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So I decided to rejoin TFF as my "business ideas" from 2 yrs ago didn't gain traction and I had a long period of stagnation; now I am ready for take-off.
This year, I suffered from an autoimmune disease (psoriasis/eczema/whatever it happens to be - the doctors I visited never seemed to get it right), which is still problematic but I am ~85% recovered now. This experience was a true FTE moment, when I realized delaying what I NEEDED to do would spell disaster in the future.
To put it simply, when your body is attacking its own tissues/nerve cells and is in a constant inflammatory state, you are in no position to work 8 hours/day or be productive. It is extremely difficult and painful - now imagine you're trying to improve your health while, at the same time, you want to keep a roof over your head and food on the table.
Not a good outlook! And who knows if one of these "unforseen events" rears its ugly head again in the future.
Because my health is gradually returning, I am in good enough shape to resume, but I will rebuild and do it right this time.
Some background information to get started:
- I currently obtain income from "shitty" gig work that pays the bills so I am not losing net worth on rent, utilities, food, etc. every month. I am at breakeven point currently, factoring in wear/tear on my vehicle as well.
Yes, I can confirm Grubhub is 10x better than Uber/Lyft/Doordash. I had some days during the pandemic where I made > $250/day over an 8 hour period thanks to juggling GH/DD, which is pretty good for unskilled work.
- I plan on getting a job in sales after this X-mas is over, as my ability to sell, a critical component of entrepreneurship, is quite lacking. The sales job will not conflict, nor will it delay, the timeline to execute the plan below. 8 hours of work + 8 hours of sleep + 8 hours of execution per day is perfectly reasonable.
- I have approx. $60,000 in NW, $35,000 liquid. (Non-liquid in a traditional IRA)
- With the help of some personal connections, I estimate my initial investment into a business is $80,000 to $100,000. Difference between 80K-100K and my capital investment will be structured as a debt note to be paid over a period (e.g. 5 years), not equity. I am very confident this will go through with only a small amount of reasoning/convincing.
My Game Plan (to be updated continuously):
1) Re-read certain books, which happens to include TMF /Unscripted . Yes, I know, MJ mentioned "reading books" is not execution, and even called it "Action Faking," but I will refresh my memory in the span of about 12 days. I'd say it's well worth the trade-off since it will help me avoid costly future mistakes.
Once I finish reading all the books I need to, I will list the books in this thread and why they are useful.
2) I will begin the hunt for an interested investor, as opposed to a business partner - I am NOT looking for someone who will partake in day-to-day decisions of a business.
Ideally the investor will take accept a bond for 8-10% - if not, then equity proportional to initial investment is acceptable. As a general rule, business people hate giving away equity, so this is more of a "last resort" option.
However, I must retain the power of business decision-making (Commandment of Control).
3) Identify locales/locations where doing business is good. (I currently live in Utah and the winters are unbearable - I'm thinking Texas, Florida, North Carolina, and some other sunny places are ideal. Avoid small business-unfriendly places like the plague unless a deal is too good to pass up.)
Here are the preliminary metrics I have in mind for acquisition:
Revenue: > $1M
Cash Flow/SDE: $200K - $350K
Price: Ideally 3.5 - 4.5x SDE
Sector: Pretty agnostic about this, but I'd actually shy away from the latest fads like eCommerce stores, cannabis, food delivery, etc. as they are beaten and analyzed to death
Reason for acquisition: Transform the business using a startup-like mentality ("disruption") combined with CENTS principles
In case anyone's wondering about the metrics I mention...
1) Revenue: Companies with less than $1M revenue are not well-organized. The owner is often the one doing everything, which leaves little room/resources for GROWTH AND EXPANSION which = SCALE.
2) Cash Flow: Self-explanatory. I'd like to start with a minimum of $200K cash flow since a business will have difficulty expanding without sufficient resources..
If we assume the previous owner takes $70K as a salary and distributes $130K through an S-Corp to avoid FICA, the previous owner is almost certainly consuming all that after-tax cash flow on personal expenses that will make him or her the next "IRA millionaire" with a 3000 Sq Ft McMansion, but does not earn any actual "freedom" as dictated by CENTS framework.
Under my control, I would take something like $45K in salary (I need to eat/sleep under a roof) + $155K remaining. That hypothetical $155K will be 100% invested back into the company through marketing, sales, more personnel, investment in technology, etc. making it seem as though cash flow dropped from the sky into an abyss. But it will be a temporary move.
3) Price: If you pay 2x SDE for a Main Street business (laundromat, house cleaning business, landscaping business, etc.) you can expect a scenario where the owner does everything, and your ability to scale is extremely limited. LIMITED SCALE + YOUR TIME BEING CONSUMED on "day-to-day" work as opposed to high-level execution = BAD OUTCOME!
Likewise, a SDE greater than 5x means you're likely getting something of pretty high quality, but the potential for value appreciation is lower.
Your job is to IMPROVE and, to the best of your ability, find new "disruptive" channels to unlock greater value, not to sit on a cash cow as a CENTS entrepreneur. The cash cow stuff can wait once your NW > $5M, not when it's in the 5 or 6 digits.
4) Sector: Explained already
I will update this thread every 7-10 days. Feel free to comment and I will do my best to answer them. Best of luck to everyone - hope MJ reads this as well.
This year, I suffered from an autoimmune disease (psoriasis/eczema/whatever it happens to be - the doctors I visited never seemed to get it right), which is still problematic but I am ~85% recovered now. This experience was a true FTE moment, when I realized delaying what I NEEDED to do would spell disaster in the future.
To put it simply, when your body is attacking its own tissues/nerve cells and is in a constant inflammatory state, you are in no position to work 8 hours/day or be productive. It is extremely difficult and painful - now imagine you're trying to improve your health while, at the same time, you want to keep a roof over your head and food on the table.
Not a good outlook! And who knows if one of these "unforseen events" rears its ugly head again in the future.
Because my health is gradually returning, I am in good enough shape to resume, but I will rebuild and do it right this time.
Some background information to get started:
- I currently obtain income from "shitty" gig work that pays the bills so I am not losing net worth on rent, utilities, food, etc. every month. I am at breakeven point currently, factoring in wear/tear on my vehicle as well.
Yes, I can confirm Grubhub is 10x better than Uber/Lyft/Doordash. I had some days during the pandemic where I made > $250/day over an 8 hour period thanks to juggling GH/DD, which is pretty good for unskilled work.
- I plan on getting a job in sales after this X-mas is over, as my ability to sell, a critical component of entrepreneurship, is quite lacking. The sales job will not conflict, nor will it delay, the timeline to execute the plan below. 8 hours of work + 8 hours of sleep + 8 hours of execution per day is perfectly reasonable.
- I have approx. $60,000 in NW, $35,000 liquid. (Non-liquid in a traditional IRA)
- With the help of some personal connections, I estimate my initial investment into a business is $80,000 to $100,000. Difference between 80K-100K and my capital investment will be structured as a debt note to be paid over a period (e.g. 5 years), not equity. I am very confident this will go through with only a small amount of reasoning/convincing.
My Game Plan (to be updated continuously):
1) Re-read certain books, which happens to include TMF /Unscripted . Yes, I know, MJ mentioned "reading books" is not execution, and even called it "Action Faking," but I will refresh my memory in the span of about 12 days. I'd say it's well worth the trade-off since it will help me avoid costly future mistakes.
Once I finish reading all the books I need to, I will list the books in this thread and why they are useful.
2) I will begin the hunt for an interested investor, as opposed to a business partner - I am NOT looking for someone who will partake in day-to-day decisions of a business.
Ideally the investor will take accept a bond for 8-10% - if not, then equity proportional to initial investment is acceptable. As a general rule, business people hate giving away equity, so this is more of a "last resort" option.
However, I must retain the power of business decision-making (Commandment of Control).
3) Identify locales/locations where doing business is good. (I currently live in Utah and the winters are unbearable - I'm thinking Texas, Florida, North Carolina, and some other sunny places are ideal. Avoid small business-unfriendly places like the plague unless a deal is too good to pass up.)
Here are the preliminary metrics I have in mind for acquisition:
Revenue: > $1M
Cash Flow/SDE: $200K - $350K
Price: Ideally 3.5 - 4.5x SDE
Sector: Pretty agnostic about this, but I'd actually shy away from the latest fads like eCommerce stores, cannabis, food delivery, etc. as they are beaten and analyzed to death
Reason for acquisition: Transform the business using a startup-like mentality ("disruption") combined with CENTS principles
In case anyone's wondering about the metrics I mention...
1) Revenue: Companies with less than $1M revenue are not well-organized. The owner is often the one doing everything, which leaves little room/resources for GROWTH AND EXPANSION which = SCALE.
2) Cash Flow: Self-explanatory. I'd like to start with a minimum of $200K cash flow since a business will have difficulty expanding without sufficient resources..
If we assume the previous owner takes $70K as a salary and distributes $130K through an S-Corp to avoid FICA, the previous owner is almost certainly consuming all that after-tax cash flow on personal expenses that will make him or her the next "IRA millionaire" with a 3000 Sq Ft McMansion, but does not earn any actual "freedom" as dictated by CENTS framework.
Under my control, I would take something like $45K in salary (I need to eat/sleep under a roof) + $155K remaining. That hypothetical $155K will be 100% invested back into the company through marketing, sales, more personnel, investment in technology, etc. making it seem as though cash flow dropped from the sky into an abyss. But it will be a temporary move.
3) Price: If you pay 2x SDE for a Main Street business (laundromat, house cleaning business, landscaping business, etc.) you can expect a scenario where the owner does everything, and your ability to scale is extremely limited. LIMITED SCALE + YOUR TIME BEING CONSUMED on "day-to-day" work as opposed to high-level execution = BAD OUTCOME!
Likewise, a SDE greater than 5x means you're likely getting something of pretty high quality, but the potential for value appreciation is lower.
Your job is to IMPROVE and, to the best of your ability, find new "disruptive" channels to unlock greater value, not to sit on a cash cow as a CENTS entrepreneur. The cash cow stuff can wait once your NW > $5M, not when it's in the 5 or 6 digits.
4) Sector: Explained already
I will update this thread every 7-10 days. Feel free to comment and I will do my best to answer them. Best of luck to everyone - hope MJ reads this as well.
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