Just curious. Title asks the question. Setting your own compensation and being your own boss aside, what kind of return would you require/desire to start your own business?
Seems you can invest in the stock market and, if you know what you're doing, get a good return with little to no work other than research. If you start a business, you need to bust ass on all fronts (sales, management, marketing, finance/acct, HR, etc. [unless you hire for or outsource]) to make a decent return.
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The first few years, just enough to get by is enough as long as the business is promising. Eventually, a consistent salary in the low six figures, with potential for upside, would be enough for me.
Since starting a small business in college, I've realized a lot of the things that oftentimes are a pain can be automated nowadays, which make things so much easier. For example, the entire shipping process can now be easily automated for free, even if you're importing from another country, especially if you have a drop shipping business model. Using a free program, as soon as a customer checks out, the item is automatically bought from the supplier and then sent to the location indicated by the customer. There is a free app that has also made the accounting process pretty easy as well, letting us focus more on just getting sales.
Just a note. I've worked with a number of successful entrepreneurs in my private wealth days. One of the biggest regrets I hear from seasoned entrepreneurs (2-3 or more successful startups) is not taking a fair salary in their early companies. It feels like you're doing the right thing, but, don't let yourself be paid below market to fatten the silver lining in your investors pockets.
This sounds like an Amazon/Alibaba type of business. Does this app also work if you're just importing and exporting by yourself (without any distribution platform)?
Doesn't have to be an app. Can be anything.
EDIT: My bad. Realized you replied to someone else
Just want to point out that I think being 'paid' is different from generating a return on your investment. Salaries and wages are an expense, whereas return is profitability and is taken after expenses are accounted for.
Exactly. Your salary is what you are compensated with for your own personal expenses, money to put away, to put towards your wife/kids, whatever. I'm talking about what's left after all is said and done. And yes, I know some people pay themselves with whatever is left, but if you set a salary for yourself, I am talking about what's left.
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Frig off Mr. Lahey
What kind of business? Really broad question.
I'd be willing to work pretty hard upfront (call it 3-5 years) & invest a fair amount of capital in a business that could generate a passive (meaning my direct hours spent on it per week are
Recently, saw an article stating that using return as a measure of an investment is a bad idea. Instead, the goal is being rich to enjoy your wealth, which means that you want to have the least amount of "worry" in generating a specific return.
Case in point, perhaps if you invested in exotic derivatives or private equity investments, your return might be 20%+ but these are not stable return and not liquid as well. On the other hand, if you were investing in a REIT or an apartment complex with a stable tenant base, even if you make less than 10%, it is a stable monthly cash flow that you don't need to worry about - most importantly the cash flow is stable.
Just another way to look at things.
This is describing the concept of risk adjusted return. Easily calculated in publicly traded securities (Sharpe, etc) but takes a fair bit of assumption for career decisions. Either way, good comparison.
I don't know. Hard to for sure at this point. But, at least double to make back the OG investment, and turn new money.
Honestly, I think 2.0x is low (assuming it takes 3-5 years to become FCF positive / exit). My back-of-the envelope says your base case expected MOIC (over a 5-10 year horizon) would need to be ~3.5x-4.0x to justify going down that road (before accounting for the potential psychological benefits associated with becoming an entrepreneur).
Ok. Let's call a base case 2.5x-3.0x just to account for paying something on the new money creation to compensate for the risk in your OG investment.
But I guess you're right that at least 3.5x would be more ideal.
Honestly there's more than $$$ when you're talking about the benefits of owning aka being the principal or partner your own business. Examples: You can take days off here and there, you don't have to worry about showing up at 10am to work, tax incentives, the work is more fulfilling, you have more pride in your work & with your life and when you're old enough to have kids you can hand off the business to them. Those are all priceless. The first half decade or even decade of the business will suck and will be stressful but a decade or two from the start, if the business is maturing by then and you've built up a reliable client base, you're more or less in cruise control and its not stressful.
$ wise, a ~$200K post-tax distribution to myself (starting within the first five years) would be my number to start my own business.
This is exactly what I am saying in the OP. Aside from the benefits of owning....
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