What would you do: New Business, Buy a Business, or Status Quo

[NewBusinessQuestion]

Long time poster (years...different account) but wanted to include more details that I typically would. I am NOT looking for ideas on how to reduce our expenses. I am looking for advice on what, if anything, you think I should do on expanding income & NW.

Situation: Married with 2 kids: 4 & 2. DW and I both have FT jobs making $300K+ combined in a high cost of living area. We are bless as we both are able to WFH remotely and have high job stability. Expenses vary year to year but are typically around $120-160K/yr including 2xdaycare and a big mortgage which make up >50% of the budget (neither expense is negotiable). We've lived significantly 'smaller' than this for >10+ years. Our NW is >$1MM even after all of the market volatility due to COVID19.

I have always had the desire to own/grow a business (15+yrs). I am a strong believe that increasing income & growing wholly owned assets (such as a business or a building) are the fastest and best way to drive NW. My 'why' is because I want to grossly overshoot our FIRE number to do significant charity work financially (think Gates/Buffet's giving pledge).

I believe that given our situation, the only way to continue to accelerate the growth of our NW/income is to focus on entrepreneurship where there isn't going to be a cap on income and, if done correctly, the business is a saleable asset that can be grown and sold for a multiple of the income stream ($1 of additional EBT drives 2-10x in business value when selling). I believe I am capable of increasing revenue & decreasing costs of a business which would increase the asset value. Think private equity model on a smaller scale.

My challenge (rich people problems): Given our situation (high NW, high income, and time constraints with young kids), pursuing the typical 'side hustle $10-30/hr type opportunities never seems to be worth it from a time perspective and from an ROI perspective. I am also unwilling to pursue ideas that will never scale. I want to grow my NW faster than current savings + 6% market returns

My skill set: I've been involved in large, manufacturing businesses for 15+yrs on the engineering, operations, and supply chains side of the business. I've negotiated billions (yes with a b) of dollars of contracts and have driven tens of millions of cost savings to corporations. I have managed multi-million dollar construction sites. I have a high interest in sales and have done some cold calling in the past. I typically am comfortable in 'dirty' businesses (think old school, low tech businesses) which is why I like the idea of buying a business from someone who is 65+ and looking to retire with children who don't want to run the business. I do not have a background in anything 'tech' or internet related (website building, graphic design, coding, app development, etc). I don't have a high interest in blogging as I do not enjoy writing unless I outsource most of the content generation. I, like most here, have always had a high interest in all things finance however graduating during the Great Financial Crisis squashed any initial hope of going into financial services.

Timeline: I've given myself a 3 year deadline to jump ship and run my own business however I would like to get started sooner than later and would rather start building will being FT employed.

What would you do?

Options
1) Do nothing. Continue saving ~$100K/yr. Enjoy the good life.
2) Lever up to buy a business for somewhere between $250K-$1.0MM with cash flow in the range of $150K-$500K utilizing a combination of business loans, seller financing, and 20-50% down payment. Quit to work on growing the business and exit (sell) in 3-10 years.
3) Start smallish side business (ideas wanted, please) while working that have high growth potential to become FT. Ideally spending less than <$25K to get started.

Thoughts?

[KarefulKactus15]

Have you read "buy then Build"?

My suggestion without anything to support it...
Start a small business, side hustle size. Dip your toes in the water and see all the different skills required to keep the wheels moving even in a micro business.

After that goes well (presumably) buy a large existing business with solid financial history.

This is pretty much my plan.  I'm already into my first small business and it's doing okayish... Considering Covid.
I want to start another one that's different from the first for wider exposure.

Then I'd like to either buy an existing larger business in a new field or use one of the 2 existing businesses to acquire a second location that's already established in a different town and rebrand it.

Sounds good on paper. In reality I'm on like phase 1.5 of a 5 part plan.

[KarefulKactus15]

Also it seems that we come from similar industry.
My professional skillset is automated manufacturing with all my hands on time coming from a maintenance and project manager side.

[Proud Foot]

You definitely meet the requirements of an accredited investor. Have you though about doing early stage investing with startups? With your operation background you could be a good fit to be a mentor/advisor in a startup accelerator. This would give you first hand exposure to these startups and allow you to really get to know the founders and their product. Most have a demo day where at the end where startups can present to investors and try to raise funding. Because they are startups you could always try get a board seat/advisor role as a requirement for your investment.

[NewBusinessQuestion]

Have you read "buy then Build"?

My suggestion without anything to support it...
Start a small business, side hustle size. Dip your toes in the water and see all the different skills required to keep the wheels moving even in a micro business.

After that goes well (presumably) buy a large existing business with solid financial history.

This is pretty much my plan.  I'm already into my first small business and it's doing okayish... Considering Covid.
I want to start another one that's different from the first for wider exposure.

Then I'd like to either buy an existing larger business in a new field or use one of the 2 existing businesses to acquire a second location that's already established in a different town and rebrand it.

Sounds good on paper. In reality I'm on like phase 1.5 of a 5 part plan.

Thanks, Kroaler. I'll have to add that to the reading list. What side hustle would you recommend that are higher value and have the ability to scale? Like I mentioned it's a tough sell given my situation to go after $25/hr time for money exchanges with two working adults and two young kids. I love the idea of getting started now while working full time with limited capital (<$25K) but I'm stumped what would be a solid value.

Also it seems that we come from similar industry.
My professional skillset is automated manufacturing with all my hands on time coming from a maintenance and project manager side.

I've bounced around in different industries from FMCG to B2B industrial supplies.

[NewBusinessQuestion]

You definitely meet the requirements of an accredited investor. Have you though about doing early stage investing with startups? With your operation background you could be a good fit to be a mentor/advisor in a startup accelerator. This would give you first hand exposure to these startups and allow you to really get to know the founders and their product. Most have a demo day where at the end where startups can present to investors and try to raise funding. Because they are startups you could always try get a board seat/advisor role as a requirement for your investment.

I am not sure my experience would lend itself well to what most start ups are given my lack of 'tech' experience. If I'm going to invest $100K+ (or 10%+ of my NW) into a business I would much rather be buying something that all ready has cash flow vs the high risk/high reward of an unproven start up. Any thoughts on where to find these 'demo days' in the age of COVID?

[Smokystache]

Not sure if this is a credible side-business, but what jumped out at me is your negotiating skills/experience. Are there companies (perhaps smaller than the ones you work with/negotiate with) that are negotiating significantly-sized deals/project, but are not large enough to have someone on staff that has experience negotiating high-dollar deals.

Perhaps you offer your services on specific types of large deals (raw material acquisition, land buying, etc.) for family-run businesses. the pitch is "you don't want to hire someone full-time just for negotiation skills, but when it comes time to these few big-ticket deals, you want someone who is completely on your side and knows the business." You could ask for a minimum payment and then a percentage of the amount you save them. These would be deals that don't happen very often, so the owners aren't very experienced and the amounts are enough to make them nervous. If I was an owner in that situation, I'd love to have someone who felt comfortable and had practical experience with really big deals.

This seems especially effective if you could carve out a specific niche (ideally something you already know from your full-time job) and has the added benefit of being something that could start relatively small and without a huge investment of time. And it fits my personal criteria of not needing to manage employees or have huge start up costs. YOu might need to do a few deals for lower fees to get some experience and referrals....

[Michael in ABQ]

#2 and I'll second the recommendation for the book "Buy Then Build"

I'm also looking to buy a business https://forum.mrmoneymustache.com/entrepreneurship/buying-a-business/ to grow and replace my current income. I've started an ecommerce side business that's on track to gross ~$20-25k with a net of $4-5k this year. While that's nice, the main thing it's provided is a much better understanding of what it takes to actually run a business. I've setup my accounting from scratch and gone back to reconcile the first couple of years my records consisted of a box of receipts and a single spreadsheet. I've learned how to handle some inventory and supply chain management. I've found suppliers and setup wholesale relationships. I've learned how to market the products I'm selling and increased sales. I haven't made much money doing all of this but I considered it education. And now I could keep things running at the current level with a couple of hours a week or less.

I see a lot of opportunities for buying a local business, especially one from a retiring baby boomer. But for me I will be looking primarily at an online business. There are several reasons why.

• You increase the buyer and seller pool substantially with an online business. That means more opportunities to find a suitable business without being limited to your geographical area.
  
• When it comes time to sell, you are also not limited to just the pool of buyers in your immediate area. Now this does mean potentially higher costs due to increased competition to buy an online business - but I think the increased liquidity is worth it.
• An online business can generally be run from your home. This means more time with my family which is often a big reason for wanting to buy/build a business in the first place.
• A physical business is usually limited to scaling based on the property it owns or leases. If you have a 2,000 square foot office you can't grow your team to 50 employees unless you move which potentially means breaking a lease or having to sell. If all of your workers are remote there's no cost for office space and you can scale far easier. Same thing with storage of physical products in the ecommerce space. Third party logistics firms can handle everything from manufacturer to customer with you never having to see or touch the goods and providing nearly infinite scalability. A storefront on a small street in a certain part of a city will never become a prime location on the corner of main and main. But a website that has almost no traffic today can grow to become the number one result on Google with millions of visitors - you just have to scale the infrastructure on the back end to handle the increased traffic.

[Saretire]

/snip

My skill set: I've been involved in large, manufacturing businesses for 15+yrs on the engineering, operations, and supply chains side of the business. I've negotiated billions (yes with a b) of dollars of contracts and have driven tens of millions of cost savings to corporations. I have managed multi-million dollar construction sites. I have a high interest in sales and have done some cold calling in the past. I typically am comfortable in 'dirty' businesses (think old school, low tech businesses) which is why I like the idea of buying a business from someone who is 65+ and looking to retire with children who don't want to run the business. I do not have a background in anything 'tech' or internet related (website building, graphic design, coding, app development, etc). I don't have a high interest in blogging as I do not enjoy writing unless I outsource most of the content generation. I, like most here, have always had a high interest in all things finance however graduating during the Great Financial Crisis squashed any initial hope of going into financial services.

Timeline: I've given myself a 3 year deadline to jump ship and run my own business however I would like to get started sooner than later and would rather start building will being FT employed.

What would you do?

Options
1) Do nothing. Continue saving ~$100K/yr. Enjoy the good life.
2) Lever up to buy a business for somewhere between $250K-$1.0MM with cash flow in the range of $150K-$500K utilizing a combination of business loans, seller financing, and 20-50% down payment. Quit to work on growing the business and exit (sell) in 3-10 years.
3) Start smallish side business (ideas wanted, please) while working that have high growth potential to become FT. Ideally spending less than <$25K to get started.

Thoughts?

Coming from a finance background, we used to inject a lot of executives/semi-retired experienced individuals into businesses through management buy outs. It was a very serious method of 10x your investment, planned exit, while relatively low risk for the executive as they continued to earn a salary. If you have the skillset, approach the PE firms, get on the boards and sniff for buyout opportunities.  At worst, you might be able to acquire a business you're now familiar with.

I'm finding acquiring a business from a seller is incredibly high risk, but maybe that's just because of my background where we partnered with the owners, rather than buying their business outright. In addition, the business then needs to generate much more than my salary (otherwise why bother) to justify giving up a relatively safe income. That puts the risk at a high level because of the size of the capital needed to be invested at even low multiples of earnings.

so, unless you want the challenge, I would go the route of partnering with PE firms. Starting your own side hustle is a bit meh, because it's so insignificant to one's salary. Would buy a business, but I'm too risk averse to buy a small company or VC and not wealthy enough to buy a medium sized firm on my own.

So I'd try find a way into the PE market so you can get into established businesses, leverage your skillset and work alongside larger investors.

[NewBusinessQuestion]

Not sure if this is a credible side-business, but what jumped out at me is your negotiating skills/experience. Are there companies (perhaps smaller than the ones you work with/negotiate with) that are negotiating significantly-sized deals/project, but are not large enough to have someone on staff that has experience negotiating high-dollar deals.

Perhaps you offer your services on specific types of large deals (raw material acquisition, land buying, etc.) for family-run businesses. the pitch is "you don't want to hire someone full-time just for negotiation skills, but when it comes time to these few big-ticket deals, you want someone who is completely on your side and knows the business." You could ask for a minimum payment and then a percentage of the amount you save them. These would be deals that don't happen very often, so the owners aren't very experienced and the amounts are enough to make them nervous. If I was an owner in that situation, I'd love to have someone who felt comfortable and had practical experience with really big deals.

This seems especially effective if you could carve out a specific niche (ideally something you already know from your full-time job) and has the added benefit of being something that could start relatively small and without a huge investment of time. And it fits my personal criteria of not needing to manage employees or have huge start up costs. YOu might need to do a few deals for lower fees to get some experience and referrals....

I would love to consult / negotiate for businesses in the <$100MM revenue range. Unfortunately I've tried this in the past and the main hurdle is convincing people they need help negotiating. Most people who has any sort of power (business leaders) believe they are an above average negotiator even though *everyone* typically leaves money on the table.

[NewBusinessQuestion]

#2 and I'll second the recommendation for the book "Buy Then Build"

I'm also looking to buy a business https://forum.mrmoneymustache.com/entrepreneurship/buying-a-business/ to grow and replace my current income. I've started an ecommerce side business that's on track to gross ~$20-25k with a net of $4-5k this year. While that's nice, the main thing it's provided is a much better understanding of what it takes to actually run a business. I've setup my accounting from scratch and gone back to reconcile the first couple of years my records consisted of a box of receipts and a single spreadsheet. I've learned how to handle some inventory and supply chain management. I've found suppliers and setup wholesale relationships. I've learned how to market the products I'm selling and increased sales. I haven't made much money doing all of this but I considered it education. And now I could keep things running at the current level with a couple of hours a week or less.

I see a lot of opportunities for buying a local business, especially one from a retiring baby boomer. But for me I will be looking primarily at an online business. There are several reasons why.

• You increase the buyer and seller pool substantially with an online business. That means more opportunities to find a suitable business without being limited to your geographical area.
  
• When it comes time to sell, you are also not limited to just the pool of buyers in your immediate area. Now this does mean potentially higher costs due to increased competition to buy an online business - but I think the increased liquidity is worth it.
• An online business can generally be run from your home. This means more time with my family which is often a big reason for wanting to buy/build a business in the first place.
• A physical business is usually limited to scaling based on the property it owns or leases. If you have a 2,000 square foot office you can't grow your team to 50 employees unless you move which potentially means breaking a lease or having to sell. If all of your workers are remote there's no cost for office space and you can scale far easier. Same thing with storage of physical products in the ecommerce space. Third party logistics firms can handle everything from manufacturer to customer with you never having to see or touch the goods and providing nearly infinite scalability. A storefront on a small street in a certain part of a city will never become a prime location on the corner of main and main. But a website that has almost no traffic today can grow to become the number one result on Google with millions of visitors - you just have to scale the infrastructure on the back end to handle the increased traffic.

I love the idea / aspects of an online business. Did you have a background in internet sales / businesses / coding prior to starting your side hustle? If not, what resources did you find helpful for a busy professional. What did you outsource? Why? Did you leverage the main channels (amazon, ebay, affiliates, etc) or did you create your own webpage?

I'm not opposed to learning however the thought of trying to learn from ground zero while working full time with young children just to build a $5K/yr income stream seems overwhelming & not worth it.

[NewBusinessQuestion]

/snip

My skill set: I've been involved in large, manufacturing businesses for 15+yrs on the engineering, operations, and supply chains side of the business. I've negotiated billions (yes with a b) of dollars of contracts and have driven tens of millions of cost savings to corporations. I have managed multi-million dollar construction sites. I have a high interest in sales and have done some cold calling in the past. I typically am comfortable in 'dirty' businesses (think old school, low tech businesses) which is why I like the idea of buying a business from someone who is 65+ and looking to retire with children who don't want to run the business. I do not have a background in anything 'tech' or internet related (website building, graphic design, coding, app development, etc). I don't have a high interest in blogging as I do not enjoy writing unless I outsource most of the content generation. I, like most here, have always had a high interest in all things finance however graduating during the Great Financial Crisis squashed any initial hope of going into financial services.

Timeline: I've given myself a 3 year deadline to jump ship and run my own business however I would like to get started sooner than later and would rather start building will being FT employed.

What would you do?

Options
1) Do nothing. Continue saving ~$100K/yr. Enjoy the good life.
2) Lever up to buy a business for somewhere between $250K-$1.0MM with cash flow in the range of $150K-$500K utilizing a combination of business loans, seller financing, and 20-50% down payment. Quit to work on growing the business and exit (sell) in 3-10 years.
3) Start smallish side business (ideas wanted, please) while working that have high growth potential to become FT. Ideally spending less than <$25K to get started.

Thoughts?

Coming from a finance background, we used to inject a lot of executives/semi-retired experienced individuals into businesses through management buy outs. It was a very serious method of 10x your investment, planned exit, while relatively low risk for the executive as they continued to earn a salary. If you have the skillset, approach the PE firms, get on the boards and sniff for buyout opportunities.  At worst, you might be able to acquire a business you're now familiar with.

I'm finding acquiring a business from a seller is incredibly high risk, but maybe that's just because of my background where we partnered with the owners, rather than buying their business outright. In addition, the business then needs to generate much more than my salary (otherwise why bother) to justify giving up a relatively safe income. That puts the risk at a high level because of the size of the capital needed to be invested at even low multiples of earnings.

so, unless you want the challenge, I would go the route of partnering with PE firms. Starting your own side hustle is a bit meh, because it's so insignificant to one's salary. Would buy a business, but I'm too risk averse to buy a small company or VC and not wealthy enough to buy a medium sized firm on my own.

So I'd try find a way into the PE market so you can get into established businesses, leverage your skillset and work alongside larger investors.

Interesting, I hadn't thought of that angle. You've given me something to think about.

-In terms of the deal structure(s) you've seen for the 'executives/semi-retired experienced individuals', how was their comp structured? Salary with large bonus for hitting financials or, given its a MBO, they got a portion of the equity?
-How did PE firms typically find the executives they'd inject into the management teams?
-Given its a MBO, would the PE firm only install a couple of people into the existing management structure to help ensure the business succeeds (pays back the debt) or were they executing a MBO where most of the management structure was replaced with PE backed people?
-Have you seen a similar model elsewhere (VC, etc.) that wasn't strictly an MBO?
-Which PE firms utilize this model the most?

[Michael in ABQ]

#2 and I'll second the recommendation for the book "Buy Then Build"

I'm also looking to buy a business https://forum.mrmoneymustache.com/entrepreneurship/buying-a-business/ to grow and replace my current income. I've started an ecommerce side business that's on track to gross ~$20-25k with a net of $4-5k this year. While that's nice, the main thing it's provided is a much better understanding of what it takes to actually run a business. I've setup my accounting from scratch and gone back to reconcile the first couple of years my records consisted of a box of receipts and a single spreadsheet. I've learned how to handle some inventory and supply chain management. I've found suppliers and setup wholesale relationships. I've learned how to market the products I'm selling and increased sales. I haven't made much money doing all of this but I considered it education. And now I could keep things running at the current level with a couple of hours a week or less.

I see a lot of opportunities for buying a local business, especially one from a retiring baby boomer. But for me I will be looking primarily at an online business. There are several reasons why.

• You increase the buyer and seller pool substantially with an online business. That means more opportunities to find a suitable business without being limited to your geographical area.
  
• When it comes time to sell, you are also not limited to just the pool of buyers in your immediate area. Now this does mean potentially higher costs due to increased competition to buy an online business - but I think the increased liquidity is worth it.
• An online business can generally be run from your home. This means more time with my family which is often a big reason for wanting to buy/build a business in the first place.
• A physical business is usually limited to scaling based on the property it owns or leases. If you have a 2,000 square foot office you can't grow your team to 50 employees unless you move which potentially means breaking a lease or having to sell. If all of your workers are remote there's no cost for office space and you can scale far easier. Same thing with storage of physical products in the ecommerce space. Third party logistics firms can handle everything from manufacturer to customer with you never having to see or touch the goods and providing nearly infinite scalability. A storefront on a small street in a certain part of a city will never become a prime location on the corner of main and main. But a website that has almost no traffic today can grow to become the number one result on Google with millions of visitors - you just have to scale the infrastructure on the back end to handle the increased traffic.

I love the idea / aspects of an online business. Did you have a background in internet sales / businesses / coding prior to starting your side hustle? If not, what resources did you find helpful for a busy professional. What did you outsource? Why? Did you leverage the main channels (amazon, ebay, affiliates, etc) or did you create your own webpage?

I'm not opposed to learning however the thought of trying to learn from ground zero while working full time with young children just to build a $5K/yr income stream seems overwhelming & not worth it.

I've always had a passion for business and entrepreneurship. In grade school I sold pencils or an extra snack from my lunch. I sold candy bars at summer camp. I majored in entrepreneurship in college and invested some money in two local business - both of which ended up failing. I'd sold a few things on eBay over the years and as a teenager my friends and I ran a computer hardware review website that in retrospect did fairly well. We almost got signed up with an ad company that would have made us some real money (maybe a few hundred per month 20 years ago) but then the dotcom bubble burst. I'm generally tech savvy but the limit of my coding is some formulas in Excel.

I got started based on a thread here back in mid 2017. Someone posted about how they were doing retail and online arbitrage. Basically find a product for sale at a local retail store or online, especially something on clearance, and then resell it on Amazon for a profit. I lost a few bucks on the first deal, made some money on a few other things but didn't really get serious until about a year ago. I noticed my neighbor down the street had a small business selling some seasoning mixes and sauces for BBQ. I approached him about buying some at wholesale to resell on Amazon. I combined that with another food product I'd previously found to be profitable through retail arbitrage. I was able to setup a wholesale account with that local manufacturer and now I'm ordering a pallet at a time of several different products. My main education source was podcasts sprinkled with some blogs here and there for a specific topic and just a lot of learning by doing.

Early on this last year I outsourced the product preparation. Normally to sell a product on Amazon you have to put a barcode sticker over the UPC. This new barcode uniquely identifies that product as yours so if two people are selling a widget and one is counterfeit, you won't get blamed for that since your inventory wouldn't be comingled. Same thing with expired goods. For grocery products Amazon doesn't allow comingling, though for something like spatulas they will. Amazon charges $0.30 per unit to label (was $0.20 until recently) and $0.50 to put the item in a polybag (plastic bag to protect the product). I could do these tasks myself and had in the past but it's not really worth my time. Plus, now that I've outsourced that I'm able to keep running my business while I'm deployed on the other side of the world. I've recently shifted to use a third-party logistics (3PL) prep firm. I have my pallet of products delivered to them and they charge about $1.00 per unit to do the same prep as Amazon. The benefit is that once they finish they handle the less than truckload (LTL) shipping of a whole pallet to Amazon and get a much better rate than I could for a one-off shipment. My main supplier charges me $100 to ship a pallet to my 3PL warehouse (happens to be close to one of their distributors so it's just a quick drop off on the way). My 3PL can do all the prep and then ship that pallet to Amazon for about $60. If I were to setup an LTL shipment myself from my supplier to Amazon it would cost me $400-500.

Right now I'm 100% on Amazon using their Fulfilled by Amazon 3PL service. My business model is a reseller of existing brands so setting up my own website wouldn't make sense. Somebody is willing to pay more on Amazon because 1. they think that Amazon automatically has the best price 2. they will get their product delivered quickly and for "free" in most cases. 90% of my orders don't have any shipping so they are probably Amazon Prime members. My goal is to partner with local brands and basically be their online retail presence. My main supplier offers a handful of their products through an outdated store on their website that probably gets almost no traffic. Meanwhile I'm selling thousands per month on Amazon. They're in thousands of grocery stores around the country and used to the regular wholesale distributor model. They don't want to bother with pick, pack, and ship for an order of 1-2 products, they want to sell pallets at a time.



Here's a list of good podcasts that I have listened to on a regular to semi-regular basis.

The EcomCrew Ecommerce Podcast - This is the best podcast/resource I've found. The hosts talk about their specific products and brands. A lot of people in this space won't discuss what their brand or product is for fear of copycats. As they put it, they talk about "the good, the bad, and the ugly". They're over 300 episodes going back several years so they've covered almost everything imaginable. Marketing, product development, inventory management, cash flow, financing, employees, outsourcing, buying a business, selling a business, etc.

eCommerceFuel - Focused more on existing sellers of larger businesses, the host also runs a private invitation only forum for ecommerce store owners with $1,000,000 or higher revenue (used to be $250,000). Lots of good information still.

The Quiet Light Podcast - This podcast is run by an online brokerage firm (Quiet Light Brokerage) that specializes in selling online businesses. They are very well regarded in that space and this is where I will be looking to buy a business. They put together a very good package of financials and 20-30 pages of information on each business plus some interviews with the seller usually.

The Side Hustle Show - Not specifically focused on eCommerce but many episodes have been interviews with people running online businesses.

Smart Passive Income - This podcast is run by one of the most prominent people in the field and is probably close to 10 years old. Primarily focused on content and affiliate marketing with digital, as opposed to physical, products. I definitely see the appeal of a 100% profit margin and not having to finance or carry inventory, worry about shipping, etc. I'm drawn to ecommerce though.

[LightStache]

PTF. I'm a solopreneur and making too much to walk away, but I don't want to expand because I plan to exit the industry in 2031. Same boat as OP - small scale side hustles are interesting but not worth it financially.

I'm thinking of dipping my toes into real estate development starting in 2025. Maybe a $1M project where I fund $250K. If I do one project every 24 months, I'll have three under my belt before ramping down my day job. OP, that's like your option 3, but obviously doesn't meet your low up-front investment criteria. But I'm not sure why you have "low investment" as a caveat for starting a business that you want to grow into the millions.

What I like about RE development is that you spin up a company and then wind it down when the project is done. So you don't fall into a situation like many entreprenuers where you grow a successful business, then come to hate your life but can't exit.

I'm definitely interested in other ideas from the community and also wondering if there are better forums for this topic? MMM seems focused on minimizing expenses, living the good life, and retiring to minimal work, basically OPs option 1.

[rocketpj]

I was involved in 3 consecutive failed business startups, then reconfigured my goals and found a business to buy (after looking at about 50).  It has gone very well.

Option 2 is vastly preferable for me.  Revenue from day 1.

The upside of a successful startup is obviously fantastic.  The downside is lost money and years.  To each their own.

[Saretire]

/snip


Interesting, I hadn't thought of that angle. You've given me something to think about.

-In terms of the deal structure(s) you've seen for the 'executives/semi-retired experienced individuals', how was their comp structured? Salary with large bonus for hitting financials or, given its a MBO, they got a portion of the equity?
-How did PE firms typically find the executives they'd inject into the management teams?
-Given its a MBO, would the PE firm only install a couple of people into the existing management structure to help ensure the business succeeds (pays back the debt) or were they executing a MBO where most of the management structure was replaced with PE backed people?
-Have you seen a similar model elsewhere (VC, etc.) that wasn't strictly an MBO?
-Which PE firms utilize this model the most?

sorry for late response.
deal structure for comp was salary plus bonus for the role as per any executive in that position. Management had to put in own capital to acquire equity alongside PE investor. Management's capital was geared by PE consortium in order to provide a massive incentive for management to really step change the business. For example, with $2m capital in, PE consortium gears it around 5x, then when you exit at 2x initial valuation with paid down debt, the management team easily earns 10x-20x their initial capital. I've seen that $2m go to $100m for management, plus salary and bonuses along the way. The worst outcome is management loses their capital after working for 10 years, but still received salary during that time.

PE firms found the executives through networking/personal relationships and were often known to each other for years/previous MBOs and advisory. A pool of management is valuable.

First prize for MBOs is not to inject any management as existing management knows the business best. Injecting new management is less likely to get the deal done, but I've seen both CFOs and CEOs injected. Best is succession inside the business. It is unlikely to have a new technical injected due to knowledge/trade restrictions etc, but sometimes when you exit a business as a PE investor, some of your management is exiting as well. Also, many businesses and PE firms are doing value add, some even have their own inhouse advisory teams.

Similar model: I don't know about VC, can only comment on PE. As mentioned, besides MBOs, some PE firms have inhouse value add teams/advisors that could be part of fund carry and be brought in on specific deals.

I'm not in the US, but MBOs were the bread and butter of PE, so I would expect your large PE players would do this the most, KKR, Carlyle, Blackstone etc. You'd need to network with the partners and let them know your skillset and find a reason to pick you.