Starting a Business: Why Haven’t You Done It Yet? A Deep Dive into Entrepreneurship and Lifestyle Enhancement
Ever wonder why you haven’t started your own business yet? For many, the idea took root during the pandemic, when creativity soared, leading to an unprecedented rise in business formation since 2020. Let’s take a closer look at what drives this trend and what it means to be an entrepreneur.
My Personal Journey
When I embarked on my journey with Financial Samurai in 2009, it wasn’t initially intended to be a business venture. During the financial crisis, it served as a therapeutic outlet for me, as I was grappling with significant losses in the stock and real estate markets. Yet, this hobby morphed into a passion.
By 2012, I had left my day job in finance, fully embracing my love for writing. Now, 13 years later, I continue to write thrice a week and publish a free weekly newsletter. Financial Samurai has become a thriving business that supports my family of four in San Francisco.
The Philosophy Behind My Business: Leading a Better Life
The core goal of my online media company is to enhance my life quality. This means engaging in fun activities and caring for my family, all while balancing profits and expenses, since my money is at stake.
Contrast this with investor-funded startups, where growth often overshadows profits. If you’re looking to get rich, joining such a startup might not be the right path for you.
I’ve always believed in bootstrapping because relying on external funding is risky.
A Case Study: Buffer
Buffer, a company that allows scheduling social media shares, provides an interesting example. Valued at roughly $40M and having raised $4M, Buffer’s transparent financials offer a learning opportunity for aspiring entrepreneurs.
Business Income and Expenses: A Closer Look
- Salaries: They are a significant expense, accounting for 65.6% of monthly expenses with an average of $3,445 per person per month.
- Revenue per Employee: Buffer averages about $5,000 in revenue per employee – decent, but not extraordinary.
- Profits: They are relatively small, with a 4.6% operating profit margin, significantly lower than the industry standard of 20%+. Imagine spending over $300,000 a month for a mere $15,666 in operating profits before tax!
- Lifestyle Business Profit Margins: On the other hand, running your own website could yield operating profits of $5,000 a month for less than $50 a month, resulting in a 98% profit margin.
Buffer’s Retreats Versus Profits
Buffer spends more on retreats ($17,588 a month) than they make in profits ($15,666 a month). Their financial strategies and public transparency may guide other entrepreneurs.
Running the Business Your Way
Whether choosing to make more profits and pay more taxes or spend more on employees for their well-being, like Buffer, you’re in control.
For example, Buffer planned to spend $400,000 on a company retreat to Berlin – an incredible way to use business funds!
Lower Taxable Income
Buffer utilizes various expense categories, like Tools, Kindle Books, Culture, and Others, to reduce monthly taxable profits by around $17,000, leading to approximately $5,100 in tax savings.
A Hybrid Business Model
Buffer finds itself in a unique position, attempting to blend big business aspirations with a lifestyle business. While some may argue they’re overspending on certain items, they’ve maintained a balance that suits them.
Building the Business You Desire
Understanding expenses as a percentage of total costs and revenue helps you gauge the reasonableness of your spending.
Like Buffer, I enjoy business retreats. They offer a chance to rejuvenate, build relationships, and foster creativity. Here’s a sample of 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
Though $11,000 for a business retreat might seem hefty, the benefits of relaxation, relationship-building, and creativity are priceless. Additionally, if structured properly, a portion of travel can be considered a business expense, leading to potential tax savings.
Running a Business to Enjoy Life
Extended work retreats, better tax management, and controlling your schedule constitute some of the biggest advantages of being your own boss.
Profit generation might not be instantaneous, but with the correct direction, you’ll eventually get there.
One final thought on starting a business revolves around providing career insurance for your children. The competitive world of work can be brutal, and by owning your business, you can teach your children valuable skills and offer them opportunities if needed.
In conclusion, starting a business is not just about making money; it’s about building a lifestyle that enables you to do what you love while taking care of your family. Whether it’s the creativity that entrepreneurship encourages or the financial independence it can provide, the question isn’t just why to start a business, but rather, why haven’t you started one already?
