Lessons Learned Since The Financial Crisis really brought me back to the time when Financial Samurai was started in the summer of 2009. I want to use this post to figure out why Financial Samurai has survived all these years. My theory is that launching during a downturn has a lot to do with it.

Since I was 12 years old, I wanted to be an entrepreneur because I witnessed the fabulous lifestyles of those who called the shots instead of those who took orders. I just didn’t know what to invent. Back in 1989, you actually had to create a physical product to make money.

My entrepreneurial dreams died down after getting a job in finance in 1999. Only after graduating from business school in 2006 did my desire to start a company reignite. I was emboldened to put all I had learned from my professors to good use. Otherwise, what was the point of going to business school in the first place?

But nothing happened in 2006, 2007, or 2008 because I was tired. After three years of working 60 hours a week while also spending 20 hours a week on business school related activities, all I wanted to do was take a break. It really felt like a vacation to only have to work 12 hour days after graduation!

Only until the world started falling apart in 2009 did I finally decide to launch Financial Samurai. It turns out, there were other companies that were founded during the depths of the recession too: Uber (2009), Airbnb (2008), Quora (2008), Kickstarter (2009), Whatsapp (2010) and many more.

Let me share some reasons why launching a business during bad times is easier.

Leaving a boring job to do your own thing is scary. There’s nowhere to hide when you’re responsible for everything. At the same time, there’s nothing more rewarding than creating something from nothing. No promotion or raise comes close.

Recently, a reader asked, “What do you think you’d be doing now if FS hadn’t worked out so well for you? Back to the IB grind, real estate tycoon, build a tennis school…other? Might be an interesting article unto itself, I know you’d get at least one interested reader.”

I haven’t thought about this situation since 2012, when I first left my day job. Further, I know that after writing, “Career Or Family: You Only Need To Sacrifice At Most 5 Years Of Your Life,” I definitely won’t be going back to work full-time until 2022, at the earliest.

But this is a good thought experiment to ponder because I’m sure many of you might be wondering what if you took the leap of faith and things don’t work out either. 

One of the luckiest things I’ve ever done was not sell any major assets during the downturn between 2009 – 2012. It’s understandable to panic sell when things are crashing and burning. It’s also easy to sell in a down market when you have a major life event e.g. losing your job, having a baby, etc. But fortunately, many of my investments were either illiquid (real estate) or were locked up with long vesting periods (private funds). Even if I wanted to sell, I couldn’t!

For example, in 2012 I put my home on the market for 28 days to see if I could get any motivated buyers after Facebook went public. I just left my day job and was thinking it might be a good idea to get more liquid in case my early retirement plan didn’t pan out. Fortunately, no buyers were to be found as IPO money takes a year to work its way into the economy. Now the home has appreciated 60% since 2012 based on a written offer I received recently on a relatively large figure.

But seeing a 60% rise in an already expensive home was not my biggest lucky break. Hanging onto my business was. Every year since 2011 someone has inquired about buying FinancialSamurai.com. There was a period of time during the bear market when several personal finance sites sold for between $1 – $4 million. Although $1 – $4 million is a lot of money in absolute terms, based on the cash flow, the acquisition prices were all absolute STEALS.

For example, one guy with an operating profit of about $700,000 a year sold his site for only $2,500,000. You’re not even a real millionaire at $2,500,000 thanks to inflation. If you have a partner, then you’re definitely not a millionaire because you’ve got to divide the after-tax proceeds by two.

To generate $700,000 a year at a 8% rate of return requires $8,750,000 in capital. At a more conservative 4% rate of return, you’d need a whopping $17,500,000 in capital to generate $700,000 a year!

It’s hard to say someone making $2,500,000 got robbed, but robbed he was because if he had held on for just 3.6 more years, not only would he have made a total of $2,500,000 in operating profits, but he would still own a site making $700,000 a year or more for the foreseeable future.