Real Entrepreneurs Are Successful, Don’t Kid Yourself

Enjoying the lifestyle of an online entrepreneur in Hawaii

Are you a real entrepreneur? Because frankly, real entrepreneurs are successful. If you can't generate enough business income to live, then you probably are not a real entrepreneur. There's nothing wrong with that. Just don't kid yourself into thinking you are.

According to the dictionary, “entrepreneur” is a term applied to a person who is willing to launch a new venture or enterprise and accept full responsibility for the outcome.

What the hell does that mean?  We all start things and accept responsibility for the outcomes, unless of course we don't because we expect handouts if things don't work out.

As far as I can tell, many of us want to be entrepreneurs because it sounds so sexy. We dream of starting the next multi-million dollar company, get recognized by Entrepreneur Magazine, and earn a fortune in the process.  Yet, this type of success is unlikely for many of us.  We don't have a great business plan, we run out of capital, we don't have charisma, and we lack the perseverance to keep on going.

The Real Entrepreneur Dilemma

Perhaps one of the biggest problems we have is that we think in an “all or nothing mentality“.  If we don't have instant, incredible success we call ourselves a failure. On the flip side, there are many online entrepreneurs who claim they are killing it, and that you too can make a fortune online if you just buy their eBook.

I love that circular pitch of selling information products that teach you how to sell information products so you can make money online.  It's brilliant, because people keep buying it, otherwise there wouldn't be these types of products flooding the market if people didn't.

Making money off of the minimalist movement is particularly peculiar. Can you believe that people actually pay money to buy a product on how to lead a minimalist lifestyle? Seriously, just sell all your belongings, live as sparsely as possible, and you are a minimalist! Online entrepreneurship is great, but without transparency of income and expenses, it's hard to take anybody seriously.

I really want you guys to be careful when following the advice of an online entrepreneur who shows no transparency. There is a reason for such opaqueness.

The reason is because they are making a laughably minuscule amount of income. You know what I'm talking about. The guy who makes $30,000 a year by teaching you how to sell something to make $100,000 a year. If you can trick enough people to subscribe or pay, you will get there!

Online Entrepreneurship: A State Of Mind

Many of us are all entrepreneurs based on the official definition of the word.  Yet, how many of us are “real entrepreneurs”? Some say being an entrepreneur is a state of mind.  An entrepreneur has conquered insecurity and plans to stick it to the man. That's nice.   Whenever you have someone who thinks their way is superior, you know there's a problem.

If you've actually built something from nothing and depend on the venture as your main source of income, then I say you are a real entrepreneur. However, there's one tiny thing that is important to point out. If you aren't making any money and heaven forbid, lose a lot of money over the years, maybe you aren't a real entrepreneur?

All of us can do absolutely nothing and make no money, hence you are no different from any of us who do nothing!  In fact, if you are a loss making entrepreneur for an extended period of time you might be much worse than anybody who does nothing! Oh, I can feel the annoyance of this fine logic now.

It's easy to look down upon the 9-to-5 community as an entrepreneur because in their eyes, 9-to-5ers don't take enough risks. Sometimes, they forget that 9-to-5ers might like a steady paycheck, health care, and security. Perhaps one is taking plenty of risks with their career within their organization? 

That doesn't matter to the entrepreneur, because anything other than complete risk-taking is frowned upon. That' OK with me. What we need to understand is that it's very difficult to become a successful, real entrepreneur. Hence, let them vent their frustration.

How To Be Considered A Real Entrepreneur

There's too much cream puff fluff.  I don't consider anybody a real entrepreneur if they cannot make the average per capita income of their state within 3 years.  That's right. If you live in California and make less than $42,000 a year from your entrepreneurial activities, you aren't a real entrepreneur.

The hurdle is $46,000 in New York, but only $30,000 in Mississippi. If you live outside of America, use the per capita income of your country as a benchmark. Seriously, this is the bare minimum of what can be considered an entrepreneur, especially given all the taxes, healthcare benefits and other expenses you must provide for.

You can be an entrepreneur in the making, but after at most 3 years, if you are not making the average per capita income of your state, you may want to give up and get a day job. And while working at your day job, if you still have the entrepreneurial itch, do both! I always recommend people at least start their blog on the side while working to see if they can gain any traction.

You aren't doing your future any favors by spinning your wheels and keeping a failed business alive for a prolonged period of time.  So many of us online think we're entrepreneurs. In reality, we're just hobbyists doing things on the side and collecting an allowance.


How Much Do Bloggers Make? A Lot More Than You Think!

Reflections On Making Money Online Since 2009


Start your own business: If you feel you're not getting paid what you're worth and want to boost your income, start your own business online on the side! It used to cost a fortune and a lot of employees to start your business. Here's my step-by-step tutorial on how you can start a website like mine in under 30 minutes. What used to cost a fortune and take an eternity is now so easy.

Brand yourself online, connect with like-minded people, find new consulting gigs, and potentially make a good amount of income online one day by selling your product or recommending other great products. Not a day goes by where I'm not thankful for starting Financial Samurai in 2009.

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Invest In Entrepreneurs As Well

Taking a leap of faith to become an entrepreneur is hard. Instead, you may want to keep your day job and invest in private growth businesses. This way, you get to have brilliant entrepreneurs work for you. Or you can do both! I certainly am.

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 can be a life-changing investment. 

Check out the Innovation Fund, which invests in the following five sectors:

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

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10 while 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. 

61 thoughts on “Real Entrepreneurs Are Successful, Don’t Kid Yourself”

  1. I think the average per capita income might only be $20,000 where I live, so I don’t have a very high hurdle! On the other hand it probably makes more sense to compare to how I’d do if I were working, though you can never have an apples to apples comparison because there are many different factors to both styles.

  2. Srinivas Rao

    One thing I appreciate about your content is that you’re never afraid to rock the boat and possibly even hit a nerve with some people, which I’m sure this post will. Now on to the question of what makes a real entrepreneur, I think that it’s something that seems to be evolving everyday. No doubt there’s tons of people starting blogs and every blogger who actually lives off their blog will tell you “your blog is not a business.” I’m one of those people that started with a blog and no real sense of a business model. That’s why I always say The Skool of Life is going to be difficult if not impossible to generate real income directly from. But I write it out of pure enjoyment. It’s a hobby, and it connects me to people that provide opportunity for income. With BlogcastFM I saw a clear opportunity to create something of value and monetize with a sponsor. It’s given me opportunities for lots of social media consulting work that I didn’t have before and I continue to build income streams as a result of it. AT this point the work I do on the side leads to more than what I get from my day job that is for 10 hours a week. But there’s no question that I’ve been caught in this confusion of freelancer/hobbyist/entrepreneur. We know that if we really want to this be the source of our livelihood it needs to looked at as a business. If three years is your mark, I’ve got about 22 months left to keep working on it :).

    Would I make more at a typical day job? Probably yes. But I also had the experience of a 9 month job search after bschool which led almost nowhere while the connections I’ve mad through the blog have given me consulting opportunities and much more. I have friends who have taken 9 to 5 jobs for 10 bucks an hour after getting an MBA because that’s all they could find.

    So ultimately it comes down to are we hobbyist collecting an allowance or entrepreneurs? I’m not afraid to admit that I was a hobbyist at one point, but that’s changing. I’m leveraging what I’ve built to create a consulting business and it’s leading to more than the 9 to 5 ever did for me considering I’ve been almost fired from nearly every job I’ve had. The transition from hobbyist to real entrepreneur is a frustrating one and there are many people who won’t make it. The low barrier to entry created by social media has done two things. It’s bridged a gap between creativity and technology enabling people to build things of value that they never could before. It’s also caused the information issue you talk about, the guy who makes 30 grand selling an ebook on how to make 100. I think that people who create things of lasting value that can sustain themselves solely on what they’ve built are the ones who can call themselves entrepreneurs.

    1. I think BlogcastFM is a great asset, and you should definitely be able to leverage that to gain sponsors and launching your interviewing or speaking career.

      The great thing about entrepreneurs is that often times they are intrepid. It’s amazing to see how hard entrepreneurs can work when their backs are against the wall.

      I for one am happy that Social Media has blown up, and the barriers to entry are small. It means that the trend is for real, which will bring in more business our way!

  3. We are all different indeed. Just want to be objective here vs irresponsible journalism/posts that say “quit your job and be an entrepreneur” from a guy who barely makes 50k/year trying to make money off you on how to be an entrepreneur. Ridiculous.

  4. Eh? Ok. Well, if the entrepreneur isnt creating as much value as he/she could just working a job of one’s skill set, then I donno. That’s negative value actually no?

  5. standardofliving9

    Problem is not fake entreprenurship. Issue is lack of people wanting to compete. People are way more concerned with innovation than competition. And these books you mention absolutely slow down competition. Its almost as if all there is to being an entrepreneur is to be inspired, this great idea comes, then you just believe, and then all of a sudden it comes true. Is there a book out there that tells people? Yes I am a successful entrepreneur. But I am not going to tell you this bs. Rather I ll share how many hours I worked and busted my ass in last three to five years and took shit from people and overcame adversity and faced self doubt on a daily basis and how everything was so much work and all the minutia and more and more work and not just some positive thinking to make it true and loving what you do so it doesnt feel like work is just a baloney, its all work, its all work, and you might enjoy it but its all work, its all nothing but work.

  6. Randy Addison

    Great article. Entrepreneurs are risk takers. If you take the risk you get the 50-50 percent chance of gaining the best thing you could ever ask from the entrepreneurial world. But if you do not take risk, you only get 100 percent failure without even trying.

  7. Hey FS – intriuging viewpoint for sure…meant to stir the pot – perhaps? You sound like a budding entrepreneur to me! :)

    Or perhaps coming from a bi of a jaded viewpoint with all of the bull-crap MMO stuff out there – which I agree is pretty much total crap – except for a few.

    I’m within my first year of “being an entrepreneur” full-time. I happen to be of that “woo-woo” mindset and believe that with the right beliefs and persistence (actually this is the key ingredient) it will happen. But there can be no relenting on this, none whatsoever. I’m not going back to the 9-to-5 – bound and determined.

    I guess we will see if I “make it” or not. I hope I do not only because I don’t want to go back, because I want to be someone who can teach others to do it and has really done it. I’m just not the kind of guy that would peddle crap on how to make it as an entrepreneur without having actually done it myself. Not only that, but not until I’m making six figures a year doing it.

    1. “I don’t want to go back”, you make a 9-to-5 job sound like a prison! Perhaps you should keep on looking for that ideal job while doing your entrepreneurial activities on the side? What business are you building?

      Not really stirring the pot here. This is actually my own mental assertion and goals, until I get off the pot.

      1. I’m glad you asked. I’m real, REAL passionate about this one. :)

        For me – a 9-to-5 is a prison. It was only a matter of time that I left that world. It was good while it lasted and gave me the skills that I need to build my own websites, create workflows, manage writers and VAs, etc.

        Out of college….I worked in the music business for indie management/booking and record label. I got to see very young people passionate about their business, scraping by until they became successful. When I left, they wanted me to stay, but I knew I had to go to the big city. I wasn’t ready to go out on my own, but there was something I picked up from those then young, passionate entrepreneurs.

        Then I worked 10 years in NYC in IT at a law firm, then a hedge fund. Corporate setting, but no more than 300 people in each firm. I worked very, very hard as I’m sure you do. I was the guy who stayed late, took on projects and stepped up to the plate when no one else would. When I left those jobs they begged me to stay, but when I set my mind on something, I do it – there was no changing it. One job had “plans” for me to be IT director. But the thought of it (no matter how much money I made) made me sick to my stomach. They even said they were “grooming” me. Yuck, the only one that grooms me, is me.

        What freedom is there in that? None for me!

        Oh and that hedge fund I worked for…one of the owners is a now billionaire. Guess what he used to do. UPS man! Think he’d be a billionaire if he worked his way up at UPS. Don’t think so.

        Then I realized – if all these people want to promote me, keep me around, then why the hell am I not doing that for myself? Duh?!?! If I’m bringing that much value to this company, why not to the world?

        I was always taking the responsibility, answering emails on weekends when I wasn’t required, taking the lead so why not do that for myself and make all the money, and get to be passionate about growing a business? That’s where my mindset is coming from because I work my butt off and won’t stop til I get it. But I got tired of doing it for someone else, that energy had to go elsewhere.

        But that’s just me, just like when I first came to NYC – worked in public relations and hated it. Wanted to work in IT and in 4 months had a job in IT with no experience. I set my mind on it, and did it, got that job and everything changed.

        All those stats about small businesses failing etc – yeah they’re true. But so what? Doesn’t concern me, I’m not one of those who’s gonna fail.

        So why do people fail? Most people have no control of their beliefs and listen to the garbage and negative stuff. They don’t even know those thoughts are constantly in their mind. They don’t stop to think what they really want, and what they’re being told, they just accept it as truth. Just take what they’re given, without ever pondering it, if They listen to “90% of small businesses fail” – instead of flipping that statistic and thinking – “I’m going to be in that 10%. Whatever it takes.”

        When you have the right mindset, passion you will do what it takes, and I have a feeling you are on your way there already, maybe you don’t know it yet.

        I recently started doing something called “coworking” where freelancers and entrepreneurs get together to work in a common space. It’s becoming quite a big movement. You should hear everyone talking about how they could never go back to a 9-to-5 and how they love the freedom of working for themselves. It’s very, very hard to pull away from a job, where everyone thinks the status quo, filled with fear about venturing on their own in a collective mindset. It takes a lot of fortitude, and hell it took me a long time to get here, to venture out. Once you even mention starting the business, watch all the naysayers come out “oh that’s really difficult, are you sure?” That’s their own fear, wishing they could do it, trying to bring you back. Indeed misery loves company.

        Really there’s nothing wrong with a 9-to-5 if you are happy there. But I’m clear it’s not for me, and I won’t go back because I know I won’t have to. You have to surround yourself with entreprenurial types and absorb their thinking, have the conservations. Then all of a sudden you have a business partner (like I just got).

        Wow – a 800+ word comment, lol maybe I should have done a guest post instead. Sometimes I just can’t help myself.

        1. Nice comment!

          I like have you have so much confidence in yourself. Sounds like a good coworking venture you’ve got going. There are a ton of naysayers, I’m not sure why. Boredom, jealously, not wanting another to succeed? I donno.

          Entrepreneurship is nice… .the idea is nice… the rewards are nice… but it’s important to realize that the honeymoon wears off at some point (3 yr deadline for me), and something has to be created, otherwise, we need to recognize what our endeavors really are.

  8. Ouch! But what you’re saying makes sense… I for one wonder if the people who says “you can make money online” is really earning enough buff even when they’re not selling their ebooks on “how to make money online”. I mean, most of the successful blogs I know are about that one particular niche and their customers are of course in the same niche who wants to be as successful as they are.

    But for those who thought they are online entrepreneurs, have failed for a long time and out of direction. When do you say that enough is enough and should just stop after all the work done, all the money and time spent? A year? 2 years? when?

    1. Well that’s the thing…. I say have 3 years… if you can’t make the per capita GDP of your state at least after 3 years, get a day job and work on your ‘hobby’ on the side.

  9. Terrific article. I guess it is sensitive because we are dealing with egos, pride, success, failure, money, passions, and dreams. All slightly hot topics to begin with. Couple points. A few comments knew of friends who made it, after the 3 year window, great news! But you have 20/20 hindsight working. You can justify their dream chasing for years because they in fact did make it. If the entrepreneur is super talented and just haven’t found their magic bullet or got discovered, stand out of the way and more power to them. However, what if you know an average joe? Do you let them go on chasing their dreams, unchecked? For example, do you let a struggling actor continue going on auditions?

    This article brings balance to a very one sided debate. 9 to 5 sucks. Don’t work for the man. You are not chasing your dreams in a cube. I agree with with all these as reasons to work for your self. But I think it is foolish to not be calm and objective when the tables are turned.

    Final question. Sam, do you consider Financial Samurai a hobby or a business?

    1. Thx Buck. Yes, at some point, we need to recognize we aren’t cut out for it and get back go reality. Not all of scan be successful.

      Financial Samurai is 100% a hobby. is also a hobby, but I can see it growing into a very dynamic and profitable venture over the years. Once you are a Member, you’ll see what the real potential is!

      1. Great, looking forward to it!

        This just came to be last night. In theory, a person with a 9 to 5 job has two options, go get another job or attempt to make it on your own. Doesn’t mean they will be successful, just counting broad options. For an entrepreneur grinding away for years, at first thought, only has one option, make it or else! After investing so many years into their projects, it will be diffcult for them to re-enter the workforce. Also, the thought of taking a low level job is beneath them. Just off the cuff, entrepreneurs I know have big egos. I guess you need one to venture on your own and stay off the beaten path. But in some cases, their ego becomes their own worst enemy.

        1. Well said Buck. Yes, our big egos and our delusions often prevent us from ever succeeding. I’d like to think that in 2.5 more years I can great this fantastically profitable, and interactive PF Network, but maybe not. I’ve given myself a time frame.


        2. Sorry this topic hits close to home. How would you deal with someone who doesn’t believe in time frames? “Living in the moment, day by day. Who knows what tomorrow brings?” Second, how would you deal with “being too structured, rigid, dealing with metrics and timelines could actually slow you down from your goal?” Finally, “All in thinking is motivating me to find my dream! It’s do or die!”

  10. Can we have a separate designation for those who are trying but haven’t made it yet… Maybe an “Entrepreneur in Training” or EIT for short :)

  11. Hi Sam,

    Some previous commentators pointed out, quite correctly, that perhaps those with true entrepreneurial blood may have to make some big mistakes along the way especially at the beginning and that these people would then fail to be classified as entrepreneurs under your definition. The resolution, however, is quite simple: what separates the “real entrepreneur” from the “wanna be,” is what that person does with those same mistakes after the fact. Have the failed attempts indeed become excuses or does the person use them to be successful the next time around?

    Not everyone is meant to be an entrepreneur as a life pursuit- even though it looks “sexy” as you say and often seems like the fast track to fame and riches. It all comes down to being honest and in touch with yourself, your strengths, and weaknesses. It’s not about process or place, it’s about a person’s nature. An entrepreneur can’t be anything else- whether it’s online or in person- just as a natural leader will unavoidably rise to the top of any organization like oil on water. Those who possess the passion, strengths, and skills to start and run businesses will have the unavoidable itch and drive to do so, and it’s those kind of people who can’t help but be successful.

    Regarding the online “snake oil salesmen” who promise quick success… I actually just wrote a post, “Picking Out the Experts from the Actors: 10 Tips to Help You Decide Who to Trust Online” that addresses these issues.

    Adam Gottlieb

  12. One of the major reasons why I wrote this post was because there seem to be so many entrepreneur wannabes where I’m just shaking my head.

    I don’t want to be a wannabe, so really, this post is a guideline for me to have some goals and not be another cream puff.

  13. Darwin's Money

    I don’t think being an entrepreneur has anything to do with income (once you reach a reasonable level). Plenty of stodgy old-economy lame pricks make 7 figures while some of the most enthusiastic, innovative people I’ve met haven’t really made much money from their grand ideas. You often read the stories about someone who mortgaged their house to pursue a dream idea and they made the big-time. But the guy who mortgage his house and lost out because someone else beat him to it? He’s still an entrepreneur. He just had bad timing, bad execution or got screwed. I think it’s more about attitude, risk and ideas than it is about income.

    And no, bloggers aren’t real entrepreneurs. What you did with Yakezie was entrepreneur. routine blogging isn’t. Millions are doing it, the barrier to entry is nil, there’s little innovation involved and no risk.

    1. Unfortunately, bad execution, bad timing, but whatever are just excuses, b/c on the flip side many MANY people are suceeding.

      Can’t a blogger be a real entrepreneur, if they build a massive blog, use it as a sounding board for products they create, and make a killing?

      Thanks for your words on the Yakezie. We’ll see where it goes, as I’ve got a 10 year plan!

      1. I also don’t consider bloggers entrepreneurs.

        My definition would be:
        Someone who builds a new business, product or technology, and invests considerable amounts of money and time into the new business, product or technology.

        Writing a blog article for an hour a day wouldn’t meet my criteria.

        Spending $100K + 2,000 hours of work on a commercial website does make you an entrepreneur, and so does opening a restaurant or any other “real world” business.

        By the way, my first “serious” online business (a directory website of some sort), didn’t make any money in the first 2.5 years. I sold my shares for just $30K.
        The people who bought my shares invested in sales/marketing, and the website is still running commercially 7 years later, and employes 15 people.
        A success or not?
        Is that real entrepreneurship?
        In my mind – yes to both.

        1. So creating something out of nothing and making money from an online business isn’t considered being an entrepreneur? Could you please explain?

          There are many blogs who make $10,000-$50,000 a month after expenses. Is that not a real business versus some retail shop? What about selling a media company for $5 million?

  14. If you buy my online course, I’ll teach you the definition of an entreprenuer!

    Sam, I have to respectfully disagree with your three year rule. It’s certainly not a bad idea reasess after 6 months, 1 year, 3 years, etc….but just because you fail doesn’t mean you’re not an entreprenuer. In fact, it may not even mean that you’re not a successful entreprenuer. It could easily be a matter of bad luck, timing, or you have a longer term investment horizon. Most successfull entreprenuers fail at a number of businesses before they find that “magic bullet”.

    I actually know many briliant entrepreneurs who have had many wild ups and downs over the years and a three year down period is nothing.

    And if you have the means to survive for a few years and are building a company, sometimes you have to pay your employees first with revenue that comes in and invest in growth. Some companies do take longer to mature than others and those often have some of the biggest payouts.

    Someday we’ll have to sit down over a couple a beers and swap entreprenuership stories.

    1. Sounds good mate. What is your definition of an entrepreneur then?

      My intent is to lay some ground work, as if we are to give up our jobs and go for the big E, we should have some types of goals and hurdles, otherwise.. there’s really no point. An unaimed arrow never misses right?

  15. Bret @ Hope to Prosper

    I admit to being a hobbyist, but I haven’t quit my day job. I’m going to double-dip for a while and I am investing all of the proceeds from my venture. When I do finally cut the cord from my 9-5, I don’t intend to starve.

  16. JT,

    Did you ever read Liar’s Poker by Michael Lewis? Seems like it is ok and encouraged to blow up a customer so long as the trading firm makes money on the trade…

    You are correct though, working for someone else means there can be decisions made that materially hurt the business but based on your deflection and political skills, you may well be able to ride it out without hurting your career.


  17. I think an entrepreneur is having a successful business – one that provides enough for you to live on. That of course is subjective, because some people just naturally want less than others. Your per-capita income benchmark is great, sam – it lets people know that you’re actually able to live off of your business. I think that entrepreneurs need to be profitable at some point – if you’re not, you’re just losing money and that is unsustainable. You may be able to call yourself an entrepreneur if you’re losing money – you wont be one for long.

  18. I had an idea for a post about being careful who you listen to for advice…as if they were so successful why do you care about you as a client (specific example in my head is the $39.99 on how to make 250% in penny stocks). If you can make 250% in penny stocks the 40 bucks means NOTHING.

    Another one I don’t get is the obviously not wealthy guy selling me a $19.99 e-book on how to become wealthy lol

  19. No doubt we should pursue our dreams forever. Let’s just do so in a more responsible way after 3 years of trying i.e. get a day job and moonlight on your entrepreneurial activities on the side. There is a real chance of failure, where you get absolutely nothing in return. If you can do both, while socking away some savings and putting those extra hours in on the side, and THEN jump once you see the venture take off, then do it.

    I have HUGE respect for entrepreneurs. Let’s not delude ourselves into believing we can all become real ones.

    1. Didn’t Facebook take more than 3 years to make a net profit more than $50k?

      Of course, Zuckerburg turned down the Microsoft buyout offer on the music rating program..

  20. I think it’s great that you challenge people with defining a word; the responses are varied and worth taking time to sort through. In your post you said “real” and yet the other people responding are saying “successful” so it begs the question, does “real”=”successful”?

    I have a friend who owns a trucking business, he has 6 semi’s and 10 drivers. Not all of the drivers are full time, not all of them even live in the same state. Last year his revenue was close to $800,000 and yet by the time he paid salaries, insurance, equipment maintenance, taxes, workers comp, disability, social security, etc he showed a net gain of $32,000. I know because I created a software platform which helped him track fuel use and purchases across state lines.

    There is a lot of work that goes into a small business and being a entrepreneur and even though he “made” $800,000 what he actual brought in at the end of the year was substantially less. He is actually thinking about giving it all up because the hours needed just to fill out of the forms to be in compliance with the government is outweighing any benefits he gets from being his own boss.

    He actually got a letter from the IRS last year telling him that if didn’t show a profit they would consider his trucking business a hobby. I told him I only wish I could afford to have a million dollar hobby.

    1. Patrick – It is quite interesting to read the various responses. Some have even sent some very disapproving Twitter messages to @FinancialSamura…. but, there’s no substance since it’s only 144 characters long.

      Thank you for providing an example of what the IRS considers as a hobby vs. a business, the reality of what a “$800,000 business” is, and the difference between real and successful.

      People, don’t be fooled by claims of having a million dollar business unless you know what the operating costs are. Top line revenue is only one indication. It’s what flows through to the bottom line, and the exit package that really count.

      I guess this topic is sensitive, if you’ve tried and failed as an entrepreneur. However, I think it’s very commendable for anybody to try and fail. So long as they are trying. After a certain point, if you one should probably recognize that maybe they aren’t cut out to be an entrepreneur. But it is the human spirit, and a lot of delusion that keep people going that leads to suffering and unhappiness.

    2. Patrick, your story sounds similar to a lot of small business owners. I’m no owner of one, but I do like to have conversations with owners just to get their take on their ventures. You would think that being a business owner is a good thing, but from what I gather, it can be quite draining. I share a story a couple of weeks ago about two outstanding Realtors who says that sometimes they feel that it would have been easier to continue working under their last corporate boss, paying the expensive franchise fees and all.

      I think that the key to ownership is having it run successful without having to be present; in other words, generating passive income from it. As long as one has to do the bulk of the work, I’d argue that they are not yet successful. So real does not equal success no more than high revenues with high operating costs equal success.

      Then again, everyone’s definition of success is different–Even Sam’s. :)

      1. @ Romeo- most people who I know who are running successful growing companies are working their butt off… I’d say bonds and stocks are better for generating passive income. It’s a bit harder with Bernanke monetizing the debt and trying to keep all rates of return low thereby forcing people to jump into the next bubble.

        And to be lucky enough before the next bubble pops again…

    3. Patrick,

      One thing you may need to consider- that is your friend may be depreciating the value of his trucks and also paying off any loans on the semis… so after a few years he owns 6 semis that may be worth some $600K or so (not sure the price on secondhand semis).

      But a net profit of $32k on an $800k business is pretty skimpy.

      I am in high volume consumer electronics- in spite of some big revenues, after investments in new capital / plant (which is necessary to keep the business running in the future) we are often left with nearly nothing! In other words EBITDA is pretty good but CAPEX can be high so net cash generation is not so good. In this case I’m glad I’m a hired hand.

      The airline industry is another great example of this. So is the semi-conductor industry. Arguably autos as well.


  21. I would have to disagree with your narrow definition of a “real” entrepreneur. A certain income level, especially the states average shouldn’t be the benchmark. If someone starts a business and is fine making just 20,000 a year from that to cover their needs then who is to say they aren’t a real entrepreneur. I don’t think you have to make millions to be successful.

    1. Neither do I. Just the average per capita income of your state or local area suffices. It’s important to think about opportunity costs, which is what I encourage everyone to think about latently, but nobody has pointed out yet.

  22. Aren’t we all hobbyists turned wanna be entrepreneuer? Even the benchmarks in PF blogs started as this. It was only after they found that they can make money sharing their thoughts online that they focused on it fulltime.

  23. What makes an entrepreneur is someone who starts a venture independently. There can be successful entrepreneurs and entrepreneurs who have failed. I don’t think being an entrepreneur revolves around income unless that’s what the person considers to be their measurement of success. -BF

      1. EXACTLY business are there to make profit money revenue what ever you want to call it… you may not like it but that’s what they are meant to do… or have i got it wrong?

      2. Financial Samurai,
        You asked what is important besides income:

        1. Independence.
        Being able to do things your way.

        2. Creating something out of nothing.
        I believe entrepreneurship is the only real magic in this world.

        3. Satisfaction.
        The Satisfaction you get from people using and enjoying your “creation”.

        4. Hope.
        Starting a new business gives you hope for success, unlike working a 9-5 job.

        5. Utilizing your skills and talents.
        I get to use and develop much more skills in my businesses, than I ever did as an employee.

        6. Freedom.
        Being able to work from home, and at your own schedule.

        I can probably go on, but I think I made my point already.


  24. I am not sure that income level determines if a entrepreneur is “real” or not. The IRS may feel you are conducting a hobby versus a business, if you do not turn a profit. Is the intent to make a profit? If so, it is a business. To me, the profit achieved, similar to rankings are an indication of success. Not all entrepreneurs are successful nor should everyone be in their business.

    Although I have ambitious goals for my blog in ranking, I had very modest goals financially. I viewed my income to be tied to how many hours I worked on the blog. On one hand I am not blogging to earn a terrific income, however I entered this venture to be successful. If I execute my long range plan well, it will be very successful and very lucrative. This is very new to me, so I am reluctant to say how much is appropriate.

  25. No way, you definition is too narrow. It’s ridiculous to say an entrepreneur has to make a certain amount of money. There are many many unsuccessful serial entrepreneur. One of my financially independent friend took over 10 years to get there. He started his own company right out of college and didn’t make any money for years and years. If he gave up after 3 years and get a 9-5 job, he would never be where he is now.

    My dad is a serial unsuccessful entrepreneur. He started so many businesses that eventually folded, but he just keeps going and starting over again. You’ll read about him soon.

    An entrepreneur goes his own way and failure isn’t going to stop him.

    1. I have never heard of the term “serial unsuccessful entrepreneur” before. Thank you for introducing me to that term. Are there other words that might replace that term?

  26. savvysavingbytes

    I’m not a label lover so I don’t think it’s important if an entrepreneur is real or not, or whether they’re making a certain amount of money or not. What matters is how comfortable, how at home that entrepreneur feels in that role. Some people take a longer time to get started than others. If entrepreneurs go too long without success, their empty bank accounts will eventually send them a solid message.

    I absolutely agree with you on the craziness of all these self-help business and life books, where people with dubious career achievements making peanuts write books on how to make a zillion bucks doing this or that – books that could be written by just about anybody on the block. I think one reason they sell so well so well is it’s a heck of a lot easier to buy a book on a subject than dive in and start making big changes in your own life.

    1. It’s about taking advantage of people in their weakest moments, which is why I encourage everyone just to take their time before parting with their money.

      More of us are entrepreneurs based on your definition. Determining how comfy one is is good!

  27. Good topic, Sam, and thought-provoking. By this metric of financial success and longevity, there scads of “entrepreneurs” who fail to qualify as such. I’ve done business with suppliers where the owner had purchased an existing business with a chunk of capital (earned or unearned, more likely unearned). Their management or people skills were lacking though, and the business suffered as a result. There is one example in particular that sticks out, a manufacturing business where the new owner larded up the payroll with inept family members. A snapshot in time a year after purchase would have shown a successful “entrepreneur” with a busy factory. A year later, not so good: alienated customers, shrinking backlog, and a company on the way down. Year three, down to bare bones. Year four, closed down.

    1. The one thing I do admire though are people who try, and give it there all and take risks. It’s awesome. Just after a while, if you’ve failed, it’s Ok! Just don’t be delusional into thinking you’ll be some great entrepreneur earning big bucks bc that would be a disservice to anybody who depends on you, and yourself frankly.

      1. Well said. No doubt, sound entrepreneurial risk-taking is to be admired. Starting
        a restaurant where the sole menu items are meat and potatoes (because it’s
        what the owner likes to eat), is foolhardy.

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