How To Create Next-Level Wealth: When A Million Just Won’t Cut It

How to create next level wealth

Creating next-level wealth is all about next-level thinking. When you first graduate from school, you may have a desire to make six-figures a year. Then once you make six-figures and get taxed out the wazoo, you start wondering how to create next-level wealth.

Next-level wealth is based on net worth, not income. Earning a top one percent income is nice, but paying over a 40% marginal federal + state tax rate isn't.

If you want to create next-level wealth, your goal should be to create as much equity as possible that is never sold.

You can build as much wealth as Jeff Bezos so you can laugh at all of us peasants trying to make ends meet during a global pandemic! You and the next 100 generations of Bezoses would become untouchable.

The Desire To Create Next-Level Wealth

Ever since I was a kid, I've wanted to become rich. I saw so much poverty growing up throughout Asia that it made me scared to be poor.

In Malaysia, when I was in middle school, my poor friends lived in a studio with their parents and siblings. They subsisted on one or two simple meals a day as their parents worked multiple jobs to make ends meet. My rich friends lived in mansions in the hills with chauffeurs. Their parents were all business people. It was such a different world.

One of the luckiest things I've ever done was not sell any major assets during the downturn between 2008 – 2009. 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 had wanted to sell, I couldn't have!

Just like how the 2008-2009 downturn jolted me into trying to build more wealth, the current 2020-2021 downturn is doing the exact same thing. These painful periods are often the most motivating to build next-level wealth.

Hang On For As Long As Possible

There was a period of time during the 2008 – 2009 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. 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.

To build next-level wealth, you've got to hold onto your equity for as long as possible.

Related: Why I Regret Selling My Site For Millions

Think About Your PayBack Period

The payback period is the length of time required to recover the cost of an investment. In the site sale example above, if the buyer can maintain his operating profit level, he'd recover his full $2,500,000 investment in just 3.6 years. 3.6 years is his payback period.

All money earned after the payback period is 28% a year gravy. Earning 28% a year for a decade will make you rich.

Let’s say the buyer has some hustle and expertise. He could conceivably grow operating profits from $700,000 in year one to $850,000 in year two and $1,000,000 in year three.

In this scenario, the buyer lowers his payback period to 2.9 years AND could sell the site for $3,600,000 (44% more) based on the same pitifully low multiple of 3.6X operating profits ($1,000,000 operating profits X 3.6 multiple).

But since 2009, something magical has happened. Valuations for media companies and the entire S&P 500 expanded by ~100%. See the chart below.

Create next level wealth

When the site owner sold his site in 2010, the S&P 500 was trading at 15X Cyclically Adjusted Price to Earnings (CAPE). Now valuations are at around 30.5X.

A 100% increase on a 3.6 multiple equals 7.2X. Let's do some math and find out how much the person who spent $2,500,000 on a site back in 2010 has made so far!

This is a perfect example of how one person can create next-level wealth through equity.

Investment Returns Scenario For Next-Level Wealth

2010 Investment: $2,500,000

Business Operating Profit: $700,000

Estimated Payback Period: 3.6 years

Forecast Operating Profits

Year 1 Operating Profit: $700,000

Year 2 Operating Profit: $850,000

Year 3 Operating Profit: $1,000,000 – Everything paid back in 3 years

Year 4 Operating Profit: $1,000,000

Year 5 Operating Profit: $1,000,000 – Keeping OP flat to stay conservative

Year 6 Operating Profit: $1,000,000

Year 7 Operating Profit: $1,000,000

Year 8 Operating Profit: $1,000,000

Year 9 Operating Profit: $1,000,000

Year 10 Operating Profit: $1,000,000

Total Operating Profit Over 10 Years: $10,000,000

Percentage Return If Not Sold: 400% ($10,000,000 / $2,500,000 investment). Not bad! The owner will continue to make $1,000,000+ a year in cash flow.

But because valuations for online media properties have increased by 100% since 2010, the buyer can now turn around and sell his $1,000,000 a year operating profit business for $7,200,000 based on a 7.2X multiple instead of a 3.6 multiple.

Total Return After Sale: 680%. $10,000,000 operating profits + $7,200,000 sale price = $17,000,000 divided by $2,500,000 purchase price = 680%. This is next level wealth!

Now imagine if the business grew operating profits to $2,000,000 before selling, instead of keeping operating profits flat for all 10 years. We're talking a total return of over $30,000,000 from a nice little lifestyle business. 

Compared to the measly $2,500,000, having $30,000,0000 is some REAL F YOU money. Compared to the returns of the S&P 500, there is really no comparison.

You can either buy a business or build your own. Why not do both?

Don't Be Tempted By Short-Term Gains

To create next-level wealth, you must have patience.

Now obviously an investor might be stupid enough to drive a newly acquired business into the ground. But most people who spend $2,500,000 have enough smarts to make sure they hold operating profits at least flat to reach their base case payback period.

Large absolute dollar amounts are enticing to business owners. But they are dangled in front of you because you have something even more enticing for the buyer! Never forget the rationalness of finance. In our permanently low interest rate environment, please do not sell your cash cows.

If you can buy a cash generating business with a payback period of less than five years, you should get excited. Your investment essentially becomes risk free after five years. It will then make a 20% return into perpetuity. A 20% return is a home run compared to a historical average 8% – 9% S&P 500 return.

If you believe you can increase operating profits after acquisition, then you should get pumped. Finally, if you believe there will be valuation expansion on top of business growth, you should go all-in.

Creating Next-Level Wealth In Real Estate And Products

Two of my favorite ways to build passive income is through real estate and creating your own products.

Below is a chart showing how much capital you need to have to generate $55,000 in net rental income and $20,000 in revenue with a product at various interest / return rates.

Notice how the lower interest rates go, the more valuable the real estate and product becomes. With real estate prices softer now due to high mortgage rates, the time to dollar-cost average into real estate now. Interest rates will come down and return to it's long-term decline.

When you can create your own products with minimal up front costs, it must be done if you want to build more wealth. I've written a severance negotiation book that has generated $550,000+ in profits since 2012. In addition, I published a Wall Street Journal bestseller, Buy This Not That.

Profits + Equity = Next-Level Wealth

There's a reason why so many of today's wealthiest people are entrepreneurs. Not only do they create businesses that generate revenue, they also own equity that can be sold for multiples of annual revenue or earnings.

Most day jobs don't build equity. When it's time to go, workers are left with nothing because they are no longer contributing their time. There is no leverage in only being a laborer.

Of course, sometimes you do get equity and your equity doesn't go anywhere. For example, you may have joined Uber in 2015 when the company was valued at $51 billion.

Today, Uber is still valued at about $51 billion. This is despite employees accepting a lower salary for all these years. But at least you have a chance to create next-level wealth through equity ownership.

Best Ways To Create Next-Level Wealth

1) Build a business

I encourage everybody to build a business that also grows a strong brand. I'm talking about many types of businesses, not just a website business. With a strong brand, you can pivot more easily as the world changes. With a strong brand, you can command higher prices and take more marketshare.

Making money from your day job is fine, but you're slaving away making someone else who owns all the equity rich. Even if you are at a startup with equity, just know that for every $1 you make, you're literally making someone else more senior 20 – 10,000X richer. Instead, get in the mindset of making yourself rich by growing your own equity.

If you own a business, please be patient and do away with short term thinking. I still remember people mocking the founders of Snapchat for rejecting a $3 billion offer from Facebook in 2013. But unlike the peanut gallery, the founders knew that if they just sat in their seats and continued to execute, their business would be worth much more over time. Today, no matter how ridiculous the value proposition, Snapchat is worth ~$32 billion.

Yes, growing a business is not easy. But at least starting one today is. Most people never try, which is why most people will never come close to creating next-level wealth.

There are endless examples of people who've created something from nothing and sold it for mega millions in a relatively short amount of time.

2) Take a gamble and join a startup

Joining a startup will likely make you poorer rather than richer. Startups pay below-market salaries in exchange for equity that could be worth a fortune. But most of the time, startup equity will be worth a ho-hum amount or nothing due to startup failure. If you plan to join a startup, please sleep with one eye open.

It's very hard to win the lottery. So long as you remember this, you are free to join a startup to seek your fortune. The earlier you join a successful startup, the more equity you will build. However, the earliest startup employees have the highest amount of risk. Therefore, please negotiate a solid equity package.

3) Become an angel investor

I also don't recommend anybody angel invest with money they cannot afford to lose. Hitting it big with angel investing is even harder than hitting it big with a startup. You have no edge. Further, you need to invest a decent sum of money to have a large return.

For example, let's say you invested $25,000 in a startup that returned 100X. The gross amount of your $25,000 is now worth $2,500,000. However, you need to cut the amount in half due to dilution from subsequent funding rounds. Then you've got to pay taxes. You may end up walking away with only $800,000. Not bad, but not next-level wealth.

Instead, I think it's much better to invest in a venture capital fund that invests in private growth companies, like the Fundrise Innovation Fund.

Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public will create next-level wealth.

The Innovation Fund invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what the Innovation Fund is holding before deciding to invest and how much. I'm bullish on AI and plan to raise my AI exposure to $500,000 over the next three years.

4) Join a tech monopoly

You might not create next-level wealth quickly if you join a tech monopoly like Google, Facebook, and Apple. However, you will get paid way more than the average employee and receive extremely generous equity packages.

For example, Google pays 23-year-old software engineers with one year of experience around $200,000 a year. By the time these employees turn 30, they will have a median total compensation of $350,000. If you are in the top 15%, your total compensation package is around $400,000.

The Easiest Way To Build Wealth

Obviously, joining a hot startup or a tech monopoly is difficult. The competition for these jobs is fierce. Meanwhile, investing a large enough sum as an angel investor also takes guts or already having a decent amount of money.

Therefore, the easiest way to build next-level wealth is by starting your own business on the side. Work your day job and then spend your remaining hours building your side business. If you want to build next-level wealth, you must put in the extra time.

The great thing about building your own business is that it's permission-less. You don't need a fancy college degree. You don't need a lot of capital. Nor do you need to be invited. All you've got to do is start.

If you want to build next-level wealth, you need to own equity that grows. You could get lucky by joining a Google in its nascent period. However, you don't only want to rely on luck if you want to get really rich. Ride your company's growth and try and increase your own luck by taking further action.

Tool To Build Next-Level Wealth

To create wealth, you must diligently track your wealth. Sign up for Empower, the web’s #1 free wealth management tool to get a better handle on your finances.

In addition to better money oversight, run your investments through their award-winning Investment Checkup tool. I will show you exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator. It pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing. 

I’ve been using Empower since 2012. In this time, I have seen my net worth skyrocket thanks to better money management.

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For further suggestions on saving money and growing wealth, check out my Top Financial Products page.

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About The Author

134 thoughts on “How To Create Next-Level Wealth: When A Million Just Won’t Cut It”

  1. That is a super interesting point to talk about the value of your income producing assets going up in value as interest rates go down. I hadn’t thought about that, but that is extremely powerful! I need to write an ebook! LOL.

    Long time read, I appreciate all the insights – you’re the man.

  2. Dividend Power

    Great article! Not selling during downturns is soldi advice. It’s usually time to buy at that time in my opinion., Of course volatility is hard to handle for many people.

  3. As someone who has a hidden desire to be a successful entrepreneur one day, I find it hard to get started. I’ve started some mom and pop businesses when I was younger and made some minimal money from them. But never did I reach 6-figure with any of them. They all just went down to zero eventually.

    I think there are 2 impediments to success:

    (1) A lack of defined path of action – starting a business means figuring it all out by myself. It involves a lot of effort and work. I opted to spend my time building a real estate portfolio instead. Maybe in hindsight, it would have been better to spend more time on an online business.

    (2) Sometimes the ramp time is long and the reward uncertain. For instance, I’ve started my personal finance blog at the start of 2019. It is a grind and is very slow in gaining an audience. I don’t earn anything from it (or try to at this point). It is certainly a challenge to keep working on it without seeing any financial reward. Money is motivating, that’s for sure. And the lack of money has the opposite effect.

    1. I think it’s smart that you have been building a real estate portfolio. A real estate portfolio is easy to understand, provides immediate benefits and appreciation, and can be improved upon.

      It is the uncertainty of starting something with no results that puts people off. But there definitely won’t be anything happening if you never start.

  4. It would be hard to walk away from a 7 figure offer for a business but your example of the website that sold for $2.5M does make sense to hold on to for much larger gains.

    There is a risk though that things could go south and you end up with far less. Think of all the businesses that Amazon and Netflix have laid to rest. I’m sure the owners of these companies would love to go back in time and cash out.

    But if the income you mentioned is guaranteed for those 10 years it would definitely be a no brainer to hang on

    1. Hugh Hunkeler

      The 2.5 Mil may make sense if:
      -The business required full-time effort, and wasn’t just passive income
      -There was risk of being crowded out of business by a major player. For example, the Netscape browser used to sell for (IIRC) $40. Then Microsoft used free Internet Explorer as an enticement to buy Windows, and Netscape couldn’t sell its browser any more.

  5. Great article — highly relevant in 2020. Finding income streams beyond my day job is giving me peace of mind. I’m fortunate to still be gainfully employed in SF, 5+ months into COVID shutdown and layoffs. Finding other ways to make money has been a welcome distraction from the monotony of staying home in quarantine. It has given me more confidence in my ability to generate income if I were to lose my job. In addition, it’s nice to feel like you’re working towards something. 2020 otherwise is a year of stagnation, if not degeneration.

  6. So true on the huge potential wealth benefits of starting a business. And yes it definitely takes patience and persistence. Great examples in this post. Thanks for the motivation!!

  7. Hi FS, such a great post, I love the idea of considering how much you’d need in the bank for those same returns! *clutch*
    I had thought of selling, after 4 years and losing money the first three. Now it’s growing pretty fast and there’s enough income to hire an ops manager, so I should be able to focus on growth/personal sanity. I hope, this will make my ski slope keep sloping upward or even hockey stick. The investors I talk to say I’m selling too early. They might be right.
    The question I wonder if anyone else has a response to: what to do when your business is finally making decent money but you want a break for quality of life/personal sanity?

  8. What The Numbers Say About Long-Term Investments In Leveraged ETFs

    – The internet is filled with articles warning people not to invest in leveraged ETFs for longer than a day.
    – This article looks at common claims made about leveraged ETFs, and shows why each claim is either untrue or greatly exaggerated as it relates to leveraged S&P 500 ETFs.
    – Long-term investments in 2x/3x S&P 500 ETFs can generate tremendous gains, grow with the index in a very predictable manner, and do not deteriorate to nothing due to volatility.
    – You can gain big or lose big with long-term investments in leveraged ETFs. But it’s not a sucker bet, and you aren’t crazy if you do it.

  9. Reposting from the fb page.

    I’m aiming for $10MM then 100MM. My June’s 1 yr annual return was 86%. Was 90% in May.

    I’m a macro investor who invests in growth sectors via 3x etfs. And a couple of moaty stocks. Thinking of newing another acct to try a new macro strat.

    As Of 06/30/2017
    Annualized Returns
    Account YTD 1-Year
    1 +38.45% —
    2 +59.41%. +101.43%
    3 +45.08% +84.61%
    4 +36.79% +81.63%
    All Accounts
    +47.25% +86.64%

    Leveraged ETFs can be held long term provided the market has enough return to overcome volatility drag. It usually does. For most markets in recent times the optimal leverage is about 2. But some markets and time frames will reward a leverage of up to 3. No markets will reward a leverage of 4.

    Tqqq last 7.5 yrs yielded over 1,725% for ex.

    Granted I’ve an economist mindset since undergrad. Business cycles, seasonality, to demographics trendlines matter more then latest sensational headlines. Velocity of money accrue to growth in tech especially as boomers retire. Reading at least 5-6 hrs daily is essential. And first principles thinking and buttressing key mental models are key to success.

  10. LendingTree just acquired another company, about 30 million in cash with another 10 million in earn out. It might be the time to get liquidity!

    1. Wow! Thanks for the heads up. I’ll have to check it out. Any idea when they started the site? I’m getting liquid by selling valuations are much much higher Then online media properties at around 29 times gross rent.

  11. It will be hard, but not impossible to measure my company’s value. A good reminder that I need another that is more liquid.

  12. Lendingtree just bought a Bank account comparison site for $33 million, the space is heating up. They also bought a Credit card comparison site for low 9 figures last year. Been a lot of shifts in financial marketing/advertising as things become more digital. I’ve seen a lot of digital assets trading at ridiculous multiples, the only reason I can gather is that these assets are difficult to scale, but given where the stock market is, I’ll take a 3x multiple all day on a quality digital asset.

    1. Do you know the names of these two companies? LendingTree stock is on FIRE! Higher equity valuations mean more firepower to acquire.

      Might have to take advantage and set up some conversations :)

  13. While I generally agree with your overall point (although it depends on personal circumstances) and fully agree that a 3.6x multiple is ridiculous for a stable or growing business, I do think your analysis is incomplete.

    To truly assess the decision you should assume the seller takes the $2.5M and either invests it in a new business or at minimum the S&P 500 for the course of time from sale date until the end of your comparison. You can’t compare $13.5M to $2.5M. Perhaps this entrepreneur took the $2.5M and used it for a business that he needed funding for and is now worth $20M?

    Again, I agree with your point on the exit multiple being bad, but make sure you compare apples-to-apples to account for the time value of money.

  14. Steve Poling

    i think this is one of the most inspirational (maybe i should say aspirational) posts i’ve read here. They say the 2nd million is easier, but this post gives a clear view of the path to $10M and beyond. Thank you.

  15. Great post. Its a real kick in my ass!
    Currently I own two businesses. One that is in the field of consulting , where my time is exchanged for an hourly rate. Its in an enjoyable line of work ( for the most part). However the business has limited scale. With no employees, scale is reduced even further. The business provides for me just a job.
    The second business is in real estate. Purchasing undervalued assets, capturing the value , and then reselling the asset. I will purchase the real estate, recoup the value of the undervalued asset and then re- sell the real estate. The risk is limited, as in very deal, the value of the undervalued asset , covers the purchase price.
    The return(s) can be lucrative many instances high five figures to low six figures.
    My problem is that the process is slow and not always steady .
    Reading this post has given me another idea that maybe starting a blog , writing about the process of investing in this asset ( problems and all) and share my experience(s) might be a great way to generate massive scale and steady returns.
    I wont deny, that my reticence to seeing more people jump into this “hidden” asset , along with the inevitable loss of anonymity have impediments to making this happen.
    However, its obvious that a good information packed blog can be very lucrative…both to the the readers and the owner.

  16. Paul Andrews

    You know, it’s fun to read through frugality blogs and how people cut their expenses on groceries, cable, etc. But my degree is in finance, and it’s really nice to read something that uses the same vernacular I had to use when getting my degree! Takes me back… :)

    I’m really glad you posted some numbers on how blogs are valued, and to be frank, they pretty much all seem like steals, as long as you know how to run one. Payback periods of less than 6 or 7 years sounds pretty good, and I can’t imagine that you’ll get anything better on traditional passive investments likes stocks. Except maybe when you’re talking cash on cash returns in real estate, but even hitting 25% return means 4 years.

    My question is how do blogs that have wild swings in revenue get valued? I’m thinking about Pat Flynn, who’s last two blog income reports had him earning 250k one month and 100k the next. Is there some sort of average that is used? Maybe the last 6 months worth of earnings?

    Of course, if anyone could make an accurate prediction about earnings, then valuation wouldn’t be the art that it is. I’m just curious to that side, if you know and don’t mind sharing. Great Post!!!

    1. Valuation is a lot of art. The buyer can look at the trailing annual earnings for the past three years.

      Most business don’t trade on a multiple of monthly earnings. Instead it’s always on annual figures.

      You’ve got to look at the makeup of the traffic. If most of the traffic is from forum traffic, that’s not that great because regulars don’t buy or take action as much as SEO traffic, who are trying to find an answer to a problem. Reddit is not worth much compared to its traffic b/c it’s just a bunch of forums.

      I like sites with more than 50% of their traffic from SEO b/c SEO is the most valuable traffic that is perpetual. Much more than 80% of traffic from SEO might be risky b/c you can’t directly control your rankings.

      Bottom line: I’m a buyer of websites, not a seller at these valuations!

      1. Steve Adams

        Great differential on the traffic!! SEO vs forum traffic is a great distinction. Recurring visitors are not similar to recurring revenue. Wonder if there would be a way to convert them – maybe charge for a weekly ‘private post’. Or a private forum. For financial samurai I would pay that but Im odd that way. :). Thanks for making Mon/Wed/Fri better!!!!

  17. Is $2.5m too small a sum to pay for a business making $700K a year (with prospects for growth)?

    Yes, if you can just pay $2.5m, then put your feet up and draw $700K passive income every year (and be assured you get your capital back, and then some, when you want to sell).

    But that’s unrealistic. Not only do you have to pay $2.5m; you also have to put your heart and soul into the business. In other words, the $700K annual income is a return to capital AND LABOUR. And there’s more: you also have to bear the risk that you can’t do as good a job as the founder, or some digital disruptor blindsides you, plus 1,001 other threats.

    I agree with your point, Sam, that hanging onto a successful and growing business is often the better way to go. But don’t overlook the point that, if you sell, you aren’t handing your buyer a Treasury bond.

    1. Frugal Familia

      Good point! I was going to post something very similar. In the example given this is not a passive investment we are talking about there is also a time investment that needs to be considered. The individual who sold for 2.5M also gained a much more valuable asset, TIME. It’s hard to place a value on this as everyone values their time differently and its unclear what the time investment of the site was. With that being said we shouldn’t assume this person to be a complete idiot incapable of doing simple future cash flows analysis. Perhaps given the situation this actually was the best choice for this person.

  18. Awesome post. It is inspirational to see what growth opportunities can be with vision & hard work. I have to look at what more I can do.

  19. I’m a 30% partner in a business that generates about $900K of annual income on revenues of $3.2m – that’s after paying salaries and bonuses, including to the partners.

    Any thoughts on how to approach someone to buy 50% of me/us with another 50% where we are incentivized to grow even more?

    Would anyone take a look or is it too early/small? The business could operate without me but I would stick around for the latter 50%, if wanted. I feel like multiples are very small unless you cross some threshold to be a “real business” of $10m+, even though it feels like a real business to me since I’m working so hard every day, 7 days a week. Thanks for your thoughts Sam + co.

    1. Hi Aaron,
      Why do you want to sell 50% of your business? If it’s too much work, I recommend talking to a business coach to see how you delegate some of your work so that you’re not working 7 days a week.
      Before you decide to sell your stake in the business, talk to a CPA about how to minimize or defer the capital gains taxes. There’s a strategy where you can defer your capital gains taxes for 30 years. It’s better to pay your taxes tomorrow than today.

      Brian, CPA, CFP

  20. Hi Sam,
    Thanks for sharing this post. It is important to keep a long term mindset with investing and starting a business. As you stated, profits + equity = next level rich. I once worked for an entrepreneur who would start a business, grow it, and sell it in 4-5 years. I wonder how much money he left on the table. One of his businesses in now a major affiliate network.

  21. Great post Sam. And great job generating 700k in income from this blog! I generate almost that much right now as an employee but do not have the guts and drive to start a business at 40 with 2 young kids, specially since I have a cushy and interesting job that lets me work 40 hours or less per week. You are right though, I am building 0 equity. In my industry there are many rules about either not owning other businesses or declaring them. I also have no idea what sort of business I’d start. A blog seems like the best idea as startup costs are minimal, hours can be low/normal, and once its successful you earn a ridiculous amount per hour worked. The most attractive aspect to me of having my own business though, besides the equity and leverage would be the ability to live and work anywhere in the world. I am about done with NYC. I can’t say that I would enjoy the day-to-day headaches, stress and growing pains involved with being a start-up.

  22. I just started my blog two months ago and see it as my baby. I can’t imagine selling my blog any time soon or ever.

    I once wondered why bloggers would sell their blogs while they were making so much profit. The I came across a post by Hamm Trent at The Simple Dollar. He explained that he sold his blog because he was overwhelmed with the management of the site and wanted to take a break from it.

    It’s a legitimate reason. But I think I’d be super happy running my blog if it gets to that stage. =)

  23. High Income Parents

    I’m getting somewhat of a late start but I’m right with you on the importance of building equity at this point. I’m a high priced laborer in a lot of aspects and building equity and sustainable income streams after my laboring years are over is becoming more and more important. Also, highlighting the important aspect of multiple was very beneficial.
    I have experience seeing national firms seeking out to buy physician groups at 7X multiples. When you factor in that most groups only pay 60% upfront, require a certain time commitment from you, and you get to pay 23.8% taxes on the upfront payment, it looks a lot let attractive.

    1. The earn out is something a seller should expect.

      I think I would be giddy to have a 1-3 year earn out period where I’ve got a salary and some more upside to my numbers while already having a good chunk of the payout already in the bank.

      1. High Income Parents

        That would be nice but the deals I’ve seen are 5-7 year earn out and only a “promise” of increasing revenue as collections increase. If that never materializes you just sold your company and control for nothing. Plus a lot of these deals include 20% stock in the national group that will eventually be worth something if they go to IPO. If not you got 80% of what you orignally thought was coming. There is also a non compete so if you sell and hate it, you have to move out of the city to work. Just like everything, the devil is in the details.

  24. I was seriously thinking of selling a property in Berkeley for a 60% profit in four years. This post has confirmed that I need to hold it. Thanks Sam!

    1. Ah, but I’m actually strongly considering selling one property now to simplify life. I’ll still be long two SF properties though.

      How many properties do you have? If it’s your primary, I would just hold on, forever.

      1. I have four. Two in SF (one which is my primary residence), one in Berkeley and another in Oakland. I actually like having rental property but I do have a full time job so it makes it difficult to be a landlord. I’m hoping to leave the corporate world permanently in two and a half years or less so I can focus more time on attending to them. I do have about 55% of my net worth tied up in real estate which I do find a little unnerving. The market is white hot in Oakland and Berkeley at the moment so it’s very tempting to sell.

  25. Sam,
    I like how you used a website as the basis instead of a traditional brick and mortar business…i am surprised that the site was sold for $2.5 million and not more…
    Take care,

  26. RetireOnDividends

    This is a fantastic post. Building wealth is all about building up cashflows and you should really think very hard before making any sales. Unless you can sell and create more cashflow with the capital you receive then it is unlikely to be a good deal. Remember that private business’ usually sell for around 2-6x multiples where as public business’ (stocks) tend to sell in the 15-20x range. So if you have a good private business that you think will keep growing then hang onto it like crazy and make sure you never put yourself in a position where you become a forced seller!

  27. In terms of your cash cows, I’m thinking of stocks. What are your thoughts about selling winners in order to rebalance your portfolio?

    1. Sam had another post “…success is mostly luck“. If you think the stock will continue to climb, hold it. I bought Apple in 2000, took profits along the way, I’d have 4x more if I didn’t sell bits along the way.

      OTOH, I’m now focused on dividend income. If a stock more than doubles, I’ll sell a portion and buy something with a higher yield. This way I increase my income and diversify.

      Rebalancing is usually done to manage risk, which beings us back to “…success is mostly luck”. We’ll know the correct answer in 3 to 5 years.

  28. Financial free

    Sam, can you or someone knowledgeable comment on where or how to buy a business? Like you said you can buy a business that generates 20-30% annually, much better than s and p.

    Recently I went to a dinner party on a ocean front penthouse. The owner is a young Asian guy. He mentioned he just bought another company so he works 5 days a week now. Sounded like he purchased both of the companies instead of starting on his own. Both are small import export companies. I have no idea how profitable they are but just guessing they should be in mid 6 figures.

    Any how I’ve heard of people buying 99 cent stores, gas stations, websites. Where do you go find these investments???

  29. Hey Sam -love you and your honesty about income vs lifestyle and free time. It is not necessary for you to post ” how to save money” type articles- this has already been done and by people who have a passion for it! Check out ” passionate penny pincher” for example. You can make a whole blog post of referrals for these–and interested readers would benefit too!

    1. Thanks Anne. But I think in order for me to grow, I need to focus on the basics of personal finance. It’s just hard for me to do, so the solution is to have someone else write about it.

  30. Your First Million

    I recently read a book called “100 Baggers: Stocks That Return 100-to-1 and How to Find Them” by Christopher W. Mayer.

    One of the main points in this book is that you need to simply “hold on” even during the tough times. If you find the RIGHT asset (whether it is a stock, a property or a profitable online business) and refuse to sell it even when it is tempting, often times the long term pay off is unimaginably massive down the road!

    1. Indeed. You must focus on long-term trends in investing in building. If you have built a business where the correlation with effort and reward is tight, then all you have to do is keep on producing and you will eventually get to those multi bagger levels of wel indeed. You must focus on long-term trends in investing in building. If you have built a business where the correlation with effort and reward is tight, then all you have to do is keep on producing and you will eventually get to those multi bagger levels of wealth.

      If you are not greedy for short-term gains, that is when you can make the big, big money. I think every single blogger who sold during the recession has tried to re-create the magic to no success. Do not let go of a good thing guys.

      1. Why can’t the founder recreate the success? Are the founders so easily replaceable by paid employees after the purchase of the blog? Do the new paid employee know as much as the founder after 1-2 yrs on the job?

  31. Sam, love your blog. To answer your first question, the barriers are higher for some than others. I work at a large industrial conglomerate – several of the conditions of employment are an IP waiver and a requirement to identify other income sources and/or business activities as part of conflict of interest reporting. The first (moderate) barrier is the legal expense to understand what intellectual property I would and wouldn’t own at my side hustle. The second (more critical) barrier is the career risk of identifying to your main hustle that you’re starting a side hustle, even if it’s not even remotely related or competitive.

    My current passive income sources are real estate and standard financial instruments. My main hustle pays really well, so I’m focusing on building my investments to a point where my passive income can sustain my immediate living expenses and fund the potential side hustle before I’ll even consider it.

    I’d love a blog post from you or responses from your readers about how they navigated similar situations.

  32. Agree with your blog , however at least thru my experience it’s a lot of work to maintain the cash flow numbers, the Internet is a very competitive landscape and unless your keeping your business in top form competition will start to chip away at your business, if not Amazon! It never last forever without hard work and innovation. So the theory of 20 hr work weeks are extreamly rare. Even with the subscription business. I would image the FS blog is low hours , I notice there’s no dates of your post ? How many do you post a month 1-2-3? Yep that’s low hours.
    I started an ecommerce biz 20 yrs ago , peaked in 2008-9 with free cash flow of approx 1.4mm had a number of 7 fig years, purchased our own bldg cash 2.2mm, paid for all quipment in cash etc. super conservative with money at both personal and biz level although i did make the mistake of wasting 175k on a super car. Stupidest thing I ever did, never even drove it, became embarrassed by it.
    Fast forward today , biz cash flow approx 500k and declining every year , I’m in my mid50s and pretty burnt out . I could pump it up thru hard work and long hours but I just don’t have it in me anymore. Have 5.2mm free and clear after tax in bank, plus the bldg worth approx 6mm. Could sell bldg net about 5mm after cap gains and recaptured depreciation. Leaves me with 10mm then it’s all about chasing yield , or could rent bldg for Pre tax cash flow of about 425k. Just sharing my story if it interest anyone . I had had a great run but it dosent last forever and yes I still have that stupid car sitting in garage under a cover never even drive it .

    1. Time to drive it! That’s a great run you’ve had. Surely you reinvested a lot of your cash flow and have made greater wealth as a result?

      It’s true, very few businesses last forever. Eventually you gotta pivot or get out. Hence the importance of a brand.

      1. Well , honestly I stayed out of the equity markets out of fear. But looks like I could have had some great returns if I didn’t , but Who knew , not me! . I wanted to preserve the cash mentioned above so I just stayed conservative, treasuries and such, it’s been a long road of low interest rates thanks to the fed. The only real investment gains were the commercial real estate I purchased to operate the business in , also as mentioned by someone above you want to keep your real estate in separate LLC from business , (also for liability) then you charge your company rent , tax advantages vs regular income, building repairs and maintanace are a biz expense etc.. At my age it’s about about yield and conservative investing now,,,,,for me anyway. As for supercar just not into it, need to sell, other than the car under cover I drive a rusty old pickup everyday, cheap timed iron man watch, live in my first home buffet style. no one knows nada. however I must say I do like the Russians yacht up above but I prefer his new “Sailing Yacht A” as I don’t like to burn fuel.
        FS Thanks for your blog site , I do enjoy it and always look forward to new postings.

        1. Waldo, love your story. Thanks for sharing. Another story of buying a building with business income… I really need to look into this…

          1. Jeff it’s the only way to go . I can’t tell you how many business owners I’ve met who in the end the building is the most valuable asset as they enter retirement. Just keep in mind location is of the utmost importance for future value /gains. I myself I’m in a major city.

            1. Now you’ve got me wondering whether I should buy the San Francisco office space for Financial Hmmm, seems like a no-brainer! After all, Apple is spending $5 billion building its own office. Why can’t I spend $2 mil to buy my own?

  33. Super fascinating read. Just getting started it’s always intimidating seeing figures like this (how the hell do you go from here to there?!) but knowing that just sticking with it is half the battle is good. I just keep on chugging away, making sure to learn along the way…

  34. Tim Kim @

    Thanks for the breakdown Sam. I’m constantly surprised what the potential of a blog “could” be, from a monetary standpoint. You were probably the biggest contributor to me starting my own, so thank you! And yes, never sell your cash cow! We talk about similar things at our company. “Protect the farm” “you don’t sell the goose that lays the golden eggs.”

  35. Wow, this is a post with a serious lesson behind it.

    I can imagine being offer such large sum of money for a business can be incredibly tempting, but it just shows that patience in your business can be even more rewarding.

    Were you ever tempted by the offers on Financial Samurai? It must be so strange to have people wanting to buy the blog off you – it’s your internet personality!

  36. Grant @ Life Prep Couple

    I guess selling is easy for some people when they have no desire for massive wealth. Sometimes it is worth it to get out and move onto something else. Especially if you don’t enjoy what you are doing. You are clearly passionate about your work and love what you are doing. Most business owners are working 80-100 hours a week and stressed out of their minds.

    1. The irony is that those bloggers who sold too soon didn’t have much money. So it was the case of being easily lured by money that caused him to miss out on the biggest money gains possible.

      Those bloggers who did it and passion and love and who also were comfortable with their financial situation have ironically made way more bc they didn’t sell.

      Have you seen the stock market and real estate market lately question

  37. Friendster and Myspace went bust…sometimes it’s better to take the cash now but hindsight is 20/20

        1. JB, I’m actually just looking for an honest reply from Joe. I guess its hard to hear tone from writing sometimes.

          I LOVE success stories from entrepreneurs who’ve built and sold businesses. See some of the other comments on this post. So cool.

          Of course, there will be times when entrepreneurs hold on to their detriment. It’s the risk on takes in believing they can do better than the offer.

          So Joe, given you’ve shared reasons to sell, do you have examples of a business you built and sold, which later turned out to be a good move? If not, it’s cool too. Just wanted to get some color on your comment.


          1. Sam, my argument isn’t if I’ve built or sold, it’s when you have a offer for $10 million and hold out for more and then your business drops to zero then you haven’t gained anything.

            It’s the same with housing. Sellers who get too greedy and don’t take a good offer, then the housing market turns south and they are stuck with debt.

            Say you bought the same house not in SF but a place where housing hasn’t recovered. Would you be holding on? It’s like that vacation property you bought and prices dipped alot. Only after 10 years have they gone back to normal but you had an opportunity cost by not investing in something else.

            Do you not think the founder of Friendster is kicking himself for not exiting when he could? $30-40 million is not chump change.

            1. Joe, you’re basically saying people should have sold after they saw their share price decline. That’s not very helpful or insightful.

              That’s like me telling everybody to go back in time and buy Facebook or Google at the IPO price. There needs to be an explanation as to the lessons learned and how to profit from those lessons in future opportunities.

              Why not share about your first hand experience and offer some analysis instead? This is what I’m trying to foster from the readership. Did not just rely on me for advice, but to think deeply before making a decision.

              I think it’s important to know where you are coming from. Can you share your current situation for more context? What are some of your wins and losses etc. It would be very helpful.

          2. I think it’s obvious that Joe is neither financially independent, nor has ever built a business or sold a business. This is where you can save time and improve efficiency. Just cut out the interaction with people who are easily offended and provide no value.

            1. The main part of Sam’s brand is experience sharing. Showing his readers’s what’s possible through example. It’s not always about efficiency, but I know he takes a lot from you… Look at his post the other day about the 15 points of advice for college grads. I thought it was a guest post from you!

  38. Great motivational post, but also not for everybody. I can understand fully when people will sell their business(es) or don’t start a business at all. Although many think it’s a low hurdle, most often it’s not. And that’s all due to the perception people have of starting a business. No wonder 8 out of 10 business will not make it past the 3 or 5 years or so.

    Owning a business requires hard work and you have to like doing it. It requires a different kind of mindset. I do agree that if it’s something you want, you just have to start trying until it works.

    1. Most people do not believe, so they do not bother to start. Hence, the next level focus. Based on your experience, what businesses have you tried and failed and succeeded at? And why do you think that was the case?

      One of my publishing goals is to actually write more posts about things that pertain to everybody to reach a bigger audience. For example, saving more money on day-to-day expenses. I know that is the way to grow because everybody can do that. But it just really doesn’t interest me so I’m struggling.

      1. Sam, to be honest, I think you are struggling because that sort of thing has been done to death. There’s plenty of people that bang on about riding a bike everywhere and eating lentils. There’s not so many people writing posts like this. Just my 2 cents.

        1. Steve Adams

          Yes!!! 8 million people can write about not buying $8 coffee. Not many people can write about the stuff you write about.

  39. Save Splurge Deny Debt - Cameron

    Great post Sam,

    I sold a restaurant business for a tidy profit once. It was a local place and eventually the selling price got out and everyone thought the new owner was insane. I was quite content but people need to look at actual numbers like you provided, instead of letting emotion take over.

    A lo of people that side hustle a business or become small business owners don’t think on a large enough scale. They see 7 figures and consider that a win. They don’t realize how close they could be to that FU money.

  40. Great logic, but the internet landscape is littered with corpses of once proud brands that could have sold for millions and are now nearly worthless. Ten years from now there might still be a Facebook, possibly, but chances are young people will have never heard of Snapchat, Instagram or Twitter. The whole concept of blogs and websites may be completely replaced by something we can’t conceive of today. I agree people should bargain for a fair value but they also need to realize that obsolescence is a huge risk in the tech world. Who would have predicted Amazon would be crushing retail ten years ago? But it is conceivable that somebody else will be crushing them ten years from now.

    1. Try to look beyond blogs and websites, and focus on businesses. I just used the website as an example bc that is what I know and then the Snapchat example. Expand the mind! There is endless opportunity out there. But I feel that whatever you create so long as you have a brand it will be portable to whatever you want to evolve into.

    2. The Long Haul Investor

      True many industries will go under a lot of change. Just look at railroads. Been around for a long time. Still there are many that failed over the last 100+ years, but the industry isn’t going away until we figure out another cost efficient way to move huge tonnage across land. As Sam says look at all the different business types out there. Many are boring, many are not. Many make money, many don’t. It’s all about what you feel comfortable with and know.

  41. I’m an employee and probably do between 1 to 2x my salary just via investments. That multiple hopefully grows with time. There could be a point in time where we surpass a normal business owner just as an employee without never being a real business owner. I believe that. However, As an employee, I’m always watching and learning and maybe one day will decide to be a business owner. Until then I take the money they give me and throw into various investments, in a fairly aggressive way, that also spreads out risk (at least I think).

  42. I think it heavily depends on your goals and motivation. Afterall the same logic can be applied to never retiring early. You’ve got an asset, yourself, making do XXX thousands a year, why would you give up your cash cow career. At some point the money may be enough and you might want to do something else with your life.

  43. Mr. Freaky Frugal

    Great analysis, Sam!

    I just started a blog as basically a hobby because I already FIREd. Don’t really need more money, but I’d never turn away any income it eventually generates. :)

    I used to be a freelance software engineer which was my own small business. I was making at least 2x as much as the employees I worked with at client sites. I could never understand why the employees didn’t go freelance. It was like free money!

    Another point about starting your own business is that you get to pick something you’re interested in and like to do. When you’re a “jobber”, you just do whatever you’re told and you become a Wage Slave. You just suck up the nasty bosses, pointless projects, and difficult co-workers.

    The saddest people I’ve ever seen are people that are Oblivious Wage Slaves – they’re clueless that there is any alternative to their misery. Your article helps people see a better way forward!

      1. Mr. Freaky Frugal

        You’re right – fear initially held me back as well.

        I had a good friend who started freelancing before I did and he suggested I give it a try. I told him I was pretty nervous about being out of work between gigs. I had a wife and two little kids.

        He said something like “I make more than 2x what you do now. If you find a 6 month contract and it ends in 6 months, you’ll have made as much money as you did last year. Do you really think it will take you 6 months to find another gig?” I thought “Hell no!” and took the plunge. I learned that sometimes you just have to walk right through the fear.

    1. Freaky Frugal, thanks for your interesting perspective. It’s better to have control of your destiny and not be dependent on others. I agree with you. Do what you like and the money will appear, eventually. Life is too short to being something that you hate. Peace be with you.

  44. Financial Loon

    I’m curious what level of effort/commitment was required to keep the personal finance site making $700,000/year? As a sole proprietor that would be something else to take into account when valuing a personal finance site. If you need to put in 30-40 hours/week to keep those figures, it’s fair to look at what other efforts his/her time could be spent on. Obviously if it’s time and effort free, he/she could have got a much higher purchase price (which also asks the question how finance focused the site was). But if they had other options/investments to pursue, it may not have been as bad a decision.

      1. I wondered the same thing. It’s really about 2 things; the amount of work and the security of the income.

        If the site is mostly SEO traffic, that could disappear pretty quickly. And if it takes most of the owner’s time, maybe the owner would rather do something else?

        I own several websites that require no work, so I’m not very motivated to sell. The earnings aren’t as stable as something like real estate, but at 99% margins and no work, there’s not any risk.

        1. In my eight years running this site, I’ve found the only people worried about SEO rankings are those who try to GAME the system and not write natural content that’s true and authentic.

          I have done ZERO SEO work beyond the basics of having H1/H2 tags, a searchable title, and a logical meta description. Search engines drive more than 60% of my traffic, up to 75% sometimes. SEO is a perpetual giving machine if you just write the best content possible in your niche. The search engines will naturally find you.

          1. There’s a lot of reasons why SEO traffic can decline. It could be a penalty or something less dramatic, like rankings sliding down or new competition. Google might take up more screen real estate with their own products or with more ads.

            SEO traffic is pretty great for website owners though, especially a website with super low expenses and no debt. I’d just be really uncomfortable paying a high multiple for it.

            1. I know first hand the pain of a Google penalty. My first startup took off in 2004. It was getting about 500k visitors/month by 2007, about 60% of the traffic being SEO. One day, it stopped ranking in Google. I have no idea why, but search traffic pretty much dried up overnight. From that point on, we couldn’t get any growth since we didn’t have a source of new, free traffic.

              Fortunately, I created a few side projects during that time that also grew. I currently have 3 websites that receive over 1 million visitors/month. I’ve also started a bunch of random sites for fun. In aggregate, all my sites get about 4.5 million visits/month and receive over 15 million pageviews.

              My experience has taught me that SEO traffic is great, but can also disappear overnight. It can also decline or go up, but it’s not entirely related to effort. There is a large luck component.

              Let’s say your search phrase “average net worth by age” stops being a featured snippet and starts ranking 7th. Most of your SEO traffic will disappear for that phrase. Now imagine that it happens to most of your search terms.

              My partners and I do all the programming ourselves and have basically no expenses. I’d be very uncomfortable if I had large expenses or debt that depended on SEO traffic.

  45. Financial Coach Brad

    SUCH a great post. This doesn’t only apply to bloggers but this is a great read for anyone with a business. As someone who built then grew a business over 18 years – turning down regular offers of purchase (until the 18th year) – I see a ton of truth and solid reasoning here. Good stuff.

    1. Thanks. I hope people look beyond my blogging example in this article and think about all sorts of businesses that speak to people’s hearts. There are so many opportunities to earn that also have great tax benefits and equity building potential.

  46. I have a niche software business, and after 20 years of working at it, it generates $700,000 year in revenue ($600,000 of that is subscription/recurring). May not sound like too much, but my wife and I, and now my son are the ONLY employees (and we work from our home). I net out personally $500,000/year. I switched banks recently, and they asked me what the value of my business was. I asked value to me or someone else? Someone else might offer me 2.1 million, but I wouldn’t sell for less than 7 million. Being the niche business it is, I don’t believe I’d ever get 7 million. That’s OK though, because I only have to work about 4 hours a day on it. And if you saw our website, you would have no idea it’s just 3 people working from home.

    I’m super focused on building personal net worth outside the business right now. After taxes (which are absurd), I’m able to save $300,000/year. Thankfully, we are debt-free at this point. I’m getting ready to start purchasing a few rental houses, too. We are at about 1.5M net worth right now (not including the business).

    I love your stories about stealth wealth, too. No one in our lives has any idea our “home business” is generating so much cash flow or our net worth. Not family; not neighbors. It’s very strange to think of myself as a multi-millionaire. I’m just a country boy that got into the software industry 30 years ago.

    I rambled a bit, but I don’t get a chance to share this with anyone. I’m stealth, remember? Thanks for allowing me to share.

    1. Awesome! Hang on to your business and grow that puppy to next level wealth!

      Got to love stable, recurring subscription businesses. I’ve thought about adding that business arm onto FS as well through the FS forum. We shall see.

      Stealth wealth 4 life!

      1. Mr. Frugal,

        >>What were the first few years like?

        Hard. Very hard. Actually the first decade+ was hard. I will give you a brief recap. Whatever you think of this recap, know that it’s only 50% of the story.

        I first started selling software in 2000. The first few years I only sold like 10K or so. This went on for a few years. I sold one-off’s until 2007. It was then that I had my first great business idea… renewals (subscriptions). Understand, this was prior to SAAS becoming big and Microsoft Office was still not a subscription. I looked at it pretty simply… if I don’t figure out a way to make this revenue recurring, I’m never going to be “rich” (and this will always be a struggle). The renewals built really slowly. I finally broke 100K in software sales around 2009. My early years were so “wheels off” I did not track sales very closely (and I did not file taxes for like 8 years). I eventually went to an IRS specialist around 2009/2010 and got caught up and paid all my back taxes (over a two year period).

        Quick back story, in 2005, and in 2007, twice I tried to bail out of this business and tried to work with friends in other new businesses. I was happy to have a steady 8K/month offer for both opportunities. My business life was so crazy 8K/month sounded like heaven. Both opportunities flamed out and I was back to depending on myself.

        In 2009 I doubled-down on my life and rewrote all the software in more current technology. I did nothing but code for 10-15 hours per day for 2.5 years. EVERY DAY. This work paid off as sales took off with updated, more modern, software.

        2011 was the first year I broke 200K, and things have been getting better ever since. Since 2011, here are our yearly sales:

        11/251,719 :: 12/375,824 :: 13/559,500 :: 14/538,000 :: 15/637,000 :: 16/703,000

        The yearly renewals are what has provided steady income. You may notice that 2014 was a flat/down year. As mentioned, our software is a niche business. Business has been flat since 2013. The ONLY reason 2015 and 2016 were higher is because in July 2015 we raised our prices (including renewals) by 50%! We didn’t lose one customer over it. That was my 2nd great idea. I knew I had to take a chance raising prices if I was going to be able to save enough money to create real wealth in my family. I’m 50, and had a negative net worth until just a few years ago (other than whatever my business was valued at). I had zero savings until the age of 45.

        Check out this crazy earnings record over last 20 years (via SSA):

        2016 $523,654
        2015 $422,723
        2014 $306,434
        2013 $285,990
        2012 $235,891
        2011 $115,761
        2010 $25,668
        2009 $25,825
        2008 $31,723
        2007 $27,420
        2006 $48,001
        2005 $58,659
        2004 $23,916
        2003 $1,398
        2002 $361
        2001 $0
        2000 $26,522
        1999 $69,799
        1998 $77,699
        1997 $105,112

        There’s a lot more up-and-downs in the story, but this is a good picture of what’s it like to be an entrepreneur. It’s not easy.

        1. Mr. Freaky Frugal

          Wow, that is a real roller coaster ride! You definitely got grit as Mrs. Freaky Frugal the Boston Marathon runner would say. And I’m glad it turned out so great in the end.

          Before I FIREd, I was also a software engineer. I worked both as an employee and freelance, but I made the most of my money freelancing. I also created a few products that I sold over the interweb. But I never did anything with renewals which is a really great idea!

          Anyway I had a business partner for most of the product business and we had total revenue of about $150,000 over 10 years. Nothing to get too excited about, but it was a nice side income.

          I owned the business completely when I FIREd 5 years ago, but by then I was sick of coding and didn’t want to do any more updates. I figured I didn’t have to work anymore so why should I do this Wage Slave crap that I hated. So I let the products die a natural death. I probably should have tried to sell it to someone else, but I just wasn’t motivate.

          Good luck!

          1. Mr. Frugal,

            >>You definitely got grit

            I inherited it from my father. I did not inherit wealth or financial advice from my father, but I did inherit grit (a hard work ethic).

            My (Vietnam vet, 101st Airborne) father died of cancer 4 years ago at the age of 69. He as diagnosed with stage 4 in December 2012 and was dead by April 2013. Prior to the diagnosis, he was STILL WORKING 40+ hours per week. No one was EVER going to outwork my Dad. He had to work as he had very little saved. His father died when he was a child. He never learned about money. He literally came from nothing. His Mom somehow raised a family of 5 brothers and sisters as a young widow. My father told me stories of sleeping on wooden floors with hogs running beneath the house.

            I grew up with a father who go up every work day at 4am or so, and got home around 6pm. He was available for a few of my school/sporting things growing up, but he never had a lot of time to play catch or teach me things (like working on cars). In my early 20’s I kind of resented it, but as I got older I realized — he was SURVIVING all those years. He didn’t have time to show me stuff. He was working or fixing something with the house or car. He was doing whatever he had to do just for me to eat.

            We had a period in my teen years where we literally ate rice and beans (flavored with sausage) and cornbread EVERY NIGHT for 6 months to a year. Money was so tight that’s all we could afford to eat. I didn’t understand it at time, and I was happy to have food, but again — my parents were simply surviving and pushing forward to the next day.

            My son sees me work a lot now (or saw me work a lot growing up — he’s 26), and I was able to attend more stuff of his as a kid because I worked from home, but I always tell him — no matter how much you see me work, I’ll NEVER be able to work (“outwork”) more than my father. Anytime I’m tired, or up late, or when I was coding constantly those 2.5 years, I always remembered “at least I’m not having to get up at 4am and work for someone else”.

            What drove me all those years is the desire to HONOR my father’s hard work and to change my family tree financially. Not to where they don’t have to work, but where at a minimum money would be there for education for future generations.

            DAD, thank you for teaching me to work. And I hope this (your) story helps others push through when times are tough.

            1. Jeff, it seems like you and I feel the exact same way! To not work hard would be to dishonor the sacrifices our previous generations made.

              My dad served in the Vietnam war as well, stationed in Thailand. My grandfather served in WWII.

              If you are up for it, I’d love to share your story through a guest post. There are so many stories from your comments alone.

            2. Mr. Freaky Frugal

              Jeff – Thanks for sharing that. My Dad was a WWII vet.

              Both my parents were children of the depression and very frugal. I had the “always live below your means” drilled into my head from a young age. Plus my Dad was always invested in the stock market so I learned some of that from him as well. I was very lucky!

              My wife has most of the grit in this family. She’s way tougher than I am.

        2. Now THIS is the American DREAM baby! Thank you so much for sharing. So inspiring when I read you feverishly coding for 10-15 hours a day, every day for 2.5 years. So money to see your hard work pay off.

          And I like how you write “create real wealth in your FAMILY.” It’s so motivating to build wealth for beyond yourself.

          It is crazy to think you had ZERO net worth just five years ago at age 45. If you have time, do you mind sharing what went out between ages 18 – 45 that led to some lean financial times?


          1. Mr. Freaky Frugal

            Sam – If Jeff’s willing, I’m sure his story would make an excellent guest post for your site! Just a suggestion…

          2. It’s a LONG story, but here are the highlights:

            18 – Moved from one state to another state to go to college (computer information systems)

            20 – Got married to a deeply troubled woman

            Twenties – Worked in IT

            23 – Had one son with that woman

            28 – Prior two years I worked on a software idea. Launched it. It didn’t pan out. Had debt.

            Late Twenties Into Early Thirties – worked two full time jobs to pay off debt; part of my work involved contracting on some MINOR software that I used for first product launch — I became an expert in this software (and this software became my future). It’s the niche that I wrote software for that has led to my success.

            30 (late 90’s) – I launched a website related to this software to do consulting and training. Had some success and kept one full time job while I did this consulting and training. My fulltime job was 3rd shift 3 days a week (12-13 hour shifts). The off days I travelled the US consulting and training.

            33 – Left my full time job after saving up 100K in bank; tried hiring a couple of employees; they screwed me by taking clients because they were jealous I was billing them out for $100/hour and paying them $35/hour or so. This all snowballed with clients not paying me for travel/consulting/training. Lost 100K fast and had to focus on myself again. Oh and I stupidly agreed to a $1500/month 3 year office lease around this time too.

            33 – Divorced deeply troubled woman — stupidly agreed to $1600/month in child support (son was 9 at time); should have fought this as this was based on old income and not what I was really making. This made things very hard for a long time and led to the not filing taxes. My financial life was a mess. I agreed to the $1600/month because I did not want my ex to have any piece of whatever my company was worth (or would become).

            This is pretty much where my previous story picked up. An ex-employee of a competitor in this software space contacted me for work. During our conversation the employee mentioned my competitor was selling add-on software for this niche industry. I thought “I could do that!” too.

            And you know the rest of the story from here!

            Again these are all highlights to a MUCH longer story.

            It should be noted I re-married around 2010 (after dating for a few years — had to make sure she wasn’t crazy). This woman, working side-by-side with me, supporting me during all that coding is a BIG part of my success. It’s very hard to be successful if your partner is a drain on your life.

            I’ve been purposely vague on what niche software I’m tied too. I’m sorry I can’t be more specific — trying to remain stealth. Speaking of which… I have a BONUS highlight (tip) for you…

            Being a one-man software company, I had to provide tech support for my software clients, right? Well early on I was contacting them via my real name (and customers knew my name — that I owned the company). This would lead to getting side tracked off technical issue, and I would get questions like: how big is your company, did you write the software, how many employees to you have — personal questions. It had nothing to do with me helping them with their technical problem, right? Well, I got the “genius” idea to start using an alias when I called. Now when I called I was “Joe with X company support”. All the questions stopped! To this day, I still call my customers using a different alias, and they have no idea they are talking to the owner of the company. I jokingly tell my friends I’m the highest paid technical support rep in the world. Haha.

            1. “33 – Left my full time job after saving up 100K in bank; tried hiring a couple of employees; they screwed me by taking clients because they were jealous I was billing them out for $100/hour and paying them $35/hour or so. This all snowballed with clients not paying me for travel/consulting/training. Lost 100K fast and had to focus on myself again. ”

              This happened to me! In late 2009/early 2010, I started a blog network. One of the financial components of the network was that we’d pull together our advertising contacts in a private forum and Google docs and create advertising campaigns. My network would get 10% and whoever created the campaign that made others money would also get 10%. Everything was working like a charm!

              One blogger decided to take all the contacts I had built and that others shared freely but privately and create a competing network. It was so disheartening and annoying, especially since she denies doing it yet advertised openly on her site what she was doing to recruit more bloggers.

              But in the end, it was a HUGE blessing b/c sponsored posts and text link ads were drastically curtailed the next yr due to Google changing their algorithms. Given I was forced to pivot, I grew. She didn’t pivot and her business died and her blog is about 1/60th the size.

              So grateful she was so greedy! :)

            2. I don’t know whether an NDA would be enforceable in civil court. And how much would you try suing previous employees for.. $100,000?

              In my field of investment banking and accounting it is industry norm to bill clients $100/hr and pay $35/hr to the youngster who is in his mid twenties. However clients won’t hop ship since there are additional departments we offer we can deep diving auditing, comprehensive financial, foreign expertise, a network of introductions. A lone wolf or two leaving the company can’t offer a comparative one stop shopping.

            3. Hi Steve,

              I agree normally a large company can hold on to a customer with more comprehensive services, but this employee specifically told the customer “me and one other guy are the only employees — you should just hire me direct”.

              What disloyal people/employees/partners don’t always understand is it isn’t only that you’re getting paid $35 and the owner is getting paid $100. The owner has office overhead, non-paying customers/bad debt (which I had two that really hit me hard during that time), and extra money to grow. Yes, when everything is perfect, if you’re billing $35 and making $100, your money can grow FAST, but it’s usually not that smooth.

              I’d like to note that one of the former employees reached out to me 12 years later and apologized. During that 12 years he had joined the military and made a career out of it. It taught him respect, and he made amends to the people he messed over in his younger days. It meant quite a lot to me, and honestly, I shed a tear or two.

            4. Sam, your story about the blog network is quite sad.

              Loyalty is the ONE trait I crave in people. Unfortunately, it seems to be the trait lacking the most in folks.

              You’ve obviously been successful, and it worked out for you, but if everyone would have remained loyal, I’m sure it would be even bigger, AND all would have participated in success.

              I admire people who are able to build a small company into a bigger one with a small group of loyal employees. There is a very fragile period of time when a disloyal employee can sink a company. If you can get past that stage and continue to grow, it’s a bit more smooth sailing.

        3. Jeff – thanks so much for sharing your story, with its ups and downs, in such detail and congrats on your success. How did you handle the early years of the subscription strategy, 2007-2009, when revenue was growing very slowly? Did you have serious doubts that it would work? Did you consider returning to a paycheck or did you have other sources of income that made it possible to continue building without much worry? (You said you almost bailed in 2005 and 2007). What made you stick it out?

          1. Hi Shaun,

            Thank you for your kind words.

            >>How did you handle the early years…was growing very slowly?

            I filled in the revenue with other related work. I still did consulting and training in this niche product, although way less than what I did in early 2000s. I also got a programming gig from an acquaintance that owned a consulting business. It was an additional 75K split over two years.

            >>What made you stick it out?

            The nice thing about renewals/recurring revenue is, as long as you don’t lose customers (or many), the revenue grows. So EVERY increase of 10K yearly in renewals was a celebration for me early on. I was like, wow, that’s almost another $1000/month! So I never had serious doubts it would work once customers kept agreeing to the new business model. I was living super cheap. Once I finished that 1600/month lease, I worked out of my cheap apartment. My bills, including the child support was about $3000 or so per month. So, once I hit 30K in renewals, I knew as long as I could keep it going, even at 30K in renewals, at least bills were paid.

            That said, when I tried to bail, it was because I knew the current software had a limited life (I was afraid of my future — I was offered 8K/month both times — twice what I was making). The current software was written in an older language, and I knew it had a short lifespan if I didn’t rewrite it. I didn’t want to put in all that work, and honestly, when you’re making less (way less) than 100K a year, I couldn’t dream of ever making 250K, or 500K, or now 700K.

            This is kind of a key point. I did ALL of that 2.5 years or rewriting the code NOT KNOWING if it would lead to more sales (or at least not 10X what I was doing in sales). I did the work JUST TO MAINTAIN the money as I knew I could at least eat/survive. The large increase in sales was an unexpected reward.

            You may have read before that the key to any business is cash flow. And I’m not referring to managing debt/cash flow (although that can be a part of it). I’m talking about when you’re starting out, even if it’s for years, if you can make just enough cash to KEEP GOING it’s makes all the difference. Because, if you take care of customers, even without a renewal business, if you’re in business a long time, you’ll have older customers come back around.

            Just as I type this, I literally just had a renewal customer worth $3750/year come back around. They thought they were done and didn’t renew a few months ago. Because we ARE still here, and they still need our software, we are making $3750 this month that wasn’t on our radar. When you can STAY IN BUSINESS for a while (and again, take care of customers), stuff like this happens all the time.

            BTW, I agree with your Ford analysis. Ford may eventually go out of business (30-50 years from now), but the next 10+ years, that dividend combined with the undervalued stock is going to be a big winner. You could easily make 30% on that stock just over the next year or two.

    2. I’m in a similar situation Jeff – my growing company was recently valued at $3m but my business partner and I each making over $500k a year (and I’m only working an easy 20-30 hours a week). Why would I ever sell??!! In reality my equity will end up being sold to some valued employees. I don’t see selling to an outside party. Plus we own the commercial building (in a separate real co and renting it to our operating co) and are building a nice asset (equity just passed 50% of value).

      Thanks FS – I agree (DON’T SELL YOUR CASH COWS!!)

      1. Chris, I love that you guys bought your building. I always worked from home, but in the last year or so, I’ve considered having my business try to buy a building like that. Real estate offers some interesting tax advantages, and I saw where even the rent I charged my business could pass through to paying off the note (like you’re doing).

        How long did it take you to make 500K a year? What’s the value of your building?

      2. You guys bank a total of $1,000,000 a year? Let me buy your business for $3,000,000 RIGHT NOW! :)

        Real Co renting to Operating Co. I need to write a post about this right now too. But after you sell me your business for $3M.

        1. Hi Sam,
          I bought an office condo in San Jose for my accounting firm for several reasons:

          1. build wealth instead of making money for a landlord
          2. freedom to remodel the office however I want
          3. more tax deductions due to depreciation
          4. by having the real estate and business owned by separate LLCs or Corporations, there are ways to game the tax code to pay less tax

          -Brian, CPA, CFP

      3. Ten Factorial Rocks

        Chris, your business success story is an inspiration. Would you mind sharing more details of your business? I would love to have you guest post on my website. Please contact me on my website if you’d like to take this forward.

  47. Vigilant Trader

    Your very motivating. The world needs people out there hustling and getting things done. Cheers

  48. Couldn’t imagine Financial Samurai being sold. It is a personal and honest account of experiences, as I understand it. Would they retain you on salary as a writer?

    1. And that’s kind of the beauty of it. There’s a personal story behind the site (versus a product review site with no story), but there is also a cataclysmic revenue generating cash cow because of the story telling. The best compliment I can get is when someone asks, ” do you actually make money from your site?” That’s when I know I’ve found optimal balance – nothing is forced.

      Some offers include a lump sum upfront, and an earn out after 1 to 3 years. Others have included joining the publicly traded entity with a salary, lump sum upfront, and an earn out. Others are straight 100% immediate acquisition.

      The goal is to develop equity that is valuable enough to sell on top of the revenue your business generates.

  49. Awesome post. We just started our blog and although it isn’t a business for us yet, more like an outlet to try and help the world. In the future we may change that perspective, who knows.

    Lewis Howes turned his business that already helps ppl to help even more by using it’s revenue to build a school in Guatemala.

    This post really helped to solidify that starting a business can be more gratifying to society if that’s your goal than laboring is. Keep up the great work!

    1. Sam’s analyses are great — but his enthusiasm and encouragement are as valuable, if not more. “Yes, growing a business is not easy. But at least starting one today is. Most people never try….”

      The funny thing is that getting out there, trying something new, learning beyond what you already know…all of these are part of the return on effort, too.

      1. Yes definitely agree! It has been said by many successful people that the journey is what teaches us the most about the destination, not the other way around :).

        I still feel like one should have an end goal in mind, but life changes quick so a nice *Subject to change* side note always helps.

    2. I also started my blog this year too and I’m aiming to turn it into an online business.

      Even though that’s my focus, I like the joy it brings when someone comments on one of my posts saying that it helped them a lot.

      It makes me feel like I’m helping out others who are looking for answers and finding them through my content. It’s an awesome feeling!

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