Sometimes you take a leap of faith and your dreams don’t come true. That’s OK because at least you won’t regret never trying!
In this article, taking a leap of faith means trying your hand at entrepreneurship. Entrepreneurship means leaving the comfort of a steady paycheck and benefits to make money from an idea.
Entrepreneurship is scary because you’re responsible for everything. There is nowhere to hide if something goes wrong. The more years of education you have, the greater the opportunity cost to become an entrepreneur.
But when things go right in entrepreneurship, there might be no better feeling professionally. No promotion or raise comes close when reward is highly correlated to merit.
What If Your Business Doesn’t Go According To Plan?
A reader asked, “What do you think you’d be doing now if FS hadn’t worked out so well for you? Back to the IB grind, real estate tycoon, build a tennis school…other? Might be an interesting article unto itself. I know you’d get at least one interested reader.“
I’ve technically been an entrepreneur since 2009 when I started Financial Samurai. The site might have made $250 in advertising revenue in its first year. I didn’t have a goal of making lots of money online. Instead, I wanted a creative outlet to share my thoughts and commiserate with others during a harrowing time.
Not everything worked out as planned. But when you have little-to-no expectations for making money from a new endeavor, any money that is made feels like gravy!
Since leaving my job in 2012, I haven’t thought much about what I would have done if Financial Samurai had failed. But this is a good thought experiment to ponder.
I’m sure some of you might be wondering what if you take a leap of faith and things don’t work out either. Like with all big decisions, pre-mortem planning is a must!
A Time Limit On Your Crazy Idea
You’ve got about three years to gain traction in your business or crazy idea before society writes you off. Nobody will bat an eye if you disappear for one or two years. Plenty of eager beavers go off to business school for two years and re-enter the workforce with no problem.
But after three years, people will start wondering what you were doing with all that time. They’ll start questioning your judgment to take a leap of faith. They’ll wonder whether you were too delusional or too stubborn to realize your endeavor wasn’t a good idea.
Once they start to think these things, your chances of getting hired at a comparable job you left for comparable pay diminishes precipitously.
Two or three years is also a perfect amount of time for a rational entrepreneur to decide whether their product or service can generate a minimum livable income stream. During this time period, you can probably pivot one or two times as well.
If you aren’t generating a livable income stream after 36 months, or you haven’t raised capital from outside investors, then you should probably get a job.
My Entrepreneurial Time Limit Was Two Years
According to FINRA regulations, the Series 7 license expires after an employment lapse of two years. The test is six hours long and contains 260 questions. There was no way I was taking that puppy again if I decided to rejoin the financial services industry!
Therefore, I gave myself two years to see if I could generate momentum on Financial Samurai. I published three times a week and saw progress. My back was against the wall!
During this two-year period, I hedged my bets by going on interviews with several financial firms. But I just didn’t feel the same excitement about working in finance as I did in my 20s. Instead, my excitement was 100% targeted towards my online business.
It was a scary moment to let my Series 7 license expire in June 2014, but it also allowed me to burn my boat and only look forward.
If you plan to take a leap of faith, check on any license expirations and set a three-year time limit, whichever comes first before you go back to work. To help your cause, consider freelancing in your old industry to stay relevant just in case.
Scenarios If Financial Samurai Failed
It’s easy to see a scenario where Financial Samurai would have stayed stagnant or disappeared.
I could have lost my motivation to write consistently each week. Search engines like Google may have never decided to rank my content. Larger media publications may have never decided to highlight my work. Disruptors like artificial intelligence writers could have gotten me down.
Since 2009, the vast majority of personal finance sites have either shut down, gotten sold, or stopped publishing. If I couldn’t gain momentum after two years, I would have done the following in order of likelihood.
1) Return to investment banking at age 37 (2014).
Instead of working at a bulge bracket firm, I would have elected to work at a boutique bank with better hours, lower expectations, and less stress. This way, it would have been easier to keep Financial Samurai going as a secret side hustle.
After three years of aggressively saving most of my salary and bonuses, I would have tried to take a leap of faith again at age 40. Three years of bull market returns would probably have given me more confidence and security.
With three more years of content, I’m also confident Financial Samurai would have been able to generate a livable online income stream by then. The combination of more passive investment income, a potential severance check, and additional online income would have been more than enough to leave traditional employment for good after age 40.
2) Move to Honolulu and say to hell with it by age 38 (2015).
Failure is on a spectrum. Failure also depends on your expectations. If I expected Financial Samurai to make $1 million a year after three years, but it only generated $250,000 a year, I’d feel like a failure. But my expectations were for a more modest $12,000 a year in online income.
My wife and I planned a simple, child-free lifestyle living off of ~$100,000 in Hawaii. $88,000 would come from passive investment income and $12,000 would come from online income. We’d reinvest 100% of our severance checks into stocks and real estate.
Then, for three months, we’d move in with my parents to buy us time to find a place of our own. We’d either find a decent two-bedroom apartment for $3,000 or look to buy a two or three-bedroom house.
With no job and a lackluster lifestyle business, I would have been highly tempted to sell my primary residence in SF before moving to Hawaii. If I did in 2014 or 2015, I would have given up ~$500,000 in gains given I sold it in 2017.
Now that I think about it, I probably would have purchased a single-family home in Honolulu for up to $1.5 million. If so, the house would have appreciated by at least $300,000 since 2015.
While in Hawaii, I would continue to write on Financial Samurai and probably focus more on lifestyle, travel, entrepreneurship, and minimalism. We’d probably also do some online freelance work as well.
The amazing thing about Hawaii is that our favorite activities, going to the beach and hiking, are both free. It doesn’t cost much to live there once your housing costs are taken care of.
With a more easy-going and family-friendly lifestyle in Hawaii, my wife and I would most likely want to start a family.
3) Get a job at a financial technology company until age 40.
The fintech space has grown tremendously since 2012. I ended up consulting part-time with firms like Personal Capital and Motif Investing for two years. It was a lot of fun understanding the industry, meeting new people, and learning/advising a lot about online marketing.
The only downside with fintech is its much lower base pay compared to investment banking. We’re talking 40% less on average.
After at most four years of working in fintech, I’d leave. Three-to-four years is how long it takes for shares to vest at most startups. I’m sure I would have gotten bored after four years.
Four years of startup life would have taught me everything I needed to know about online marketing, public relations, customer acquisition, growth, and more. Then I’d implement what I learned on growing Financial Samurai, my X Factor.
4) Find work-from-home jobs in Hawaii.
If I still had a day job when the pandemic began in March 2020, it would have meant Financial Samurai was a complete failure. At age 43 in 2020, I would have been a disgruntled employee three years past my original ideal retirement age of 40.
I’m confident that by 2021, I would have negotiated a severance and retired completely or found a new job I could do from home in Hawaii. Like for millions of people, the pandemic would have been the ultimate catalyst to change my life for the better!
Ideally, I would have spent my time writing Buy This, Not That on a lanai overlooking the ocean in Hawaii. But in order to get the book deal, Financial Samurai would need to have been around! Ah, the mind games we play.
Given I would have worked for nine more years after I originally fake retired in 2012, I would have been richer by 2020. Therefore, I probably would have permanently left work for good by 2021.
Finding Constant Themes
Going through this thought exercise, I realize I would still publish on Financial Samurai no matter how well the site did. I’ve always used this site as a creative outlet. It’s the perfect thing to do for a retiree who loves to travel or someone who gets easily bored with their day job.
Money is a byproduct of doing what I enjoy. Every day I’m still amazed we can make money from the internet.
Another theme I discovered from writing this post is that I anchor to age 40. Instead of retiring after achieving a certain amount of money, I was focused on doing something new by age 40. You can always make more money, but you can never make more time.
Trading time for money in your 20s and 30s is easy. But after 40, unless you truly enjoy what you do, work starts feeling like a suboptimal use of time. Sure you might still need the money, but the feeling of dread about going to work starts becoming more common.
You also start knowing people who pass away in their 40s and 50s. Steve Jobs died at 56 for goodness sake. He was the healthiest eater with the best healthcare money could buy. Kobe Bryant died at 41 in a helicopter crash. The list goes on and on.
Maybe this whole exercise is pointless because I’ve always had confidence Financial Samurai would not fail. There are too few storytellers with finance backgrounds who also have the grit to keep going for decades.
I knew if I could speak forever, I could write forever. One of the greatest things about running an online business is that the harder you try, the better you do.
If You Plan To Take A Leap Of Faith
There is no doubt that being an entrepreneur is stressful, especially if you have a family to raise. Here are some suggestions I have before you take a leap of faith and go out on your own.
1) Work on your business after hours while you still have a job.
Unless you have a major amount of funding, please don’t leave your job to work on your business full-time without testing it out for at least a year. We all know that most businesses fail. Working from 5 am – 7 am or 9 pm – midnight is plenty of time to see if your business can gain traction.
I hired a guy from Craigslist to come over to my house and create a website after work in 2009. Nowadays, you can launch one on your own in thirty minutes with my step-by-step instructions.
2) Refinance or get a mortgage before you leave your day job.
Once you lose your W2 income, you are deemed too risky for banks. Only after you have at least two years worth of 1099 (freelance) income will banks consider you a creditworthy candidate. Despite having a significant amount of assets, one of my refinance attempts got rejected in my early years post-work.
You may also consider taking out a line of credit, such as a HELOC. The rates are much higher than a conventional mortgage. However, it’s nice to have a line of credit in case of emergencies.
3) Leave your day job after you see hockey stick growth or operating profits.
If you plan to become a lifestyle entrepreneur, then it’s best your lifestyle business generates at least a minimum livable income stream before leaving. If you plan to grow a non-lifestyle business, then you either need to wait for a visible path to profitability or raise enough funding to last at least 18 months before quitting your job.
4) Negotiate a severance before you take a leap of faith.
A severance will buy you months, if not years of runway to grow your business without overly worrying about profits. If a business focuses too much on profits in the beginning, the product or user experience may not be the best.
If you can’t negotiate a severance, then have at least one year’s worth of living expenses in the bank, preferably two. The longer your cash runway, the better before starting a business.
My severance package in 2012 provided me with full living expenses through 2017 when my last deferred cash payment was paid. This 5-year runway allowed me not to stress about money and build Financial Samurai without worrying about making a profit online.
5) Learn the pitfalls and build a network.
Speak to as many people in your field of business as possible and learn how they got off the ground and thrived. Learn about their mistakes and figure out ways to help them so that they might one day help you. Listen to as many podcasts and read as many articles as possible about existing entrepreneurs.
6) If you have a spouse, talk things out thoroughly before you take a leap of faith.
Discuss your entire entrepreneurial plan with your partner. Having a spouse work a stable job with benefits while you go off and do your crazy thing is an excellent combination. Just make sure you have some revenue and time guidelines in order to not burn each other out.
The leap will be scary, but the regret of never leaping will eat you up inside if you have a good business idea. Limit your entrepreneurial endeavors to three years and you’ll likely be fine. After three years, all bets are off.
Enjoy Your Wonderful Journey!
Taking a leap of faith is scary. I get it. But the fear in your head is often greater than reality. The worst that will likely happen is that your business fails, you lose time and money, and have to go back to work.
The best that could happen is you do something you love and get incredibly rich in the process! If you want more control of your time, then you can always start a lifestyle business that focuses on cash flow instead of a huge exit instead.
Having to go back to work if your business fails isn’t the worst thing in the world. But can you live with the regret of not trying? I couldn’t so I took the leap.
Every business needs its own website. Here’s a step-by-step tutorial that shows you how. Not a day goes by where I’m not thankful for starting Financial Samurai in 2009.
Back when I started, I had to hire someone for $1,500 to launch FS. Now you can launch in under 30 minutes for less than $50. It’s nuts how easy it is to start our own business online nowadays.
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