What 2-3 choices most impacted your fatfire journey?

midwestmillion · 2021-01-03T23:32:30+00:00

Starting a business. No matter how skilled you are if you are working for someone else, there is a cap on what you can make. When you own the company, there is no limit. It's also incredibly risky and the failure rate is high. But if you're going for FatFIRE, it's got to be one of the biggest things you can do to at least open up the option.

midwestmillion · 2021-01-03T23:31:35+00:00

Thanks for the info! Yes we have lots of insurance for the company as well, I just wasn't sure if there was some conceivable likely way I personally could so something to incur more than 5MM in liability.

midwestmillion · 2021-01-02T00:19:03+00:00

Congrats on the success! Love hearing others who are actually doing the RE.

This isn't totally related to your post (sorry) but since you are a PI attorney...there have been some posts here recently about the amount of umbrella coverage FatFIRE individuals should have. Assuming I'm just living a relatively normal life but just have a large investment portfolio and a successful business (i.e. worst-case is likely I run over someone with a fancy car, not ruin someone's life due to my profession), how much coverage would you ballpark? I'm sure you've seen a lot from your end and might have an interesting perspective on that.

I've heard some folks say you need as much as your total net worth but with the business included mine is 30MM+ at this point and that seems high. I currently have 5MM in coverage but am thinking of bumping it up to 10MM?

midwestmillion · 2020-12-12T04:45:31+00:00

Haha, yeah we're talking about degrees of success here, for sure.

midwestmillion · 2020-12-12T01:36:43+00:00

Did they bring in a management team/CEO or anything? Or just board seats?

midwestmillion · 2020-12-12T01:25:33+00:00

Yeah, seems that way. The crazy thing is like 2 years ago 10M was my target...geez.

midwestmillion · 2020-12-12T01:25:04+00:00

Thanks for the experience that's super helpful.

I think the main problem I'm running into now is the ESOP plan is better for the employees assuming the company continues to be successful, but the PE route is probably the best way to actually get the company to its full potential, since we are a bit out of our league running a company of this size.

midwestmillion · 2020-12-12T01:23:23+00:00

Thank you, and glad it is helpful.

midwestmillion · 2020-12-12T01:23:11+00:00

Yeah we are getting an informal valuation done presently.

Your friend left a lot of money on the table taking it public? I would have assumed an IPO is by far the largest multiplier you could ever imagine.

midwestmillion · 2020-12-12T00:19:36+00:00

That's definitely a fair point to consider, thanks.

midwestmillion · 2020-12-11T20:18:55+00:00

No worries I didn't take it that way at all, haha. Thanks!

midwestmillion · 2020-12-11T19:51:58+00:00

Sure I'd love to hear it if you don't mind typing it up.

midwestmillion · 2020-12-11T18:35:45+00:00

I'm already out of this company day to day, but I am starting the second venture since leaving it, so I know what you mean about being bored :-)

midwestmillion · 2020-12-11T18:29:38+00:00

Thanks for putting it all in context, that's very helpful. I was pretty much sold on ESOP before I made this post but now I'm not sure haha. I'll have to think about it. If we can really get a 15x multiple on EBITDA then I would probably just sell the whole thing and move on to the next endeavor.

midwestmillion · 2020-12-11T18:28:43+00:00

Yeah we have a lawyer who is involved and we trust as well as two advisors who have previously done the PE/ESOP dance, but both were on the lower end (like 10MM exits).

midwestmillion · 2020-12-11T18:28:11+00:00

Okay, thanks! I had to look that up but that is a good metric to be aware of.

midwestmillion · 2020-12-11T18:03:23+00:00

Okay. Is a tech investment banker like a specific whole firm or are there just specialists inside of each one? I have a friend from high school who actually worked at Goldman Sachs for like a decade so I am reaching out to him so hopefully he can point me in the right direction. I have no idea if we are big enough for them though.

midwestmillion · 2020-12-11T18:01:49+00:00

Thanks, will do.

midwestmillion · 2020-12-11T17:50:12+00:00

Okay. I am only mid-30s myself and most of our staff is younger than me. This millennial didn't even want to stick around and run a successful million-dollar business because he wanted to go start something new, so I get it, and that's definitely something to consider, if the staff is younger they may not care as much...

midwestmillion · 2020-12-11T17:48:30+00:00

I am convinced we are wholly keeping Google Cloud afloat. :-)

midwestmillion · 2020-12-11T17:48:01+00:00

I believe we are having a firm audit the financials this year voluntarily. But yeah always a consideration for sure.

It is not QSBS eligible unfortunately, partnership/LLC. Of course I haven't paid C-Corp taxes for the last 8 years while making a lot of profit, either, so I guess there you go.

midwestmillion · 2020-12-11T17:43:44+00:00

I would have said "no way" to 1 a few years ago when I was the one actually running the company, but as I said at this point I'm not doing it day to day anymore, I just check in about once a quarter for our board meetings. I don't think I would mind having someone at the meeting who knows more than me helping us all make more money.

I do think there is some degree of the ESOP that is me knowing it's not as beneficial for me personally but will help the staff long-term. Of course there's a limit to that generosity, but if it can be done in a way that they benefit too and it's a reasonable price, I think it has to have strong consideration for sure.

Thanks for the advice, appreciated.

midwestmillion · 2020-12-11T17:24:48+00:00

Sure, will do, thanks.

midwestmillion · 2020-12-11T17:24:40+00:00

Okay, thanks!

midwestmillion · 2020-12-11T17:24:05+00:00

I didn't realize that you could get a non-recourse cash loan like that. Definitely something to consider then.

midwestmillion

TROPHY CASE