the negative replies on this thread.
We are supposed to be an optimistic and supportive bunch. The story the OP has told is not the norm, but that doesn't mean it is out of reach for everyone.
Success requires risks to be taken. Good on you for being persistent and resilient in the face of failure CargoBiker, more power to you.
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its awesome you had the drive and wanted to do all of that. i already make an insanely high income. if i wanted to start a business selling crap on amazon i'm sure i could figure it out. but its much easier to just invest it in all of america's publically traded companies. i may pick the right widget and make a killing i may not. you got lucky and congrats. i make crazy money buying and selling things on CL when i find the right deals and its probably what i'll do when i FIRE but until then i'll just take my day job and bank the huge cash and retire around 5-7 years from now vs trying to build something.
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Not really. Most are about optimizing whatever you choose to do and spending less so you don't HAVE to work hard.
In MMM's life, spending less equates to inputing sweat equity in place of dollars. Hard work. Building a pre-fab building in the backyard from the foundation up. Crawling under his house with a head lamp. Doing all his own repairs/maintenance/upgrades.
And yes, for many things, he optimizes and just does without. But he works hard to get/build the things he wants, because he enjoys the work and all the benefits and skills that come from doing something yourself, and saves money as a bonus.
I am skeptical that you aren't providing any details to this wonder business of yours. Is it a MLM? If it is, you are just making money on the backs of others, which isn't something I would be comfortable with.
Have you ever bought anything using Amazon Prime? If so, that was a product that Amazon employees packed and shipped instead of the business/brand owner. 85% of my sales are via Amazon prime. 15% are sold wholesale to retail stores. 100% are packed and sent to Amazon or wholesale customers by a 3rd party warehouse company in Arizona.
Anyone who thinks starting an MLM is "owning a business" is delusional. The only people who make money are the people who own the MLM.
My husband is an entrepreneur. I work the stable job so that he can take the risks that are likely to make his business more profitable in the end. There is room for both in an FI world.
I agree, my wife works a day job too. She likes teaching.
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How many hours a week do you spend on your business? Has that been continuous, or was there more hours upfront, but less now that things are up and running?
There were more hours upfront. Figuring out the product details/branding/marketing/advertising, learning how to use amazon, create an ecommerce website, etc. There was a learning curve. After a year, things were pretty much on auto-pilot, and last summer I took the family to live in Sweden for 2 months, and the business stayed steady at 4-6 hours of work a week, and I was making sales while we were on the beach or biking around.
It can still run and maintain at 4-6 hours of work a week. Any work I do beyond that, is generating growth. Like, learning new methods of advertising, developing more products to sell, or creating new marketing. I don't really work more than 20-25 hours a week tops, though.
In the age of the internet, nearly everything process in a business can be automated or outsourced. I haven't touched my product, or packed an order, in close to a year.
Thank you for the response. Are there any resources (books, blogs, etc.) that you recommend for starting an online business such as yours? Not asking you to out your product or specific processes, just wondering if there is "general knowledge" that would be useful.
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My husband wants to start a business that requires significant investment to get started and has fairly high risk. I'm all for it, though, and have accepted that we will likely lose the investment amount (we'll live) so I can be pleasantly surprised if it succeeds. Meanwhile, I'll keep my steady job. My one requirement is that he have a solid business plan in place before we invest anything.
In our case, it would be absolutely safer for us to continue plugging along and investing, but I have my dream job, so that's easy for me to say. My husband deserves a chance at his.
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I'm a little disheartened by all the negative replies on this thread.
We are supposed to be an optimistic and supportive bunch. The story the OP has told is not the norm, but that doesn't mean it is out of reach for everyone.
Success requires risks to be taken. Good on you for being persistent and resilient in the face of failure CargoBiker, more power to you.
I too am surprised by all of the complainypantsing and negativity here, myself.
Starting a business is not out of reach for anyone here. I am no one special, and I had no skills 5 years ago, other than knowing how to teach middle school kids how to play band instruments. I went $30,000 in debt, and spent 5 years in college to learn a skill that made me $50,000 a year, with no chance of ever earning more. With a few years of hard work, using free information from the internet, and one $300 course about selling on Amazon, I am earning way more than that.
You get to FI by having enough wealth to have passive interest cover your expenses.
You can get there by reducing your expenses and investing a % of your paycheck every month until you have enough.
You can get there faster by reducing your expenses and multiplying your monthly paycheck by starting a business.
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its awesome you had the drive and wanted to do all of that. i already make an insanely high income.
That's awesome. If I could go back in time, I would've either started a business right out of high school, or learned a skill that made me an insanely high income, like you. If your income is high, you can get to FI pretty quick just investing, and reducing your cost of living. My teaching income wasn't high, however, thus, the business.
but until then i'll just take my day job and bank the huge cash and retire around 5-7 years from now vs trying to build something.
That's definitely the smartest way to go in your case, I agree. It'd take about 5 years to get a businesses to a point of financial independence, assuming you were really working hard to grow it.
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I'm a little disheartened by all the negative replies on this thread.
We are supposed to be an optimistic and supportive bunch. The story the OP has told is not the norm, but that doesn't mean it is out of reach for everyone.
Success requires risks to be taken. Good on you for being persistent and resilient in the face of failure CargoBiker, more power to you.
I too am surprised by all of the complainypantsing and negativity here, myself.
Starting a business is not out of reach for anyone here. I am no one special, and I had no skills 5 years ago, other than knowing how to teach middle school kids how to play band instruments. I went $30,000 in debt, and spent 5 years in college to learn a skill that made me $50,000 a year, with no chance of ever earning more. With a few years of hard work, using free information from the internet, and one $300 course about selling on Amazon, I am earning way more than that.
You get to FI by having enough wealth to have passive interest cover your expenses.
You can get there by reducing your expenses and investing a % of your paycheck every month until you have enough.
You can get there faster by reducing your expenses and multiplying your monthly paycheck by starting a business.
yeah you can get there faster by building a real estate empire like ARS did. there are tons of ways to get there. i built a mid 6 figure networth in around the same amount of time you left teaching school. how did i do it. by getting an engineering degree and being an engineer and investing. you went a teaching path as did ARS ... which give you a few months of down time each year to explore in depth one of these business starting like enterprises and congrats to you on it. there are many different ways to skin the cat. but starting a business as you show above has many failures you found success on your 5th try congrats... what about the guy who's on his 100th try in 15 years. their is however little to no risk on the investing side when compared to starting any business.
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Thank you for the response. Are there any resources (books, blogs, etc.) that you recommend for starting an online business such as yours? Not asking you to out your product or specific processes, just wondering if there is "general knowledge" that would be useful.
The business book that influenced me the most is one with a stupid title: The Millionaire Fastlane. Any business you start with the general principles he lays out, is going to do well, online or offline. It just happens that online buisnesses can lend themselves to scale a lot easier than say, a plumbing company. 4 Hour Work Week is a little cheesy, but has some similar principles regarding maximizing your time input, and his initial business was similar in structure to mine.
Beyond that, it's important that you find a need that is unfulfilled. Is there a problem that people have in their daily lives, that a product would help solve? Or maybe the products that are supposed to solve that problem suck, and you can improve them. Is there a service that would make life easier for people?
Listen to the conversations of the people around you. Anytime someone says "I can't do xxx" or "I hate xxxx" or "I can't believe xxx" or "I wish xxx" is an opportunity.
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I'm a little disheartened by all the negative replies on this thread.
We are supposed to be an optimistic and supportive bunch. The story the OP has told is not the norm, but that doesn't mean it is out of reach for everyone.
Success requires risks to be taken. Good on you for being persistent and resilient in the face of failure CargoBiker, more power to you.
I too am surprised by all of the complainypantsing and negativity here, myself.
Starting a business is not out of reach for anyone here. I am no one special, and I had no skills 5 years ago, other than knowing how to teach middle school kids how to play band instruments. I went $30,000 in debt, and spent 5 years in college to learn a skill that made me $50,000 a year, with no chance of ever earning more. With a few years of hard work, using free information from the internet, and one $300 course about selling on Amazon, I am earning way more than that.
You get to FI by having enough wealth to have passive interest cover your expenses.
You can get there by reducing your expenses and investing a % of your paycheck every month until you have enough.
You can get there faster by reducing your expenses and multiplying your monthly paycheck by starting a business.
I would say there is a difference between complainypantsing/negativity and realism.
The realism is that you are more likely to succeed by investing than starting a business. MMM himself worked a regular job and didn't start a business until he was FI at which point doing so was very low risk to himself.
I will readily agree that a successful business could very well speed up this process, however I don't think it is unfair to say that this comes with a substantial amount of risk too if you aren't FI already. A level of risk not involved if you work a regular job, work hard there at growing your income and saving as high a percentage to invest in will diversified low fee index funds.
You say that today you don't need to risk much capital and it would be mostly time ignoring the fact that time is money. If someone spends hundreds of hours setting up and managing a business there is an opportunity cost in losing those hours instead of working them at a regular job or if you are still working a regular job possibly putting them in as OT or a second job.
It's not that people are unwilling to work hard or be optimistic, but there is a difference between being optimistic and simply ignoring the numbers that don't agree with your point of view.
100% of the time reducing your expenses will speed up FI.
100% of the time working extra hours either through OT or a second job will speed up FI
100% of the time investing money in diversified index funds will lead to more money in the long run(except for catastrophic failure of the economy which would also impact most businesses)
however:
The majority of businesses fail losing either money or the opportunity cost of the hours involved with setting up and managing the business.
So when you say instead of investing in something that is guaranteed to bring you a moderate return and instead invest in this risky proposition that is very likely to lose all money/time invested, but at the chance of a higher return many people are going to criticize it here just like people criticize stock picking. Some people manage to gain unimaginable wealth doing it, most lose money though as opposed to investing it in a low fee index fund.
That is also only going in to how many businesses fail. I am sure the number of businesses that don't fail, but fail to return above the average of the market would grow that percentage even more.
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My husband wants to start a business that requires significant investment to get started and has fairly high risk. I'm all for it, though, and have accepted that we will likely lose the investment amount (we'll live) so I can be pleasantly surprised if it succeeds. Meanwhile, I'll keep my steady job. My one requirement is that he have a solid business plan in place before we invest anything.
In our case, it would be absolutely safer for us to continue plugging along and investing, but I have my dream job, so that's easy for me to say. My husband deserves a chance at his.
From a husband perspective, having the blessing of the wife is a huge wind in the sails. I did not have my wife's blessing at first, because of my previous failures, and I operated the current business in secret until it was making money, at which point I told her about it.
For any investment, you don't put in more than you can afford to lose. The attitude you have is a healthy one. Of course, you do whatever you can to mitigate the initial risk, and operate on your gut/best judgement. 100% of the time, my gut always knows a good choice from a bad one. When I've gone against it, I've failed.
What is risky about this business, specifically (without telling me what the business is)?
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so now we get to the root of this you're essentially saying invent or innovate which is even more difficult than just buying a bunch of chinese widgets on alibaba and selling them on amazon.
of course inventing or inovating will be out the market if it succeeeds.
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what about the guy who's on his 100th try in 15 years.
That guy needs to take a hard look in the mirror and figure out why he hasn't learned anything from his failures.
their is however little to no risk on the investing side when compared to starting any business.
Absolutely. And if you currently have the income, or have a way to get that income quickly, from a day job, more power to ya. It's a good plan.
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I didn't interpret the responses in this thread as negative so much as cautionary; yes, it is possible to make a boatload of money in your own business, assuming you find the right niche and can be successful. Yes, probably many of the people on this forum could be successful at it. But, no, it is not necessarily a panacea, or the right move for everyone; some people would be miserable starting their own business, or could make enough money to FIRE in their current job within the time they'd need to get a business in a certain niche up and running and would in fact extend their FIRE timelines, and there is always a chance for failure because of external factors (demand changes, legislation in your niche, etc.)
I think it's definitely worth considering, and there is tremendous opportunity, and I like the idea of fostering further discussion around how to start a business with a high likelihood of success, and how to use it as a method of asset diversification.
I've considered starting a consulting business but right now it would be extremely difficult for me to start one on the side (various health issues really cut down on how much time I can invest outside of my normal job into working), and I am not at the point financially where I feel comfortable just quitting my job to pursue something like that.
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The realism is that you are more likely to succeed by investing than starting a business.
True. I didn't say a business was as or more likely to succeed as investing. I did say that it potentially could get there faster.
MMM himself worked a regular job
A six figure engineer job. I think his wife had six-fig salary too? I wouldn't call that situation regular, or necessarily recommend someone in that situation to start a business, as I've said to @boarder42 in this thread.
I will readily agree that a successful business could very well speed up this process, however I don't think it is unfair to say that this comes with a substantial amount of risk too if you aren't FI already. A level of risk not involved if you work a regular job, work hard there at growing your income and saving as high a percentage to invest in will diversified low fee index funds.
I'll agree with this, and acknowledge that you are being realistic and not complainypants in this post.
If someone spends hundreds of hours setting up and managing a business there is an opportunity cost in losing those hours instead of working them at a regular job or if you are still working a regular job possibly putting them in as OT or a second job.
There's also opportunity cost of spending the next 8-15 years at a job, when you could've started a successful business instead and got there in a third of the time. X number of hours upfront to purchase a few more years of freedom for my life.
100% of the time reducing your expenses will speed up FI.
You can reduce your expenses and start a business, and I have. A business generates profits, that can be used to grow the business. You don't have to continually invest in it.
100% of the time working extra hours either through OT or a second job will speed up FI
100% of the time investing money will lead to more money in the long run.
True.
So when you say instead of investing in something that is guaranteed to bring you a moderate return and instead invest in this risky proposition that is very likely to lose all money/time invested, but at the chance of a higher return many people are going to criticize it here just like people criticize stock picking.
Some people manage to gain unimaginable wealth doing it, most lose money though as opposed to investing it in a low fee index fund.
That is also only going in to how many businesses fail. I am sure the number of businesses that don't fail, but fail to return above the average of the market would grow that percentage even more.
You have to set up rules for yourself to mitigate the risk. If you're lazy or haphazard with your plan, you'll get those same results.
I will only start a business that fulfills a need. If it's not something people need or want, don't do it.
I will only start a business if it can scale. Either in volume of sales, or in magnitude of price.
I will only start a business that has a barrier to entry. If any joe off the street could do this business, I don't want to do it.
I will only start a business that I have near-complete control over. I break this rule by having such a large percentage of my sales from Amazon, but my next business won't.
I will only start a business that can operate and grow independent of my time.
Most people who start businesses break all of these rules.
They start a product or service that no one really needs or wants, that is easy to get started doing, that takes 100% of their time to run.
Most of your post was based in reality, but where you went into assumption mode was when you assume that it takes lots of money or hundreds of hours to start a business. It doesn't necessarily need to take either. You can spend a month and small bit of cash to try and get something off the ground, and if it doesn't work, you move on. If it failed, all you wasted was a month of your life and a bit o' cash, which ain't going to make a huge difference in the grand scheme of your FI plans.
I think the point I'm trying to get at, is that the risk can be much lower than people in this thread seem to suggest. And I think the risk is low enough to at least be worth considering as a valid path to FI.
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so now we get to the root of this you're essentially saying invent or innovate which is even more difficult than just buying a bunch of chinese widgets on alibaba and selling them on amazon.
of course inventing or inovating will be out the market if it succeeeds.
Yeah, Amazon is just a sales/marketing channel for me. 40% of all online sales take place on Amazon, so you can't really ignore it, if you want to sell products online. I didn't mean to imply that I'm selling cheap off-the-shelf chinese stuff.
I think inventing is very difficult, and personally have had zero experience doing this. Inventing is pioneering into the unknown at a wild upfront cost of time and money, into an unknown market.
Innovating, or improving, is taking something that already exists, that people have already shown that they want, looking at how it could be better, and making it better. This is way easier than inventing.
Or an approach that has also worked for me, is finding products that exist in other countries, that aren't yet being sold here in the U.S., and being the first to do so.
The iPhone was an invention. Completely radical. Every smartphone, from every company since then, has been an innovation. A slow improvement to an existing product that people want.
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I didn't interpret the responses in this thread as negative so much as cautionary; yes, it is possible to make a boatload of money in your own business, assuming you find the right niche and can be successful. Yes, probably many of the people on this forum could be successful at it. But, no, it is not necessarily a panacea, or the right move for everyone; some people would be miserable starting their own business, or could make enough money to FIRE in their current job within the time they'd need to get a business in a certain niche up and running and would in fact extend their FIRE timelines, and there is always a chance for failure because of external factors (demand changes, legislation in your niche, etc.)
Good points all around. You're right, it's not for everyone.
I think it's definitely worth considering, and there is tremendous opportunity, and I like the idea of fostering further discussion around how to start a business with a high likelihood of success, and how to use it as a method of asset diversification.
This is what I hope this thread can be. I think we're all aware of the risks of going on your own. Clearly, the business path is more zig zag, and less straight, than a job to index fund plan. Let's talk about how to mitigate those risks, and make it happen!
I've considered starting a consulting business but right now it would be extremely difficult for me to start one on the side (various health issues really cut down on how much time I can invest outside of my normal job into working), and I am not at the point financially where I feel comfortable just quitting my job to pursue something like that.
Yeah, that's the trouble with consult businesses. They are 100% time dependent on you. If you aren't inputting your time, you aren't making money. People try to scale up by having others do the consulting underneath them, but this can be pretty difficult to do while keeping the quality of consultations high. After all, if they were good at consulting, why wouldn't they be doing it on their own.
I think consulting is only worth doing if you have a very high price tag for your service.
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Bottom line: we need an entrepreneurial section on this forum rather than the once-a-month threads that pop up that end up going down the same rabbit holes.
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Bottom line: we need an entrepreneurial section on this forum rather than the once-a-month threads that pop up that end up going down the same rabbit holes.
MOD Note: Yes, we do. Let me work on it.
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CargoBiker, do you get satisfaction from the business you run? I am not asking condescendingly or rhetorically; I know a lot of people get satisfaction from sales, from the process of connecting people with products that they seek. I just wonder if it's true for you, and how it compares to teaching band (time with baby aside).
I feel like a lot of these discussions, about what job to train for/take, or what business to start, focus exclusively on the bottom line. But if you're spending time doing something, you want it to either be actively enjoyable, or to bring you satisfaction of a job well done, else it becomes tedious or downright repulsive no matter the paycheck (a pacifist at a defense contractor, no matter how good their technical acumen, would be miserable due to moral conflict). You have some kind of sale or resale operation; I would feel zero satisfaction from that. If I was to start a business, it would probably be a tutoring gig, but that has the same issue as consulting that you pointed out: 100% dependent on personal capital. Null startup costs are a plus, though. However, I bet Aerospace Engineering pays better with more stability, and any downtime I have from that, I'll want to spend pursuing soul-satisfying, health-generating, non-lucrative hobbies (like hiking, cooking, crafting, etc).
On a related note, let's note that some professions don't translate well to startup/small business contexts vs standard employment models (W2 or contract), such as engineering, nursing, physics, pharmacology/biochem, etc. In fact, off the top of my head, I would pull out three categories that lend themselves to starting businesses: software, sales (resale), and service. (Don't gouge me if that's an incomplete list! It's just a guess!) If you don't see a path to higher income and/or satisfaction than your "standard" job through one of those avenues, it likely it doesn't make sense to invest the time and possibly money in the business, away from the main job or other life-satisfaction activities.
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Bottom line: we need an entrepreneurial section on this forum rather than the once-a-month threads that pop up that end up going down the same rabbit holes.
MOD Note: Yes, we do. Let me work on it.
Alright!
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CargoBiker, do you get satisfaction from the business you run? I am not asking condescendingly or rhetorically; I know a lot of people get satisfaction from sales, from the process of connecting people with products that they seek. I just wonder if it's true for you, and how it compares to teaching band (time with baby aside).
Not particularly. That's the main reason for selling it, and getting into something else. I sell a product that people want, but that I don't particular care for.
What does give me satisfaction, is all the perks of having the business, like getting to spend lots more time with my family, and being location independent. I didn't really like teaching all that much, and the 5th year I had the worst kids of all 5 years, and it was a real beat down. I was ready to jump into anything else, be it business, or another job instead.
I feel like a lot of these discussions, about what job to train for/take, or what business to start, focus exclusively on the bottom line. But if you're spending time doing something, you want it to either be actively enjoyable, or to bring you satisfaction of a job well done, else it becomes tedious or downright repulsive no matter the paycheck (a pacifist at a defense contractor, no matter how good their technical acumen, would be miserable due to moral conflict). You have some kind of sale or resale operation; I would feel zero satisfaction from that.
Yeah, absolutely. I enjoy the process of creating, be it a business, or a treehouse in my backyard. I think this is an important part of the discussion. I don't think passion is necessarily required for a business, as the perks alone can make it worth it, even if you have to spend a small amount of time each week doing something I don't like (like customer service emails).
If I was to start a business, it would probably be a tutoring gig, but that has the same issue as consulting that you pointed out: 100% dependent on personal capital. Null startup costs are a plus, though. However, I bet Aerospace Engineering pays better with more stability, and any downtime I have from that, I'll want to spend pursuing soul-satisfying, health-generating, non-lucrative hobbies (like hiking, cooking, crafting, etc).
I used to do private lessons/tutoring for different musical instruments. I wouldn't call it a business, it was really just more of a job that I created for myself. Tutoring as a business, is the music school down by wal-mart, that brings in teachers, and charges them to use the facility, and then rents instruments and sells supplies to the students.
I did take this, and other manual labor skills that I have, into account when I decided to leave my teaching job. I knew that if for some reason my business went nuclear over night, I would still be ok, because I can just start making money immediately by putting my skills to use, in exchange for time.
I would pull out three categories that lend themselves to starting businesses: software, sales (resale), and service. (Don't gouge me if that's an incomplete list! It's just a guess!) If you don't see a path to higher income and/or satisfaction than your "standard" job through one of those avenues, it likely it doesn't make sense to invest the time and possibly money in the business, away from the main job or other life-satisfaction activities.
That's a really good list actually. Doing any of those things, will give you skills that are very helpful/essential for starting your own business, especially sales. It's hard to run a business if you don't understand how to sell.
In a way, teaching is a form of selling. You have to communicate your message, and do a song and dance, to get these kids to hear what you're saying and digest it. So I'd say, spending 5 years teaching helped me in this area.
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I've thought about the same thing: starting a business to accelerate wealth accumulation. I'm terrible at sales & marketing though...
Sales & Marketing are super important. Having a good product is the most important thing. It's your vehicle. Having good marketing is the gas that makes it go. You gotta have both to do well.
One of my favorite sales books is Ca$hvertising. Lots of good info on copywriting in there, which is the main sales skill you need if selling online.
I'm not great at graphic design or branding, so I have a cousin who does most of that for me.
Plus, what gives me the flexibility to start a side business also makes it difficult to want to start a business: I have a six figure income, set my own hours, set my own work days, work from home anywhere in the US and get a guaranteed 8.5 weeks off per year plus a small pension.
In your case, when you don't have a need or even a desire necessarily, a business would probably best develop from some sort of hobby that you have. Say, you're really into flying drones, and then you start a business doing aeirial real estate photography for a friend who is a realtor, and then it goes from there. So something that would be fun for you to do, and just happens to make money at the same time.
Or just starting something for the fun of it in your free time, to see if you can. It is kind of addicting launching new products and seeing them be successful.
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I'd like to see a business sub-forum too!
I'm in the process of starting a business right now. Although I think it could be a great choice for me and obviously was a great choice for you, I definitely don't think it's for everyone. Maybe not even most people. I think you've got to have some kind of secondary motivation for starting a business beyond 'if it works it could be a better investment' whether that's a genuine desire to be an entrepreneur, a business idea you're excited about, a hustling mentality, a need for flexibility or an inability to do a traditional job. The early stages of a business are hard work and draining. If you don't have more invested in it, I think you'd struggle to get beyond that stage.
I'm also very risk averse so I'm sympathetic to those who would rather take a predictable path even if it were longer.
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I, too, would be interested in a business subforum. My husband is a business owner and we have been blessed to so far be successful with it. It has increased our income and has the potential to continue to increase our income. We don't invest everything back into the business, but instead we pay ourselves a salary (I'm employed as well) and distributions and we invest as much as we can. I've heard stories of people who put everything in their businesses and 30 years later they don't have retirement savings and their business tanks and they lose their entire savings. So although we will continue to grow our business, we also will invest in the stock market and maybe someday in real estate. Another advantage of being self employed is that if our business continues to do well we could potentially sell it and shorten our time to early retirement.
It has also helped me as a stay-at-home mom who was out of the workforce for a few years. I've gained business experience by working in the business yet my hours are flexible so that I can be home when my kids get home from school and while my youngest isn't in school yet. This gives me extra security knowing that I have business skills, and I'm lucky that my husband and I can work well together in the business.
Running a business may not be for everyone, but it has helped us in our quest for financial independence. And even though it's a service business and at the beginning we could only make money on how much my husband worked, we have since hired employees and can do more work and earn more money even outside of our own potential. We are also looking at selling products in the near future and that could take our business to another level.
Part of our success in running the business is using a recurring revenue model that's not based on hours, staying out of business debt and bootstrapping the business, becoming experts in a niche, and working hard.
I will say that we lost out of some years of investing at the beginning, but our income has made up for that and we will be able to have a higher savings rate going forward.
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I think this quote from Donald Rumsfeld is perfect for this topic, especially the last sentence.
"There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know."
I see so many people putting things down in a way that just shows their complete lack of knowledge on the subject. I have a feeling that a sub forum would degenerate quickly.
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Thank you
I thought I heard wise words when someone told me "The best way to get ahead is to do what everyone else is not doing."
The theme of this forum seems to be that when everyone else is enjoying consumerism, we are saving and investing.
The initial investment of $100 is very low. The education costs to run this business could include the books read as well as the money lost on previous businesses.
Starting a business is a great option for anyone who is not a high earner.
There is very little risk in doing what everyone else is doing, such as going to college and getting a high paying job.
There's plenty of free education out there to minimize the risk of starting a business.
The greater the risk. The greater the reward.
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A few thoughts:
Definitely want a small business subforum.
The $200 Startup is a very interesting read.
People who do well in self-started businesses tend to overestimate their skill and underestimate outside factors. Survival bias is significant.
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Very interesting topic. Starting a business is easy, making money the first year or two is easy. Keeping it going for years and being able to retire off of it is a bit harder.
My brother is a CPA and serves a lot of small businesses. He's seen a ton of small businesses come and go. Some were wildly successful for the first year or three, and then business falls off and the owners lose a lot of wealth. Business cycles come and go.
I may start a business, with very little capital once I quit working full time. It might start as a hobby and perhaps may grow slowly over time to something decent.
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My daughter was born, and I knew I had to start a business that worked, because my day job was going to keep me from spending time with her. So, on my three month maternity leave, I started the business that I mentioned in the OP with a $100 bill, re-invested 100% of the profits for a year and a half, and am now selling $70,000+ a month of XXXX products.
This is pretty much me right now. I've always wanted to start a business. But when my daughter was born, the idea got a new sense of urgency. In three months "maternity" (paternity?) leave, I developed a mobile app (not quite finished yet), developed and started selling a product offline in cooperation with local businesses, and got the idea for a niche percussion instrument I plan on manufacturing and selling. None of these ideas is likely to make me rich fast, but they might make a nice side income and need almost no startup capital.. Also, I like to think they maximize my chances for good things happening to me (as Altucher puts it) more than sitting in an office 8+ hrs a day working for someone else.
Of course starting a business isn't for everyone, and many businesses fail. But folks have different risk tolerances, just like in the investment world. With great risk might (!) come great reward. Nothing wrong with that if the risk is suitable for you, in my eyes.
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The discussion on this thread is the exact reason that we need a small business sub forum and I have thought that for a while. First a couple misconceptions and then why we need the forum.
Businesses are far less risky than people realise. Just like real estate there are rules people can follow to have a successful business. And the types of business investments are so varied that people need direction for finding a winner. Those business failure rates are meant to scare people from entrepreneurship. Most businesses don't last 5 years, which is true. But, what they don't tell you in those statistics is that many of those businesses where never meant to last five years. Tons of them are people setting up their business to sell at the farmers market for the summer or at the county fair. In 5 years many get bored and stop and it isn't just cause they failed. Just because those businesses stopped doesn't mean they failed. They might have perfectly intended what they were supposed to do in the short time they existed.
Also, I consider my employees to be in a riskier position to be in than I am. I get 20 checks a month from 20 different sources. They get 2 from the same source. I loose one check and I am ok. They lose one check and they are looking for a new employer.
Second, not everyone is employable. Just like not everyone is meant to run a business. So telling people who are not meant to be employed to get a job doesn't help them get to FIRE. I am one of those people. I am not employable, not because I don't have skills, I am unemployable, because I don't like having a boss and I am driven to run my own thing. It is the reason I was fired. But, also the reason, why my boss at the time told me in my exit interview that when I was ready to start something let him know as he would like to invest. (I worked for a VC firm. I didn't take the investment, I bootstrapped).
Third, I disagree with the premise of the OP, but as a business owner I look to diversify, which is why I invest in the market as well.
Which leads to why we need the small business forum.
1. Not everyone is meant to be an employee or good at it. Those people still need paths to early retirement.
2. Third understanding how to invest your money as a small business owner is so much more difficult than as an employee. I always way what do I take out of my business to invest and what do I put back into the business for growth. These are tough decisions. And are made tougher by the compounding of tax laws, and the things you can and can not do based on business size and business type.
3. People looking to start a business need a lot of help identifying opportunity to make it less risky.
4. People growing their business need to find a mustachian way to do so. And I do think businesses can be run in a mustachian way. I feel I do a pretty good job of this, especially as I am more mustachian than my employees, though they are pretty good. I purposely hired them because they fit the culture. There are so many things to talk about in this section alone that I have looked at starting my own forum/blog on it, but haven't had the time.
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Bottom line: we need an entrepreneurial section on this forum rather than the once-a-month threads that pop up that end up going down the same rabbit holes.
MOD Note: Yes, we do. Let me work on it.
So excited! Can't wait!
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I spent a fair amount of time as a bookkeeper/tax preparer. One thing I learned is that most businesses are driven by the consistent efforts of one key person who generally isn't making much more money than he or she could just having a run of the mill job. Granted they are their own boss, but working 120 hours a week to net 45,000 a year is not something that should excite.
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Great to hear we're getting an entrepreneurship/business forum. I am looking forward to it!
Thanks for sharing your story. This is a familiar story about how to make money using Amazon FBA. What we see in the FBA stories are:
* Anyone can do this, so can you
* Innovate/create constantly to differentiate your product, as 95% of FBA competition doesn't bother
* It can all disappear in an instant when the crowded competition innovates better than you
* It can all disappear in an instant when your sales channel (Amazon, in this case) implements an arbitrary policy change
* Don't hold inventory. You can lose everything if you're holding inventory and something changes.
The steps for creating an FBA business are usually:
* Find a product in the top 100 best sellers by volume
* Find some way to improve it or combine it with another product
* Write clever marketing to promote it (this appears to be the "secret sauce")
* Use Alibaba to find a cheap source for the product overseas
* Profit!
I'd like to hear more about your "secret sauce" marketing the products you've developed. That, I think, is the lesson we can all learn from you. Thanks!
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I spent a fair amount of time as a bookkeeper/tax preparer. One thing I learned is that most businesses are driven by the consistent efforts of one key person who generally isn't making much more money than he or she could just having a run of the mill job. Granted they are their own boss, but working 120 hours a week to net 45,000 a year is not something that should excite.
Exactly, not to mention business owners sometimes can't sleep well at night knowing so much is on the line.
Employees have the luxury of sleeping well and not worrying about businesses' ability to survive day to day. Business owners not so much.
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"I did it and I am fabulous therefore my way is the best way so stop wasting your time with investments... suckas!"
I disagree with your premise, OP, and I find your tone rather unconvincing. You sound like Carlton Sheets. 😉
I ran a small business for ten years and reached FIRE at age 38. That sounds like a confirming story, right? Except that I would've earned *more* had I stayed in the corporate world, and the reason we FIREd relatively young was 18 years of saving, dual incomes, and investing in low cost index funds.
Running a business was rewarding, but it didn't make me more money than my management career would have. And out of the 10 small business buddies I started with, only 2 of us made it ten years. I loved being a business owner, but mostly it was for the freedom and creativity. Money would have been better at a MegaCorp or Big5 consulting firm.
Congrats on your success so far. And like you, I'd love to see an entrepreneurship subforum here on MMM.
SiS
Very good point. I could have started a business early in my life as well, but I made more money as an employee, which was more consistent, less risk, and easier on work/life balance, over my career. I may reboot and start a self service business after FIRE.
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...I used to do private lessons/tutoring for different musical instruments. I wouldn't call it a business, it was really just more of a job that I created for myself.
Okay, this is a bit of pedantry, but what do you consider "starting a business"? At first I was thinking how unsuited I am to starting my own business, but then I began to think of little "side hustles" I could tolerate and make extra money. And I suppose "side hustles" are a very small business? Then you said that you do not consider private tutoring a business. Is pet-sitting a business? Collecting & redeeming recyclables? Selling crafts on Etsy?
I really am interested in your thoughts. Sometimes I get hung up on words. I don't always agree with how the term "retired" is used (verses financially independent), but I just accept it like I would any regional usage. Why bicker if someone calls a "cookie" a "biscuit"? It's not like one regional usage is "right" or "wrong." Just eat the delicious treat!
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...I used to do private lessons/tutoring for different musical instruments. I wouldn't call it a business, it was really just more of a job that I created for myself.
Okay, this is a bit of pedantry, but what do you consider "starting a business"? At first I was thinking how unsuited I am to starting my own business, but then I began to think of little "side hustles" I could tolerate and make extra money. And I suppose "side hustles" are a very small business? Then you said that you do not consider private tutoring a business. Is pet-sitting a business? Collecting & redeeming recyclables? Selling crafts on Etsy?
I really am interested in your thoughts. Sometimes I get hung up on words. I don't always agree with how the term "retired" is used (verses financially independent), but I just accept it like I would any regional usage. Why bicker if someone calls a "cookie" a "biscuit"? It's not like one regional usage is "right" or "wrong." Just eat the delicious treat!
A business doesn't need employees, constant attention, nor have some unique idea to be considered a business in my opinion. I disagree that a private tutoring service shouldn't be considered a business. And I bet the IRS would too. A business that relies on one single person's knowledge and skills to function is no less a business than Apple - it's just probably not going to be a very big one. Any activity where you're controlling marketing, price, expenses, the service itself, etc, should be considered a business. I say that because I absolutely think all of the side-hustles you mentioned could be considered businesses. They're just more mini-businesses and much of the logistics and infrastructure are outsourced.
Ideally, the sub-forum would be devoted to "all things entrepreneurial" and not get hung up on the term "business" since the purpose is finding and sharing ways to make extra money creatively either in addition to, or in place of a day job. I think the misconception that it's an "all or nothing" proposition should be killed. Working your more secure day job and venturing out to do things on your own are not mutually exclusive ideas. You can have both and learn something from both.
When people think of taking risks and being successful, they think of sinking a bunch of money into something and cutting ties from everything else they've built. But, that's not how it works at all. Elon Musk was on track to become a researcher before he negotiated time off from Stanford to start Zip2 (then PayPal). He virtually took zero risk because Stanford was prepared to let him come back and he didn't spend much (if any) of his own money to start Zip2. Same thing with Bill Gates. Same thing with literally most super successful entrepreneurs. There's no reason you can't learn something and start creating things in addition to your "guaranteed" path.
Alex Honnold is a world class free climber who doesn't consider what he does to be risky. He climbs granite rock faces like Half Dome in Yosemite faster than anyone else in the world with zero gear. He could die at any wrong step, yet he doesn't consider himself to be taking extreme risks. Why? Because he's practiced thousands of hours and started at a very young age so to him it's just natural. It would be incredibly risky for any one of us here to do what he does tomorrow. I guess the lesson is that time spent working at something lowers the perceived risk, so it's easier to dismiss something as risky rather than dig into it and figure out all the inner-workings of something.
The moral of the last two paragraphs is that it's not an all-or-nothing thing. Everything starts small. Not everything is successful. Perception of risk basically has a direct correlation with the comfortability and the amount of time spent at any given activity.
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...I used to do private lessons/tutoring for different musical instruments. I wouldn't call it a business, it was really just more of a job that I created for myself.
Okay, this is a bit of pedantry, but what do you consider "starting a business"? At first I was thinking how unsuited I am to starting my own business, but then I began to think of little "side hustles" I could tolerate and make extra money. And I suppose "side hustles" are a very small business? Then you said that you do not consider private tutoring a business. Is pet-sitting a business? Collecting & redeeming recyclables? Selling crafts on Etsy?
I really am interested in your thoughts. Sometimes I get hung up on words. I don't always agree with how the term "retired" is used (verses financially independent), but I just accept it like I would any regional usage. Why bicker if someone calls a "cookie" a "biscuit"? It's not like one regional usage is "right" or "wrong." Just eat the delicious treat!
Pretty much this. There are lots of arguments because we all have "personal" definitions of things like "retirement" and "Business" I would define business as any activity that is consciously undertaken and optimized to make a profit.
It depends on your motivation, the time/money you invest and how you run something that determines if it is a "Hobby" or "Business" So any side hustle, or hobby could be a business. A nonprofit should be seen as and run like a Business. Their definition of "profit" might be different, but they have the same issues as a business, and if they don't treat it like a business, they will limp along or collapse.
Running your own business may or may not be the best path to FI, it depends on who you are, how you work, what your skills are. On the other hand, you might meet your other needs so you aren't as concerned and a strict definition of retirement because you are doing something you would choose to be doing in RE anyways.
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...I used to do private lessons/tutoring for different musical instruments. I wouldn't call it a business, it was really just more of a job that I created for myself.
Okay, this is a bit of pedantry, but what do you consider "starting a business"? At first I was thinking how unsuited I am to starting my own business, but then I began to think of little "side hustles" I could tolerate and make extra money. And I suppose "side hustles" are a very small business? Then you said that you do not consider private tutoring a business. Is pet-sitting a business? Collecting & redeeming recyclables? Selling crafts on Etsy?
I really am interested in your thoughts. Sometimes I get hung up on words. I don't always agree with how the term "retired" is used (verses financially independent), but I just accept it like I would any regional usage. Why bicker if someone calls a "cookie" a "biscuit"? It's not like one regional usage is "right" or "wrong." Just eat the delicious treat!
I think that anything that you make money at (or a loss the first couple of years) but is within IRS guidelines that it's not a hobby is considered self-employed and can be called a business. I would include side hustles in this. Over the years I've made money outside of traditional employment doing the following:
- Teaching private piano lessons
- Working as a subcontractor online and setting my own hours
- Creating an online course through Udemy that generated income
For each of these endeavors, I've been able to claim deductions for materials used including a piano for teaching piano lessons as well as software for working as a subcontractor and creating a course. None of these endeavors made me rich, but they helped our household budget and gave me something I enjoyed doing. Teaching piano lessons and working as a subcontractor only made money when I personally worked.
With my Udemy course, it's made me money while I sleep. I launched the course in 2015 and put in an initial time and money investment that I made back in 3-6 months. In 2016 I didn't spend any money on the course and only spent 10 min/month answering questions. I don't make much money from the course (maybe $75-$150/month) due to limited promotion, yet I would consider this self-employment income. So even though the way I make money through my course is different than when I taught piano lessons, I consider all to be self-employment income.
I think people have different opinions on what a "business" is. The book "The E-myth Revisited" talks about different types of businesses, and that some businesses are essentially you creating a job for yourself, like an accountant who only works for himself. They have a different term for the type of business where you have products or employees so that you're earning money outside of your direct time contributions.
I think there are many ways to go about self-employment and owning a business. At some points in your life you may have a side hustle and at other times only W-2 income.
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got the idea for a niche percussion instrument I plan on manufacturing and selling. None of these ideas is likely to make me rich fast, but they might make a nice side income and need almost no startup capital..
Just curious what your prototyping and mfg plan is given that you don't plan on spending much. I've always assumed prototyping and manufacturing can be pretty pricey ( prototyping less so now that 3D printing is pretty common). Is this something you plan on physically manufacturing yourself?
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I'm in the process of starting a business right now. Although I think it could be a great choice for me and obviously was a great choice for you, I definitely don't think it's for everyone. Maybe not even most people. I think you've got to have some kind of secondary motivation for starting a business beyond 'if it works it could be a better investment' whether that's a genuine desire to be an entrepreneur, a business idea you're excited about, a hustling mentality, a need for flexibility or an inability to do a traditional job. The early stages of a business are hard work and draining. If you don't have more invested in it, I think you'd struggle to get beyond that stage.
Great insight! Yeah, in my case, hating the day job was a powerful motivator.
I'd like to see a business sub-forum too!
There is one now, and I'm going to start a new thread over there to continue this one.
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People who do well in self-started businesses tend to overestimate their skill and underestimate outside factors. Survival bias is significant.
Haha, man, that's a very interesting thought!
I'm going to have to do some self-reflection on that...
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"I did it and I am fabulous therefore my way is the best way so stop wasting your time with investments... suckas!"
I disagree with your premise, OP, and I find your tone rather unconvincing. You sound like Carlton Sheets. 😉
Yeah... I kind of wanted to stir the pot a bit. In hindsight, I should have toned it down a notch, haha. But hey, there's a subforum now!
I loved being a business owner, but mostly it was for the freedom and creativity. Money would have been better at a MegaCorp or Big5 consulting firm.
I think the crux of my enthusiasm for business, was the alternative was a low paying job that I hated. Lots of you guys in the thread had high-paying jobs as an option, in which case, there's a lot more pros/cons to consider.
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I spent a fair amount of time as a bookkeeper/tax preparer. One thing I learned is that most businesses are driven by the consistent efforts of one key person who generally isn't making much more money than he or she could just having a run of the mill job. Granted they are their own boss, but working 120 hours a week to net 45,000 a year is not something that should excite.
OOh, a bookkeeper, I bet you have the real inside scoop on this conversation.
The way I think of businesses like you described, is that it is a job that you created for yourself.
If the business depends on you, I don't really think you have much of a business.
It's the difference between "working in your business" and "working on your business".
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Great to hear we're getting an entrepreneurship/business forum. I am looking forward to it!
Thanks for sharing your story. This is a familiar story about how to make money using Amazon FBA. What we see in the FBA stories are:
* Anyone can do this, so can you
* Innovate/create constantly to differentiate your product, as 95% of FBA competition doesn't bother
* It can all disappear in an instant when the crowded competition innovates better than you
* It can all disappear in an instant when your sales channel (Amazon, in this case) implements an arbitrary policy change
* Don't hold inventory. You can lose everything if you're holding inventory and something changes.
The steps for creating an FBA business are usually:
* Find a product in the top 100 best sellers by volume
* Find some way to improve it or combine it with another product
* Write clever marketing to promote it (this appears to be the "secret sauce")
* Use Alibaba to find a cheap source for the product overseas
* Profit!
Easy money never lasts long. If it's easy for you to do, it's easy for everyone else. What you described is the mindset I started with 2 years ago, but quickly learned the flaws in it's execution.
My newer products have little to zero competition. It's something I don't even have to worry about. The products are good, but I wouldn't say I really out did myself on the marketing.
Better to have lots of products in low to medium traffic niches, than a couple of products in high traffic niches. I would never want to sell anything in the top 100. Or the top 1000 for that matter. Even the top 10000 is pushing it.
I'd like to hear more about your "secret sauce" marketing the products you've developed. That, I think, is the lesson we can all learn from you. Thanks!
My only "secret" marketing sauce is to spend lots of money on Amazon ppc advertising, which works better if you've gotten some good reviews on your product, which can be gotten faster if you have an e-mail follow-up sequence sent out to your customers, soliciting their feedback.
Having a good product (with good pictures) is the real "secret".
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Third, I disagree with the premise of the OP, but as a business owner I look to diversify, which is why I invest in the market as well.
When I have been in business for a bit longer, I will diversify. I have been more high-growth, re-invest model, to this point, but I'm only a couple of years in. I had a bit of urgency to replace my day job income and then some, as I really wanted out.
2. Third understanding how to invest your money as a small business owner is so much more difficult than as an employee. I always way what do I take out of my business to invest and what do I put back into the business for growth. These are tough decisions. And are made tougher by the compounding of tax laws, and the things you can and can not do based on business size and business type.
You should start a thread about this in the new business forum. This is not an area I am expert in, clearly.
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Employees have the luxury of sleeping well and not worrying about businesses' ability to survive day to day. Business owners not so much.
Except that your continued employment is contingent upon how well the business continues to do. You don't have the business survival to worry about, but you do have your paycheck's survival. The difference might be that the business owner can see change coming, and can take action to do something about it.
The more products you have. The more streams of income. The more customers. The more sales channels. The more resilient your business is, and the better you can sleep. I sleep pretty well these days. I only check my sales/bank statements a couple of times a month.
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Okay, this is a bit of pedantry, but what do you consider "starting a business"?
Here's how I see it: Does X of hours = $X amount of cash? Do you have to report to work each day? If so, you have a job, whether or not you own it.
Most businesses will require your time input at the beginning, but is there a clear path to move beyond that? That should give you a good indication of whether you have a business or a job.
Is pet-sitting a business?
If you aren't the one sitting on the pets.
Collecting & redeeming recyclables?
If you aren't the one collecting or redeeming.
Selling crafts on Etsy?
Not if you're having to hand-make every piece yourself. Etsy has loosened up on this, and now allow you to partner with an outside manufacturer, as long as you are the one "designing" the jewelry. You have to get approved though.
I don't always agree with how the term "retired" is used (verses financially independent)
Yeah, it's similar to that. Just a pedantic thing on how I define a business.
The concept is sound, though.
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The moral of the last two paragraphs is that it's not an all-or-nothing thing. Everything starts small. Not everything is successful. Perception of risk basically has a direct correlation with the comfortability and the amount of time spent at any given activity.
I love this. You're far more eloquent than I am!
If something starts small, and is not successful, it's not near the destructive force to your FI plans that others in this thread would make it out to be.
Side Hustles are a great way to dip your toes into business. It's how I got started. Just be realistic about what you have, and that is a time for money machine, until you build it beyond that.
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CargoBiker - I just want to say I have read all your comments and this is great information, thank you for the post. You are kicking ass, keep up the good work. Thank you for sharing.
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MOD NOTE: Moving the thread over to the new subforum :)
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Alright, very cool!
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Here's my two cents. Or one cent. Most small businesses fail. But a person could possibly make their small FAILING BUSINESS pay out money $$ in order to assist with early retirement. Maybe you or your wife will have steady employment and a failing business can be just a side job.
Off the top of my head...
1. Savers Credit. The jist of it is, for most people, they'll save about 20% (or up to $400 at tax time) if you contribute the max $$ of 2 or 4K. Owning a business means you can open a retirement acct like an IRA if your employer doesn't offer one and/or add your spouses name to the business and open one up for them. Max contribution for a married couple is $4000. This reduces your MAGI. MAGI Must be 40K or under per year for a married couple
I cannot see how ANYONE would do any better than saving 20% of 2-4K.unless they already owed a HUGE tax bill. So about $400 is gained per year.
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit
2. 20% off of your energy bill due to reduced MAGI. Gov't program (called LHEAP or IHEAP, something like that) where energy customers are charged a few dollars on their energy bill to cover low income folks. We gain about $120 year
Reduce MAGI to 37K or under for a married couple = 20% off energy bill. Example-
https://www.pge.com/pge_global/common/pdfs/save-energy-money/help-paying-your-bill/care-fera-application-en.pdf
3. REDUCE MAGI to qualify for the States FREE Medicaid program (Medical Plan) , especially if you are already getting a subsidy. Could be better insurance with you paying nothing out of pocket. You may need to sign up for an Health Savings Acct somehow, either accessing one because you now own a business or thru your employer (if you started a side business). Max donation to HSA is $5500 or $1000 more if you are 50 yrs or over. Owe less $$ to your accountant since he won't be dealing with IRS Subsidies. I have a medical plan and our dental care covered, with accident, life etc.. for us. It costs us $400 to add him on to my workplace plan. This means gaining $400 per month or $3600 per year for us. I just increased my contribution to my 401k to 90% (for one of my employers) so we'll qualify in a few months.
Beware of the Medicaid Estate Program if you are between the ages of 55-64. Might not be worth signing up. Look up the laws in your State.
MAGI must be about 23K per year or below for a married couple to qualify.
So though my husbands business isn't thriving, even if it ever fails, there is reason above to keep it. If just for his medical care and the 20% off (about $120 yr) off of the energy bill. MAGI must be 37K or below per year for a married couple to qualify. Sign the form once and send it in, you are approved for 2 yrs.
I see us gaining $4000 per yr totalll due to my husbands business, even if it were to begin failing. And that doesn't count the forced increase contributions to the 401K (in order to qualify for the above ^^ perks so it's alot more$$).. We would not fold up shop for this reason. This is beans compared to most here but for a select few who are in the right circumstance, or re-arrange their life to be, and do not make alot of $$, some of these ideas might be helpful.
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My husband wants to start a business that requires significant investment to get started and has fairly high risk. I'm all for it, though, and have accepted that we will likely lose the investment amount (we'll live) so I can be pleasantly surprised if it succeeds. Meanwhile, I'll keep my steady job. My one requirement is that he have a solid business plan in place before we invest anything.
In our case, it would be absolutely safer for us to continue plugging along and investing, but I have my dream job, so that's easy for me to say. My husband deserves a chance at his.
From a husband perspective, having the blessing of the wife is a huge wind in the sails. I did not have my wife's blessing at first, because of my previous failures, and I operated the current business in secret until it was making money, at which point I told her about it.
For any investment, you don't put in more than you can afford to lose. The attitude you have is a healthy one. Of course, you do whatever you can to mitigate the initial risk, and operate on your gut/best judgement. 100% of the time, my gut always knows a good choice from a bad one. When I've gone against it, I've failed.
What is risky about this business, specifically (without telling me what the business is)?
Sorry. I'm sworn to silence so no one steals his cool idea. :)
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got the idea for a niche percussion instrument I plan on manufacturing and selling. None of these ideas is likely to make me rich fast, but they might make a nice side income and need almost no startup capital..
Just curious what your prototyping and mfg plan is given that you don't plan on spending much. I've always assumed prototyping and manufacturing can be pretty pricey ( prototyping less so now that 3D printing is pretty common). Is this something you plan on physically manufacturing yourself?
The product is made mostly out of wood and it's design is very simple. I built a prototype myself in two days. I plan on subcontracting a carpenter friend for parts of the manufacturing process and assemble and finish the instrument myself. I expect a very low volume of sales (I'll be happy to sell 10 instruments per year!). It's not like I'm going to manufacture thousands of congas in China :)
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About 17 years ago my wife started a part time side hustle (didn't know that term at that time).
She did it for about 3 hours after she got out of her other job. After a year my work got slow
and I started working it for about 2-1/2 hours in the morning and she come back in the afternoon.
Two years in she said. "why don't you quit your job and do this full time?" I said, "I'll quit my job if you quit yours." We both quit our jobs and within 3 years we more than tripled our household income.
I semi retired at the beginning of this year, I would prefer full retirement but my wife doesn't want to retire
or let the business go. It is a two person job and she is stubborn enough to do both parts, but I work an hour in the morning and been working about 1 day a week to give her a break.
The business is retailing a single perishable item, but that's all the detail I want to give.
Ya, we already had FU money, and were only earning a bit above minimum wage, so if things failed, it would not have been hard to get back to where we were.
We started with basically no cost, but a year after we both quit our jobs we bought a $6,000 van to use.
We kept all business expenses low and still do.
It worked for us, but for 15 years it was 80 to 100 hours a week between the two of us, we are open 363 days a year 10 hours a day. Our business is real work for average 3 hours a day and then plenty of time to surf the internet, read MMM, watch TV or get in some walking.
I'm glad not to be scheduled everyday, but in the long run the extra income was invested and brought FI and semi RE.
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Ever notice how people leap to conclusions based on incorrect assumptions when you tell them about FIRE and how to do it?
It's as if their mind goes into creative overdrive to find ways to disprove what we all know to be true.
I really felt like that was what was happening to the OP in this thread when people first started responding.
Just sayin...
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An Entrepreneurship forum! Cool!
I've recently started a business providing freelance services this year. Estimated to make somewhere around $4,300 and $5,700 gross, which isn't a ton but also isn't something to sneeze at either. It's dependent on my hours right now, but I plan to use the income and the flexibility it provides to start a second business that isn't dependent on my time (probably real estate).
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Employees have the luxury of sleeping well and not worrying about businesses' ability to survive day to day. Business owners not so much.
Except that your continued employment is contingent upon how well the business continues to do. You don't have the business survival to worry about, but you do have your paycheck's survival. The difference might be that the business owner can see change coming, and can take action to do something about it.
The more products you have. The more streams of income. The more customers. The more sales channels. The more resilient your business is, and the better you can sleep. I sleep pretty well these days. I only check my sales/bank statements a couple of times a month.
This is an excellent point! As a business owner your livelihood isn't tied to the whims of one boss or decision maker. When you've got a dozen (or a hundred) little paychecks, no *one* person can deprive you of a paycheck.
In that way, business ownership feels *more stable* than ordinary employment.
SiS
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Employees have the luxury of sleeping well and not worrying about businesses' ability to survive day to day. Business owners not so much.
Except that your continued employment is contingent upon how well the business continues to do. You don't have the business survival to worry about, but you do have your paycheck's survival. The difference might be that the business owner can see change coming, and can take action to do something about it.
The more products you have. The more streams of income. The more customers. The more sales channels. The more resilient your business is, and the better you can sleep. I sleep pretty well these days. I only check my sales/bank statements a couple of times a month.
This is an excellent point! As a business owner your livelihood isn't tied to the whims of one boss or decision maker. When you've got a dozen (or a hundred) little paychecks, no *one* person can deprive you of a paycheck.
In that way, business ownership feels *more stable* than ordinary employment.
SiS
Agreed! I was "let go" from a job 7 years ago because a new director came in and wanted to hire her own people. It was my first lesson in the reality that you can still do a good job an be a hard worker, but still not have job security! I promised myself I would never work for a company again and used the time I spent in unemployment to begin starting a business. I have a professional degree and so needed to sell myself rather than products. I started out working as a contractor part time which led to full time. And over the years I gradually started taking on my own clients until fully independent. Last year we opened our office location and expanded it a few months later to take on more clients. We now have 8 employees and our income has increased past the ceiling of any salary I would have been paid for employment. It is very exciting. But it is a huge responsibility and I do lose sleep over it... That's why we are on a 5 year FI plan and then we are planning to get out. But it's true.. if you have a good business going invest in that first. Your income potential is truly how you build your wealth!
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I spent a fair amount of time as a bookkeeper/tax preparer. One thing I learned is that most businesses are driven by the consistent efforts of one key person who generally isn't making much more money than he or she could just having a run of the mill job. Granted they are their own boss, but working 120 hours a week to net 45,000 a year is not something that should excite.
OOh, a bookkeeper, I bet you have the real inside scoop on this conversation.
The way I think of businesses like you described, is that it is a job that you created for yourself.
If the business depends on you, I don't really think you have much of a business.
It's the difference between "working in your business" and "working on your business".
I will never cease to be amused how people shit on the accounting profession yet how many people who would have saved themselves a lot of heartache by ensuring their business made any sense on paper first I cannot count. I don't know what it is, people think just because accountants don't get paid very much compared to them that we don't know anything I guess.
Piss on me all you want, but seeing the real costs and incomes of everything from small grocery stores and used car lots to attorneys and cardiologists doesn't lie. There's usually someone working themselves silly to make it happen and it's a serious gamble whether it pays off or not. I saw a hot shot attorney who left a $500,000 a year job go into business for himself, proceed to lose money for 7 years straight, and die at age 38 from a heart attack. Incidentally, I only worked on this case because his sons hired us to sort out the company records and clear up their mess with the IRS, a debacle which cost them over 100k all because, wait for it, they didn't hire a bookkeeper because they had the same attitude you do.
People have no idea how much small business owners can sacrifice for how little gain; these entities get lauded as the salt of the earth and as the most successful people among us at times, but the survivor-ship bias is never considered. Of course self employed people advocate it, because the people it didn't work out for are now too busy driving a truck or something. I didn't even mention all the files I had to close because the client went completely bust and requested all of their records.
For the record, I am not saying starting a business is universally bad, rather what I am saying is economically it's often not an individual's best opportunity, unless you crave the psychic benefits a great deal. One of the clients who confused me the most was a contractor who could have easily made more money working as a foreman or something similar for someone else, but when he said he hated working for other people and didn't care if he had to work more for less money because it was freedom to him, it made sense to me.
Now, if you have something that other people don't and see a way to bring it to market, go ahead. Some services are best delivered by starting your own firm. Now to be fair and balance out the story about the attorney who died of a heart attack, I also saw a man quit working for an oil drilling company start his own and become ridiculously wealthy, but that's because he realized the way the work was being done was massively inefficient and he had his own ideas how to steal the business out from underneath his old employer. That's the kind of person who should start a business, someone with a unique opportunity and insight (I should also mention this man had 20 years of unique experience and admitted openly he'd been very lucky).
I may even do it myself one day but you can be certain I'm going to use what I've learned from other people's mistakes. Mistake one is fetishizing entrepreneurship.
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Ideally, the sub-forum would be devoted to "all things entrepreneurial" and not get hung up on the term "business" since the purpose is finding and sharing ways to make extra money creatively either in addition to, or in place of a day job. I think the misconception that it's an "all or nothing" proposition should be killed. Working your more secure day job and venturing out to do things on your own are not mutually exclusive ideas. You can have both and learn something from both.
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The moral of the last two paragraphs is that it's not an all-or-nothing thing. Everything starts small. Not everything is successful. Perception of risk basically has a direct correlation with the comfortability and the amount of time spent at any given activity.
100% agree.
Being snobby about what's "a business" is doesn't really help anyone, in my opinion. The skills used in doing things like mowing lawns or doing graphic design on the side are really useful if you do want to transition to something that runs without your efforts.
If it's good enough for the IRS, it's good enough to me.
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Ever notice how people leap to conclusions based on incorrect assumptions when you tell them about FIRE and how to do it?
It's as if their mind goes into creative overdrive to find ways to disprove what we all know to be true.
I really felt like that was what was happening to the OP in this thread when people first started responding.
Just sayin...
Hmmm . . to be fair, CargoBiker admits that (he?) purposefully used inflammatory language to "stir the pot". And it worked! We have a new subforum and an active topic. I disagree that posters are having knee-jerk negativity when someone is announcing that someone should NOT invest and INSTEAD start a business. That's not an incorrect assumption: that's the title of the thread.
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Ideally, the sub-forum would be devoted to "all things entrepreneurial" and not get hung up on the term "business" since the purpose is finding and sharing ways to make extra money creatively either in addition to, or in place of a day job. I think the misconception that it's an "all or nothing" proposition should be killed. Working your more secure day job and venturing out to do things on your own are not mutually exclusive ideas. You can have both and learn something from both.
...
The moral of the last two paragraphs is that it's not an all-or-nothing thing. Everything starts small. Not everything is successful. Perception of risk basically has a direct correlation with the comfortability and the amount of time spent at any given activity.
100% agree.
Being snobby about what's "a business" is doesn't really help anyone, in my opinion. The skills used in doing things like mowing lawns or doing graphic design on the side are really useful if you do want to transition to something that runs without your efforts.
If it's good enough for the IRS, it's good enough to me.
Mod note: We have been considering adding an entrepreneur section for a while, but not sure if there was enough interest in it - and it remains to be seen if it will get enough traction to stick around.
Hmmm . . to be fair, CargoBiker admits that (he?) purposefully used inflammatory language to "stir the pot". And it worked! We have a new subforum and an active topic.
Yes, the feedback from this thread did tip the balance in favour of creating this sub-forum. HOWEVER This is not going to serve as a platform for a pissing match over what "is" and "isn't" considered entrepreneurial. Like all language that we use that is open to interpretation on a variety of levels, we will all have slightly different opinions and that is fine, as long as we are open to acknowledging and accepting the differences.
Being an Entrepreneur takes an attitude and skill set that is vert different from other paths to FIRE and that is why we felt this forum is needed. That being said, for many, many, people it is a HORRIBLE choice compared to other methods. So we have a duty not to sugar-coat the challenges, or proselytize that because it works FOR US it is the best choice FOR EVERYONE - and we should support anyone who is interested in exploring the idea.
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Now, if you have something that other people don't and see a way to bring it to market, go ahead. Some services are best delivered by starting your own firm.
but that's because he realized the way the work was being done was massively inefficient and he had his own ideas how to steal the business out from underneath his old employer. That's the kind of person who should start a business, someone with a unique opportunity and insight
There's the crux of our whole conversation.
If you have something unique to offer, and have a way to market it, start a business.
If you don't, then why are you starting a business?
Great post.
And for the record, I would never shit on your profession. You guys happily do the stuff that I would rather gouge my eyeballs out than do. I'm a bit jealous of your behind the scenes peek at everyone's businesses though!
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Agreed! I was "let go" from a job 7 years ago because a new director came in and wanted to hire her own people. It was my first lesson in the reality that you can still do a good job an be a hard worker, but still not have job security! I promised myself I would never work for a company again and used the time I spent in unemployment to begin starting a business. I have a professional degree and so needed to sell myself rather than products. I started out working as a contractor part time which led to full time. And over the years I gradually started taking on my own clients until fully independent. Last year we opened our office location and expanded it a few months later to take on more clients. We now have 8 employees and our income has increased past the ceiling of any salary I would have been paid for employment. It is very exciting. But it is a huge responsibility and I do lose sleep over it... That's why we are on a 5 year FI plan and then we are planning to get out. But it's true.. if you have a good business going invest in that first. Your income potential is truly how you build your wealth!
Cool success story Nara. Thanks for sharing!
Any tips on how to hire a good employee?
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The fastest way to generate wealth is by owning a business, and I think that there should be more discussion about this.
Running a failing business(which isn't that uncommon) is also one of the fastest ways to lose wealth.
Not saying it is not a viable way to wealth. however though I haven't seen the number I would venture a guess that if you were to compare the amount of people that succeed using the passive investment advocated around here to the percentage of new businesses that succeed that your odds at the former to achieve FI are better using the former, though smaller odds of becoming excessively wealthy are higher with the latter.
Since MMM is a large advocate for frugality rather than excess the people drawn to that message are likely to choose the better odds of achieving FI through a safer, but potentially less lucrative way through "relatively" safe investing and achieving frugality rather than through taking the higher risk for a higher potential return involved with starting a business.
I also believe that a large portion of people are not well equipped to handle being self employed and self guided and that these kinds of people would be all the more likely to fail at starting a company. You can tell anyone to invest in a small number of diversified funds and they won't need to put that much effort in. However the drive and work put towards starting a company are much higher and riskier.
Can I comment on this theme? I don't think one wants to view entrepreneurship or small business ownership as a substitute for a portfolio of passive investments. Rather, view it as a substitute for a job.
I.e., replace a job with a small business... and then (just like you would with a job) accumulate wealth in your tax-deferred accounts using cheap index funds.
BTW, happy to stipulate that small business is not a path for everyone. But it can be a way to generate a rather secure stream of income and a way to structure a gig that works well for your specific situation.
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Here are some statistics to consider:
https://www.sba.gov/sites/default/files/SurvivalRatesAndFirmAge_ADA_0.pdf
Two comments about business survival rates:
1. Though I can't find it, there is data (from a business school professor named Cooper) that shows business survival rates vary widely. Some businesses basically don't fail... and some fail a huge percentage of the time.
2. One wants to keep in mind that if your business only survives, say, five years, that may or may not be a bad thing. If you made two or three times what you would have made doing your next best option, hard to see that five years as a failure.
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Also, I consider my employees to be in a riskier position to be in than I am. I get 20 checks a month from 20 different sources. They get 2 from the same source. I loose one check and I am ok. They lose one check and they are looking for a new employer.
Lots of good comments from ProfGubler... but I especially like this one.
If you're an employee, you bear risk that you'll lose your one "customer" some afternoon... if you're a small business owner with 20 or 200 customers, it is extremely unlikely you'll lose all at once.
The other thing related to the above point is this: If you're an employee, you may be doing a great job but still get blindsided by losing your one "customer"... if you run the show, you are probably not going to get blindsided... if you lose some big chunk of your revenue, you'll probably see it coming a mile away...
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I spent a fair amount of time as a bookkeeper/tax preparer. One thing I learned is that most businesses are driven by the consistent efforts of one key person who generally isn't making much more money than he or she could just having a run of the mill job. Granted they are their own boss, but working 120 hours a week to net 45,000 a year is not something that should excite.
I agree with this. And you can point to all sorts of good data sources that back up your point.
But here's the other thing you can see in the data: While maybe the average small business owner in a category basically only makes a living, the top quartile or decile probably does really well. There's a power law dynamic to this in other words.
This reality doesn't mean, then, that one should give up ... it means one should learn how to run a top quartile or top decile performer.
P.S. Isn't the above also true of jobs in general? Most people earn around the average... a few top performers earn a multiple of that?
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I enjoyed this thread very much.
Thanks for the tips, CargoBiker. You've inspired me to put together a pilot small business and see how it goes. I reckon that even if I fail miserably a few times I'll have learned something valuable as an interesting life experience.
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I disagree with your general premise though. Starting a business can be very risky, time consuming, and requires a lot of creative energy. It isn't for everyone. Putting your earnings in an index fund is simple and easy. It truly IS for everyone.
more.
A business is an investment and a job (time + capital). Index funds are just an investment (capital only).
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Starting a business is awesome but is not an easy process that takes tame, money and a lot of effort.
It depends on how you define the investment - Lord Sugar as he is saying all the time " if you haven't invested in property then is not time to run a business"
Business is for fun but investment is to make THE real money
Happy that I found this forum post. Also I agree $200 is not a lot to start with it.
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Hahaha, what a great thread.
Cargo Biker, you are awesome. But, you must not be very old or have much experience as a business owner. Why? Because you have not stopped trying to get others to see the light! I admit it, I've tried to convince others till I'm blue in the face. Probably been a bit annoying over the years to friends and family. Now, I've accepted that most people just don't have the desire to be business owners. Works for me just fine - less competition.
FYI - I'm an own my own law firm. All the "Lawyer Mustachians" have probably tuned me out by now. But, I keep offering the small law perspective.
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Starting a business is awesome but is not an easy process that takes tame, money and a lot of effort.
You know what else takes time and a lot of effort? A job.
This blog/forum preaches all the time about working hard and making an effort. Riding your bike everywhere takes more effort than driving. Cooking your own meals from scratch takes more effort than eating out. Doing things DIY takes more effort than paying a contractor to do it.
Business is for fun but investment is to make THE real money
haha, ok. Enjoy your 4% returns. I'll go back to playing with my "fake" money.
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Because you have not stopped trying to get others to see the light!
hahaha, I love your observation, and I guess it's true. I don't bother talking business to people in real life, however.
I think I was just trying to keep the thread afloat from getting completely over-run with anti-business naysayers. I made the thread under the false assumption that this community would have more business-minded people than a typical sub-set of people.
Works for me just fine - less competition.
You're right. And where would our businesses be without the consumers?
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I own a consulting business which does fairly well and on average has netted me 900-1300$/month for the past 2 years or so. Now things are slowing down, and i have friends constantly telling me that i should invest in X or Y with them.
I don't.
I started my business with my computer and my printer and made it into a small business. I have no desire to spend 5000-10000$ in an idea that could, potentially, flounder and fail. That's risk, and a risk that's hard to calculate. Buying businesses, websites or the like is a high-risk investment. Most businesses started in sweden fail within a few years.
I would rather put those 5000-10000$ to work in my portfolio. It takes money to make money. In my case, in all of my cases, all it's taken is time. But i'm someone who plays things extremely safe. Business ownership is a very risky thing to do - it's more risk than i'm willing to take, especially if it involves me putting down dollars on the table that might be lost if things do not go well.
Kudos to those who invest and do so successfully, in businesses. If i'm starting a business, usually it involves me sitting down with someone and discussing how we can get things going. For zero - or near-zero - dollars :). If that's not possible then i usually am not interested. Do i miss some opportunities? Probably.
Does it bother me?
Nope.
A common attitude i encounter in friends who know about my investments and about my wealth is that because i have money, i shouldn't care if lose 1000$. Or 5000$. Or 10000$. I mean, i have so much anyway, right? Wrong. Every dollar counts.
OP says that yeah, maybe the first 4 or 5 business ideas fail - but you could get it right eventually. Well, what if you don't? What if you, like the OP, get scammed a number of times, end up out 25-30 000$ that you could have spent on either loan repayment or investing? Some people don't have the luxury of failing a "few times". Frankly, as far as business advice goes, that's as bad as it gets.
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I just want to say I love your enthusiasm and optimism CargoBiker. This thread is the epitome of the saying:
"If you think you can, or think you can't, you are right."
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I just want to say I love your enthusiasm and optimism CargoBiker. This thread is the epitome of the saying:
"If you think you can, or think you can't, you are right."
Very true. One of my favorite quotes.
http://www.mrmoneymustache.com/2012/10/03/the-practical-benefits-of-outrageous-optimism/
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If i'm starting a business, usually it involves me sitting down with someone and discussing how we can get things going. For zero - or near-zero - dollars :). If that's not possible then i usually am not interested. Do i miss some opportunities? Probably.
I'm the same way. I'd prefer to bootstrap a business from nothing, rather than go "all-in" and invest everything that I have. If you enter in with this mindset, I think you tend to be way more conservative and efficient with the operation of the business in general.
Some people don't have the luxury of failing a "few times". Frankly, as far as business advice goes, that's as bad as it gets.
It wasn't advice. If I could go back, of course I wouldn't have made those choices, as they were just dumb. It was an illustrative story to counter the "don't do business because most businesses fail" posts. If you do fail on the first try, which many do, of course do it with as little money invested as possible, like you've said, and be sure to learn a lesson from the failure.
I was hard-headed and the lessons I should've learned from my first failure, would've have prevented the future failures if I had taken a step back and allowed myself to learn from the mistakes.
What's the business culture like in Sweden? I've had a Swede tell me that it's culturally looked-down-upon to try and go off on your own and create a high-earning business. He also told me that business failure is very embarrassing, and people tend to hide failures from their past. Is this true of your experience as well?
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I just want to say I love your enthusiasm and optimism CargoBiker. This thread is the epitome of the saying:
"If you think you can, or think you can't, you are right."
+1
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What's the business culture like in Sweden? I've had a Swede tell me that it's culturally looked-down-upon to try and go off on your own and create a high-earning business. He also told me that business failure is very embarrassing, and people tend to hide failures from their past. Is this true of your experience as well?
It's looked-down upon to earn money in sweden.
No, really. I'm serious. If you're an extremely well-off person (currently, i make as much money as an entire, wealthy household of 2 people together after taxes), you don't want to around telling anyone. Ever. While i won't be in this position forever, i will always be careful telling people just how my finances look because of this. It also makes it very hard to find a partner who is financially suitable, because most swedes live very much paycheck-to-paycheck, but would never admit that they do.
The Law of Jante (Danish: Janteloven, IPA: [ˈjand̥əˌloʋˀən]; Norwegian Bokmål: Janteloven, Nynorsk: Jantelova, IPA: [ˈjɑntəˌlɔːvən]; Icelandic: Jantelögin; Swedish: Jantelagen, IPA: [ˈjantɛˌlɑːɡɛn]) is the description of a pattern of group behaviour towards individuals within Scandinavian communities that negatively portrays and criticises individual success and achievement as unworthy and inappropriate. The Jante Law as a concept was created by the Dano-Norwegian author Aksel Sandemose,[1] who, in his novel A Fugitive Crosses His Tracks (En flyktning krysser sitt spor, 1933, English translation published in the USA in 1936), identified the Law of Jante as ten rules. Sandemose's novel portrays the small Danish town Jante (modelled upon his native town Nykøbing Mors as it was at the beginning of the 20th century, but typical of all small towns and communities), where nobody is anonymous.[2]
Generally used colloquially in Sweden and the rest of the Nordic countries as a sociological term to describe a condescending attitude towards individuality and success, the term refers to a mentality that de-emphasises individual effort and places all emphasis on the collective, while discouraging those who stand out as achievers.[3]
The above is true in every respect. It's gotten better with higher degrees of globalization, but you do not want to showcase your success, or even use it as an example to give advice, except to VERY close friends. Chances are, people will take offense in the "You're just trying to be better than me"-way.
Scandinavian psychology is that the more money you make, the more money you should pay back. To other people, to taxes, to society. It's one of the reasons i'm thinking of FIRE-ing in another country, though i do not know which one.
I'm not actually swede by birth btw, i'm german. I've lived here since i was 4 though.
Sweden is a very "special" country. My ex, who was from Seattle, hated how antisocial and weird certain aspects of our society are. When she described them to me, i could actually understand her really, really well.
But on the other hand, we have free education, healthcare, excellent public transportation and some of the best tax climates in the world (for dividend investment).
Where would i live if i could, and have everything work out, including taxes and the like? Probably Colorado or Texas, honestly.
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Swedish: Jantelagen, IPA: [ˈjantɛˌlɑːɡɛn]) is the description of a pattern of group behaviour towards individuals within Scandinavian communities that negatively portrays and criticises individual success and achievement as unworthy and inappropriate.
Yeah, Jantelagen is the word my friend used, I just couldn't remember what it was. Thanks for providing the interesting context behind it.
Scandinavian psychology is that the more money you make, the more money you should pay back. To other people, to taxes, to society. It's one of the reasons i'm thinking of FIRE-ing in another country, though i do not know which one.
Yeah, that's interesting. It makes sense, being a socialist country.
But on the other hand, we have free education, healthcare, excellent public transportation and some of the best tax climates in the world (for dividend investment).
My family lived in Malmo for 2 months last summer... we loved it. Cycling everywhere was nice, tons of parks/playgrounds, seemed very family-friendly.
Where would i live if i could, and have everything work out, including taxes and the like? Probably Colorado or Texas, honestly.
I live in Texas, I like it... just not the summer heat, haha. We have no state income tax, but property tax is higher than other states.
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OP, the business you're describing is a similar structure to one I've thought about getting into many times. It definitely has great potential and I think I'd like setting it up and watching it grow quite a lot. I understand you not wanting to give out specifics of your own operation, but curious how you settled on whatever you settled on or selected it? was it an item you had dealt a lot with in the past or just saw an opportunity to market something that others were not capitalizing on?
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but curious how you settled on whatever you settled on or selected it? was it an item you had dealt a lot with in the past or just saw an opportunity to market something that others were not capitalizing on?
1. Lots of demand, not a lot of competition
2. Low production leadtimes and simple logistics.
3. Margin isn't as high as I would like it to be, but it's decent, and the volume makes up for it.
4. Fast turnaround and cash flow.
After spending 40-50 hours looking at hundreds of potential products, I just *knew* when I found this niche that it was the right one. It checked nearly all of my boxes.
I had no previous experience with these products, however, there wasn't much required technical insider knowledge required.