Why Start A Business? A Better Life Of Course

Start a business, lead a better life
Graphic by CKongSavage.com

You may ask yourself: why start a business? The better question to ask yourself is: why haven't I started a business already! The pandemic forced many of us to get creative. And business formation has skyrocketed since 2020.

When I started Financial Samurai in 2009, I didn't start it as a business. I started this site as a cathartic way to get through the financial crisis. I had a job, but was losing lots of money in the stock market and real estate market. Writing provided the creative outlet I needed to get through a difficult period.

But partially thanks to starting Financial Samurai, I was able to walk away from my day job in finance in 2012 and do something I loved: write. More than 13 years later, I still write three times a week and publish a weekly free newsletter. Now, Financial Samurai is technically a business as it generates enough online revenue to take care of my family of four in expensive San Francisco.

Why Start A Business? A Better Life

My #1 business goal is to leverage my online media company to lead a better life. A better life to me means getting to do what I want in a fun way while taking care of my family. To do so, I need to maximize profits and minimize expenses since it's my money at risk.

In contrast, for investor funded startups, it's more about growth at any cost with less concern for profits because they are spending other people's money. Don't join a startup if you want to get rich!

My plan is to never rely on anybody for money. Bootstrapping is the way to go because one day funding may dry up.

Let's take a look at a venture-funded company called Buffer, which enables you to schedule your social media shares online. Buffer has raised about $4M and is valued at roughly $40M based on their last round of funding. I'm thankful Buffer is completely open with their finances, because it allows other entrepreneurs to learn from their actions.

Let's have a look at Buffer's monthly Profit & Loss statement to see why running a business can provide for a better life.

Business Income And Expenses

Save On Taxes With Work Retreats
Buffer App Co. P&L

P&L Feedback

If you're wondering why start a business, all you've got to do is zero in on the expense line item Retreat.

People are expensive. 

Salaries account for a whopping 65.6% of monthly expenses. With ~65 people on the payroll (they say 90 in one post, but only list 65 in their open salaries spreadsheet post), that averages to $3,445 a month or $41,342 a year per person. The figures are inline with the median income in America.

Managing people can be cumbersome. Ideally, you want the fewest people possible to generate the most amount of revenue. In Buffer's case, the average revenue generated per employee is about $5,000 a month. Not bad, but not amazing.

Profits are small.

For a software company, having a 4.6% operating profit margin is very low compared to the industry standard of 20%+. Can you imagine spending over $300,000 a month to only make $15,666 in operating profits before tax? Or what about spending $10,000 a month to earn just $460 a month in operating profits? At least Buffer is profitable, unlike many other startups who will inevitably shut down.

Profits margins can be much higher with a lifestyle business. You can easily run your own website for less than $50 a month and generate $5,000 a month in operating profits for a 98% operating profit margin. Or you can pay yourself a $2,000 a month salary on $5,000 in revenue and $50 a month in website costs and earn a 58% operating profit margin.

But the reality is, since you can distribute the remaining $2,900 in company operating profits to yourself, your personal operating profit margin is much higher.

Buffer spends more on retreats than they make in profits. 

We've finally got the the line item in the P&L that answers the question: Why start a business?

Buffer spends $17,588 a month on retreats while making $15,666 a month in profits! As far as I know, Buffer App hasn't been audited by the IRS or gotten into trouble with their finances. Given they are publicly showing the world all their finances, everything is probably legit. Therefore, Buffer's financial moves may serve as a guide for other entrepreneurs.

There's a running joke that says the reason why non-profits are unprofitable is because they pay their executives all of their profits. As a small business owner, you can either decide to make more profits and pay more taxes, or you can spend more of your revenue on you and your hard working employees. Buffer has clearly chosen the latter.

They were planning to spend $400,000 on a company retreat to Berlin. That's awesome! You can start a business to spend it on boodoggles.

Lower taxable income.

There are other random things in the spreadsheet such as The Tools We Use, Kindle Books & Culture, and Other which help lower Buffer's monthly taxable profits by around $17,000. If we use a 30% effective tax rate, that's a ~$5,100 tax savings.

If they wanted, I'm sure Buffer could easily cut out over $30,000 in non-employee expenses each month. But why not pay less taxes and let all employees enjoy life more?

Making $30,000 more in operating profits a month simply means a $9,000 higher monthly tax bill. Sure, they would get to retain $21,000 in earnings on their balance sheet. But it sounds like they already have enough money on their balance sheet.

A hybrid business model. 

Buffer is stuck in the middle where they want to become a big business with venture funding, yet also want to be a lifestyle business as well. Given this hybrid, it may be hard for them to see an exit any time soon. They are spending a little too much on extraneous expenses IMO. With no exit, all you've got is your salary.

Unfortunately, salaries are light for all – except the top employees – compared to the salaries for similar positions at larger firms. I think the management knows this, which is why there's such an emphasis on work retreats and other fringe benefits. The latest news is that it looks like even these fringe benefits may be going away as they recently announced layoffs.

Buffer app salaries
A sample of Buffer employee's latest salaries. Not bad for the CEO, COO, and CTO. Not sure about the others.

Build The Business You Want

Focusing on absolute dollar amounts is often misleading. Therefore, I recommend every entrepreneur look at their expenses as a percentage of total costs and revenue. ~5% of total revenue for work retreats seems reasonable.

Alternatively, you could spend as much on work retreats as you make in operating profits, but that seems excessive. The only thing I'm amazed about with Buffer's P&L is the 65%+ of revenue going to salaries. Even the much maligned finance industry doesn't pay more than 50% of its  revenue for salaries and bonuses.

Like Buffer, I enjoy going on business retreats. I've always wondered what is a reasonable amount of money to spend on business off-sites. Thanks to Buffer now I've got a better idea.

Here's my estimated business retreat budget:

Two Economy Plus roundtrip plane tickets to Honolulu from SF: $1,100

9 nights at The Kahala Hotel & Resort: $5,400

Food for 10 days for up to four people: $2,500

Team bonding activities: $2,000

Total: $11,000

Sample itinerary breakdown:

Day 1: Meet main FS editor for lunch at Ethel's Grill in Kalihi to discuss how things are going. General catchup to make sure my editor is happy with his current duties and salary.

Day 2: Meet with editor to discuss editing efficiency. Attempt to go from old school editing to uploading my drafts in Google docs to streamline the editing process. Suggest editor skim posts first to understand overall message, and then get into the weeds.

Day 3: Meet with business partner to strategize on editorial calendar for the second half of the year. Brainstorm a list of 60 post ideas to work on. Go to the farmer's market and buy all the white pirie mangoes we can.

Day 4: Team building day. Spend the afternoon snorkeling in Hanauma Bay followed by jet skiing close by. Dinner at Alan Wong's for four that evening.

Day 5: Review various business categories and compare month over month, quarter over quarter, and year over year trends. Come up with revenue forecasts for each business for the following year. Decide which businesses to cut, and which businesses to emphasize in a downward trending economy.

Day 6: Strategy session to discuss community building. Have an open discussion on how to deal with angry commenters or spammers. Discuss new features to add such as an FS forum. Review social media initiatives and see whether time spent is worth it.

Week Two Business Trip Itinerary

Day 7: Team building day. Spend the morning hiking up to Manoa Falls. Eat some poke at Fresh Catch and then hit the beach for some boogie boarding.

Day 8: Review YTD salary, operating profit, and revenue figures. Come up with overall targets for the year. Decide on whether to hire staff writers, virtual assistants, graphic designers and other freelancers to help with day-to-day operations or keep everything simple. Need to come up with a marketing budget.

Day 9: Dedicated day for writing posts, responding to comments on FS, and commenting on other posts by other publishers on their platforms. Dinner at 12th Avenue Grill.

Day 10: Publish a new post first thing in the morning. Review business retreat initiatives over breakfast. Get a final hour of tanning on the beach. Catch a 1pm flight and head back to San Francisco.

Although spending $11,000 on a business retreat is expensive, it's important for me and my team to recharge, relax, and build stronger relationships. It takes a lot of creativity to constantly write about intersting things.

There is no rule that says you have to have a business retreat in your basement. In fact, everywhere I travel, I do some business. Therefore, at least a portion of my travel can be a business expense.

And by the way, if you are a business owner with a pass-through entity, be sure to check out the PTE Tax Salt Cap workaround. You could save a lot in taxes.

Running A Business To Enjoy Life

Many companies have work retreats. But not many companies are able to have a work retreat this long. Since I run an online media business, it doesn't really matter how long I'm away so long as articles get published on schedule.

At the end of the day, it's my money and time. Besides fun work retreats and better tax management, being able to control your schedule is the biggest benefit of being your own boss. 

Generating profits from your business won't happen overnight. But if your direction is correct, sooner or later you'll get there.

There is one final reason why you should start a business. If you own your own business, you can provide career insurance for your children. The work is a brutally competitive world now. By owning your business, you can teach your children your business and provide them jobs if they can't find anything worthwhile.

I plan to teach my two children everything there is to know about online media, finance, marketing, PR, writing, and more. Being able to combine real world education with school is a win!

Interested in starting your own website?

Check out my step-by-step tutorial guide on how you can launch a site like mine in under 30 minutes for just $2.95/month. A website legitimizes your business and becomes your online portal. Not a day goes by where I'm not thankful for starting Financial Samurai in 2009. Everyone should leverage the internet to build a brand, build a business, and become untethered from an office to live freely!


Related post: Reflections On Making Money Online Since 2009

Invest In Leading Entrepreneurs Through An Open Venture Fund

If you want to invest in entrepreneurs, check out the Fundrise Innovation Fund. The fund invests in private growth companies in AI, property tech, data infrastructure, and fintech.

What's great about the fund is that the investment minimum is only $10 and you get to see the portfolio composition before making an investment! You don't have to start a business. Just invest in one or a fund that invests in private growth funds so you can focus on doing other things.

You can also listen to my hour-long conversation with Ben Miller, CEO of Fundrise, about venture capital and why he's so bullish on artificial intelligence and more.

45 thoughts on “Why Start A Business? A Better Life Of Course”

  1. Sam! You got a @Cernovich retweet on this post! Congrats, your already-impressive traffic will be getting another pop on this great post!

    1. I’m super impressed with his Twitter reach and power. Got a handed to the guy, Mike really knows how to market. Amazing he predicted Trump victory and start buying the past year and a half! Props to him.

  2. As a worker, those fringe benefits sound sweet. It’s no wonder people are willing to take lower salaries, I would/did too.

    I just have one question though (please don’t smite me :( ): I know these guys opened the business to make money but why didn’t the higher earners didn’t take a pay cut to save a few jobs? People remember things like that and it makes them loyal to the company.

    It’s good advertisement for a business that you plan on keeping alive for a long time, right? At those salaries, I’m sure taking a pay cut isn’t going to ding them personally and in a way it would be like investing in your company and building your brand.

    Unless of course they were planning to build and sell or recoup all their personal money as soon as possible but then that doesn’t make sense because as a business owner you’re always going to put money into your business especially when times are hard.

    If they’d taken the pay cut then I might’ve believed these guys are doing something different.

    1. Being certain in the increasing future equity value of your company, you would be happy to receive 99% stock and 1% cash salary, enough only to cover living and food expense. Because the founders believe future revenue stream will plateau or decline. So they’re hedging against it. Only 1 in 10 startup companies survive over a 8-10 year period. This Buffer company is going on its 4th year of operations, netting $150000 profit this year. Another 4-6 years from today, do you think it’s profit per year will be >$150000 to maybe say $1,500,000 pure profit a year or do you think it will have yearly net loss due to unknown unforeseen circumstances?

      Many CEO founder’s take $1 salaries instead of $200000 yearly salaries when they truly believe the company equity will rise. Go Google: $1 founder salary and you’ll read a list of examples.

      When VC oversight and policy is lax, who cares. I’d pay myself $300000 a year and raise further series rounds and give myself a 15% salary increase yearly on top. If the VCs are not sophisticated enough to set founder guideline policy on founder salary pay, then they deserve it. I’ve seen VC contracts limiting annual salary of founders to under $100000 a year until revenue growth goals are hit every year. But obviously this is not the case with this company’s VCs.

      1. Oh. Thanks for the information Simon. I checked out dollar salaries (didn’t even know such a thing existed or founder guideline policies). They sound great with those bonuses and stock options on some of them.

        It’s sad that they’re using VC as a way to get rich instead of building a company.

  3. Sam,

    Pretty timely article. I’ve been reading your blog for quite some time and finally decided to go ahead and start my own blog. Thanks for the inspiration!

  4. Thank you so much for this article you have inspired me so much in the last few days. Glad I found you. I will keep reading. Currently working on my Blog set-up!
    Thanks again!!

  5. I’m waiting for the day my business is self-sustaining. Until then, I’m going to have to hustle to grow it.

    Over the past couple years, I’ve really taken to the idea of starting my own business. I used to think it was too risky and difficult. A few years of having a stressful, low paying job will change your mind. The idea of having a passive income business that I can leverage for financial freedom excites me. Is it sad that I keep one of my own business cards in my desk to help me get through the day?

    It’s nice at least to be able to truthfully tell someone I’m the CEO of a corporation. Even if the corporation is worth less than a month’s rent of a regular sized apartment (in an expensive city).

    Hopefully it will grow and grow soon. My revenue is capped due to it being a commission based business, but there is no debt, barely any costs, and almost no risks. It’s all about just growing to the point of automation.

    I would urge anyone out there with a great idea for a business to go for it. Maybe you’ll succeed. Maybe you’ll fail. But if you don’t go for it, you’ll never forgive yourself.

    ARB–Angry Retail Banker

  6. Great ideas! Love all your posts. Hey try the poke at Nico’s fish market if you have not already, I think it’s even better than fresh catch.

  7. It’s understandable for Buffer to aggressively spend a lot of the $4M raised since it’s not theirs. If the company was 100% bootstrapped, they’d be much more careful.

    A lot of tech companies ignore their finances until it is too late. Hopefully they can focus on their financials more. But if not, at least they had a good time living it up w/ other people’s money!

  8. My LLC is just me so far, but business travel is a way I make sure I leave my town and its problems. I travel to important conferences in my field for as cheaply as I can. Then I deduct the expenses and reduce my tax burden. I am forced to vacation a little, which is difficult in the first few years of a business. I am forced to continue developing professionally. I see more of the US and meet folks who can teach me how to be better at my job. Definitely worthwhile.

  9. I’m definitely pretty jealous of that work retreat. I just got approved for my first major affiliate marketing program, so I may finally start bringing in revenue in excess of $3.87 from Adsense. I just started at the end of March though, so I know I just need to keep trodding onward.

    I look forward to your post on getting some additional profits though. Regardless, I’m fulfilling my purpose with my blog by informing friends, family, and others in a way that’s enjoyable for them. If I shut down tomorrow, I would still say my time has been worth it.

  10. Graham @ Reverse the Crush

    I’ve never used or heard of Buffer until this post, but sounds like they’re on trend with transparency. That clarity probably makes it a lot easier for investors as well.

    I really enjoyed this post and how you broke down Buffers finances as well as your retreat plans.
    Sounds like an awesome time with the perfect balance of work and pleasure. Wish more employers would do things like this.

    Regarding your question on why more people don’t start online businesses… I think most people are so bombarded with the 9 to 5 and they second guess themselves too much. Also, the initial start of an online business is the most difficult. It seems to be extremely hard to find the right combination of content | advertising | affiliates | products or what have you in the beginning.

    That said, I’m really looking forward to your post on generating profits from an online business! I’ve been trying to build up an online community for the past 6 months or so. Maybe I don’t have the correct direction yet. The main thing, though, is that I’m working on something fulfilling. Thanks for sharing!

  11. What about Avenues, Side Street Kapahulu, Alicia’s, Ahi Vegtable, Agu Ramen, DK’s Steak House? Had Tataki sash at Ethels a couple weeks ago, it’s still the bomb!

    4026 Black Point Road. FS Diamond Head HQ. :)

  12. Jack Catchem

    The best retreat occurred accidentally. I went on a 4 day retreat to Addis Ababa that thanks to airline travel inefficieny turned into a 9 day trip when we got stranded. I was able to do some awesome networking with fellow stranded senior management who would never have given me the time of day before. Thanks Ethiopia! I love you!

    As for why more people don’t start online businesses, I think it’s an issue of passion and dedication. Most people are happy consumers these days. I find it immensely more satisfying to say “I’m going to prepare another blog post” instead of binge watching a TV series. You have to be passionate enough to create instead of always passively consuming.

    It’s also the issue of dedication. Consistent application to growth despite setbacks. I’m finding my law enforcement community to be very restrained and cautious, it’s slow growth. By publishing a chapter a week of military tales, I’m now 1/10 through a book I always said I would write and greatly expanded my readership base! Prior to the inspiration gathered here I had the passion, but never the dedication to see the project through.

    Without passion and dedication I believe most people think of an online business and just say, “Why?”

    Too bad they don’t see the easy answer: “Because it’s fun!”

  13. Hi Sam,

    Now that’s my kind of business retreat…enjoy! I also believe it’s important to document revenue and expense categories to perform different types of analyses. Since salaries are usually the highest expense, it would be an interesting analysis to see how they translate into revenue or vice versa. Of course for an online blog, the writer and perhaps editor would be the two main expenses and sources for generating revenue.

  14. Holy cow your stripe fees are huge! Have you thought about looking into building a custom solution? Obviously at first it doesn’t make sense, but as you scale those costs become killer. You could probably get a custom solution built for less than one month of fees.

  15. We used to go on retreats when I was a school administrator. It was good to get off campus and spend time both working and getting to know one another better. Those have all dried up now with budget cuts and layoffs though. Teaching your editor Google Docs will be fun – hard to get them to change their ways! Your team building days sound much more fun that what we ever had :)

  16. Most people are too ignorant and afraid to launch an online business or blog. I had ambitions to do so for years but didn’t know where to start – silly, I know. Once I launched my site and began experimenting, I was surprised to see how easy it was if I stuck to the basics.

    It is inspiring to see that you aren’t letting FinancialSamurai become stagnant, Sam. You remind me of Walter White in Breaking Bad – wildly successful with no real need to keep growing, but passion and drive won’t let you rest on your laurels.

    I wish Iived in SF and could take advantage of the short flight to HI. It’s a long ride from O’Hare.

  17. That’s fascinating that Buffer is so transparent. If I was an employee there I don’t think I’d want my salary published to the world for everyone to see. But being on the outside looking in, it’s incredibly insightful. The entry level salaries are pretty good imo, but I agree the executive salaries are on the light side especially for places like NYC and SF. I would never have guessed a company like that would have such high expenses on company retreats. I guess that’s part of the corporate tech culture – which really makes me curious how much other tech firms, especially the huge ones, spend on employee retreats.

    1. just a thought

      Speaking from experience, the amount of money pre-IPO companies burn on stupid stuff is insane and made me sick to see (retreats, dinner, booze, etc). When you are out with coworkers and notice that everyone orders the most expensive items on the menu, because they can, you know the company doesn’t value the money of it’s private investors or the revenue that is generated. It was one of the reasons I left the company (their burn rate on cash) and within 12 months of me leaving droves of others left or were let go.

      1. None of them pay taxes either because none of them are profitable. It is a pretty amazing system to use investors money to live it up!

        how is the company you left doing now? And what type of company did you go to?

        1. just a thought

          True that!

          The company I left has scaled back (so I have heard) in terms of headcount, strategy and burn rate of cash. Many people have left due to layoffs, restructuring and resigning. Myself and several others that were recruited left due to unkept promises of comp plans when certain metrics were hit. Fool me once, shame on you, fool me twice, shame on me :) Does that answer your question?

          I went from a company known as Big Blue to the pre-IPO company and then to a company that has stage coaches in their logo.

            1. just a thought

              I think you posted that article right around when I started at that place. Much of your perspective of these types of companies isn’t far off and my advice to former co-workers and anyone that asks is that a bird in the hand is typically better than two in the bush.

      2. Fringe benefits, sporting events, offices with expensive newest macs, free meals. Raise a few millions from VCs who aren’t using their own personal money but $ they raised under the pretense of a fund. A multiple of the seed capital becomes the valuation. Who gives the company this highly undeserved valuation? The same VCs who invested $500,000, a million dollars or two into the company. Stupid. I’d value the companies as an ongoing concern to bankruptcy.

        Traditionally business were all about saving $ until they become profitable. It could take 3-4 yrs. I don’t understand why today VC funded business are all about spending lasciviously before becoming profitable. Spending, raising more $, spending, hiring more employees then finally unable to raise more $ all employees are laid off. It’s common sense 1 in 10 business succeed and the rest fail.

        So why all these careless VC investments without thorough due diligence? My knowledge is the VC investors are usually engineers with MBAs who go straight into the VC world. They’ve never worked for, run or started a company before. Idk but I think it would be only proper to fire the VC if they lost millions of dollars with 0 or negative rate of returns over time. The company founders are usually very studious kids with straight As from studying 24/7 with little or no time to learn bout real business. But these kids hire 10-20 employees on day 1, pay below mkt salary, promise stock equity but then rescind once you’ve solved the problems they wanted solved, and the company ends up with a technology that ppl just dont want or doesn’t work, or a product no one really wants or doesn’t quite do what their initial power point does.

        I guess looking into where the VCs $ comes from (pension funds, foreign investors, speculation), what happens to VCs who annually return 0% or negative return rates would lead to a better understanding of the system here.

  18. You should write an article on how you would invest 1 million dollars. If 1M in house money to invest what would you do?… Hopefully I get too see it on your site soon:)

  19. I admire bloggers and how they’ve turned something they love into a profitable business. Like Preston above me mentions, electronic media or similar types of business have so many advantages over B&M’s (e.g., mobile, create own working hours, scaleable, low capital costs, etc.)

    To answer your question “Why don’t more people start online businesses since it’s so cheap and easy?”

    The challenge, at least for me, is discovering an idea to pursue as I don’t enjoy writing. Most of my ideas are home-based businesses (e.g., beer-making, coffee roasting), but beer-making is high in capital costs, neither business is mobile, and profits are volume-driven (e.g., lots of labor). Not to mention the market is already saturated with these types of businesses.

    I’m entrepreneurial by nature. I ran a small laptop repair business in college. I’m successful in my full time job, which requires selling/generating revenue for the business. I’m just stuck on Step 1 – business idea.

  20. Preston @TheDrunkMillionaire

    Starting a website/media empire has so many advantages over the traditional brick and mortar business (Thanks for the motivation to start my own by the way..). Our good friends just purchased a local tea shop for hundreds of thousands of dollars and after 6 months have about $500 positive cashflow/month- ouch! Being risk adverse, the idea of $50/month + sweat equity is super sexy.

    I’ve actually used buffer. Thanks for the look inside the books and have a good retreat!

    1. The main advantage is that overhead is usually way smaller. Right now I work from home as a web designer, I also run few websites (advertising revenue) and teach people who to start their own online business. These income streams allow me to earn a very good income (especially for my country), work for 2 hours/day and focus on my 2 year old daughter. It’s been a pretty long run (started web design in 2002), I did put in a lot of work prior to becoming a mother, but now I reap the rewards.

  21. What the heck is a happiness hero…and why is there such a differential in the pay between happiness heroes? Do some HH produce more happiness?

    And why do HH make more money than someone who drafts content which is what the site actually produces?

    1. What’s more important than happiness? They are probably customer support folks. Or, maybe they go around the office and give the producers back massages and other special things.

      I might have to hire a Happiness Hero as well to keep me happy. But probably a freelancer just in case things don’t work out.

      But if you look at the location of one of the content crafters, she is in TN. TN is much cheaper than NYC or SF.

  22. FIRECracker

    Love how you balance work with play. That’s the beauty of being FI and an entrepreneur.

    “Day 6: Strategy session to discuss community building. Have an open discussion on how to deal with angry commenters or spammers.”

    – HA HA, love this. My way of dealing with them is with jokes and snark. You give snark, you get snark. That’s how it works. I’m thinking of making a “FIRECracker reads mean tweets about herself” video, ala Jimmy Kimmel. It’s fun to make fun of haters :)

    1. That would be very entertaining! Turn those lemons into lemonade!

      I’ve created several Comment Commentary type posts before which were fun. It’s good to try and use as much of the good and bad from the community to generate more content. Then no matter what, you are always going to come away with positive results.

  23. FinanciaLibre

    Awesome job accommodating the tax code and the contours of your business to make a retreat like this work for you on personal and professional levels – love it!

    And I love the message you’re sending out here. Life shouldn’t be all about money. It also has to be about genuine enjoyment.

    When you can max out enjoyment while making or saving money, you know you’re doing it right.

    1. Thanks for highlighting the link. It is not a surprise given their operating profit margins and the way they’ve been spending money on work retreats and other benefits with plateauing revenue. However, it is always very difficult and sad to let go of a large percent of your work force. Folks need to take notice of the tone:

      * Somber.

      ‘It’s the result of the biggest mistake I’ve made in my career so far. Even worse, this wasn’t the result of a market change—it was entirely self-inflicted.”

      “The fact is, the challenge that I created has now irrevocably changed people’s lives. I put the company in this position. I had poor judgement and took the wrong actions in many different areas.”

      It is very difficult for any boss to lay someone off. Therefore, for those who want to negotiate a severance package, you can HELP this boss by volunteering to get laid off and SAVE someone else. Your boss will appreciate this immensely and you’ll probably get a much better severance package than if you had waiting for the axe to fall on its own.

      * Managing people is tough.

      I would much rather work with just one other person and have freelancers than have to manage dozens of full-time employees. Be careful about what you wish for when hiring people. Things can get very hairy.

      “Reflecting on it now, I see a lot of ego and pride reflected in that team size number.
      Although I know rationally that the size of the team is not something to celebrate, I feel that I slipped into that harmful mindset quite a bit over the last year. Not everyone is familiar with growth metrics like monthly recurring revenue, but team size is easy to understand. Sometimes it impressed people when I told them how big the company was, and I was proud to share it.”

      EGO really is a killer when it comes to being an entrepreneur or leading a happy life. You tend to show off and make yourself a target. Focus on what matters and be more stealth. Their revenue per head is around $5,000, but they can say how quickly their team grew and the CEO can say how many people he managers. No thank you. I’d rather make $50,000 revenue per head and manage just myself without anybody giving a damn. Be stealth.

      “Through this experience I’ve learned to re-focus on what truly matters. Our values and mission are so much more valuable than the size of the team. Now I am reminded that working towards our vision and creating great experiences for customers is what matters, and we should strive to do that as efficiently as possible.”

      This passage should be OBVIOUS. I’m sure the founders and senior people felt very proud to show how much they make, that they raised money, have a bunch of employees etc. But your head gets in the way of what matters to the detriment of others sometimes. It’s hard not to brag, but try to stay as humble as possible, especially as the economy slows.

      * Take stock of your cash.

      “The result of these mistakes and getting full clarity on our financial situation was that despite having $1.3m in the bank, we were rapidly trending towards zero cash within 5 months.”

      Trending towards ZERO cash within 5 months is scary for a company who is profitable and raised $4M. Things can turn south in a HURRY.

  24. I manage social media for a software company during the day and use Buffer, so I’ve followed their journey very closely. I love how transparent they’ve been about their business and finances. I especially loved how they shared their decision to let 10 team members go back in April. They realized they had grown too fast and needed to cut back to survive long-term. They mentioned they are skipping this year’s work retreat to save on expenses. Your analysis is interesting and I like how you tied it back into your own online business. I’m looking forward to earning more revenue from my blog, and finding ways to save on taxes, in the future.

    1. I just read the post about them letting go of people based on the comment w/ that link. It’s great they are focused on profits more as revenue plateaus or maybe even declines. All business need to take stock of their cash and cash flow right now. It’s going to get ugly over the next couple of years.

      Their transparency really is great. They are free to run their business as they wish. I run my business very lean and would never spend as much on work retreats as I make in operating profits. But more power to them and other business that do. I really try to look at the upside, and that is less taxes they have to pay to the government and more fun. The only downside is the potential need to lay people off.

      Is using their app worth it? I find part of the fun in running this site is to push the social media buttons myself and interact in real time.

  25. That’s truly scary when they are only making $15k , But then again he is really not. He is enjoying those other life style expenses. And I believe over 60% of the time is not even for his team but for himself ( obviously you mask it with taking a few employees from time to time).
    If things go south he could still be making the same or more, all you have to do it cut a few employees and away with those vacations ( or retreats)
    Also, rent at almost 8k per month? you could definitely buy your own 10k-15k square ft retail store with great visibility on the street level ( not that he needs it) if not rent couple warehouses for $2500 with 4 x bigger space! how is that to save 5k a month?

    So, he want to earn that because he wants to, he can manage to have 25+% earnings if they desire… ( they just prefer spending it on high ticket vacations)
    Oh, and payroll almost $6000? someone is taking advantage of them… I mean I have same profits as his and I only spend $350.0 a month on accountants plus less than $1000 so ADP takes care of payroll. I just wish I had an extra $40k to spends on retreats, tools and other spending in the community…

    1. Perhaps he’s got the right business model and you don’t if he can spend $40K/month on retreats and goodies and you can’t? Rent is expensive in big cities like NYC and SF.

      One can either make more profits and pay more taxes or make less profits by spending their revenue on themselves and pay less taxes.

  26. The Green Swan

    It makes complete sense to start a website or company in order to make money and live a good life. I’m curious to hear from you (an established blogger, entrepreneur, etc)… how much do you weigh the pleasure of writing in your decision to keep the blogging? Do you enjoy the comments you receive, feedback and such just as much as turning a profit on the blog? Thanks in advance for your thoughts!

    1. I don’t think there’s much pressure to publish 3-4 articles a week. It’s just kind of like speaking. If you can speak forever, you can write forever. It gets easier writing a coherent article over time. Content is my product. It’s the most important thing I can do.

      I like feedback b/c it helps me write more content. It’s a virtuous cycle. So the more feedback I get, the more content I can write instead of always thinking up things on my own.

      So one of the questions I have for other online publishers is: Why stop? Why not keep on going, especially if there’s a chance to break free from a job or make a healthy income?

  27. Apathy Ends

    Sounds like you have a sweet retreat planned.

    I haven’t been on many overnight retreats, most of them are single day. The best one was a 2 day fishing trip in Northern MN

    Haven’t heard of Buffer – looks like it may be beneficial, thanks for the tip

    1. Fiscally Free

      Ten days in Hawaii is definitely pretty sweet.
      A fishing trip sounds nice too.
      The closest thing I’ve gotten to a retreat is an off-site meeting to plan our upcoming fiscal year. All that meant was a different conference room to sit in all day.

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