Learn how selling your landscape company may not be the best way to create wealth and provide you the freedom you are dreaming of.
There is so much talk about people wanting to sell their company, or the dream they have to sell their company some day. It’s sort of the American dream to build your company, sell it, have all this money, retire, whatever. My argument is, and you’ve heard it before, why is that necessary?
If you could build a real company that doesn’t require all of your time and you’ve built a company you like, why wouldn’t you want to continue to participate in it and let it spin off a lot of cash for you to live a great life and continue to build wealth? That’s my basic argument.
Let me illustrate. Let’s say that you build your company to the point where you could sell it for one million dollars and I would argue that isn’t even in the ballpark of the amount of money you’d need to live anywhere close to the dream that most of us imagine. Let’s say you did sell it for a million.
The numbers aren’t accurate, but let’s say you got to keep after taxes, $750,000 of that. Then another magical thing happens and that is you actually figure out how to invest that money and earn 10% a year without massive risk. I would say good luck with that one!
If you could pull that off then you would make $75,000 per year and that’s what you’d now have to live on after selling your company. If you sold that company for a million dollars and you actually got a million dollars, you were probably actually making more than $75,000 a year to get the million dollars a year valuation. That’s the basic scenario.
At $75,000 you’re going to go get another job or you’re going to start building the next company which is going to eat into your $750,000 so that you can fund that next thing. My argument’s basically this, when you actually break down the numbers, what does it really cost to live a pretty exciting lifestyle where you don’t have to sell your business?
Let me show you some numbers. If you know me, then you know I’m not too big on having a bunch of debt, but we’re going to use debt in this example because this is what’s possible. For $5,000 a month you could buy a one million dollar house. That’s actually a one million dollar mortgage, so maybe you save some money and you put down some money. Maybe you actually put down 200,000 or 300,000. In my scenario here, you’re really living in a 1.3 or 1.2 million dollar house.
For 5,000 bucks that’s a pretty good house in a lot of markets unless of course you live in New York or San Francisco, then that sucks. Now, for $200,000 you could buy a Lamborghini or a Ferrari. Or maybe a really awesome boat and some jet skis. Whatever that thing is that’s sort of your thing.
You could finance those cars for 10 years, actually for 12 years at about 4.99% with good credit. Your payment on that would be 2,120 a month. Let’s say that you want to take some vacations, 30,000 a year is your vacation budget. That’s $2,500 a month. For $9,686 you could live in a 1.2 million dollar home, drive a really incredible car and you could take some really great vacations.
If you were adding to that list of what else you would do if you suddenly came into millions of dollars, maybe you’d have a second house somewhere. You could figure that out and add this to that number, but those are usually the three big things. We’re going to buy a really awesome house, we’re going to drive some good cars and we’re going to take great vacations.
We’re going to eat good food, but that doesn’t really cost that much anyway. But, what else do you really add to the list generally once you make it big and make a lot of money? My argument is this, those three things right there will cost you $116,000 per year, pretax.
What if you could just build a company that made you a quarter million a year? I know I’m talking big numbers and for many people given where their business is right now, thinking that far out into the future, it seems like I’m talking way too big and the numbers are way too big, but it’s totally doable. In every way possible, it’s totally doable.
Imagine that you could get there. You could get to a quarter million dollars a year. My point is you don’t have to build this thing to sell it. You can live a pretty amazing lifestyle, have some pretty amazing toys, do some pretty neat things and continue to own your company and participate in it and build this thing.
The whole point of the video was to point out a little bit of math and what kind of lifestyle you could potentially live if you wanted to and keep the thing you own. Because let me tell you, selling it for a million dollars and making 75,000 a year, which I’m telling you is very difficult to get a 10% return on your money year after year and not potentially risk some of your principal, it’s not even in the ballpark of what you’d need.
You’d need to sell your company in my mind for more like four million, if not five million to get to this kind of a lifestyle right here. Even then, as inflation eats away at your money, you’re spending all of your return every year to live this lifestyle. That’s a little bit more complex, but I’m simply saying five million dollars isn’t enough to get this, yet building a great company making a quarter million dollars a year could probably get you this.
Again, take the example for what it’s worth. I didn’t think through all the numbers. They’re not perfect. I’m illustrating a point, an idea of how to think about building the company and retaining it versus selling it.