Partnerships – Should you?

“The only ship that always sinks is a partnerSHIP” I read that somewhere from some guru and it sure seemed like bullshit at the time. After the last 15 years of starting multiple partnerships I can say that it’s mostly bullshit, but has a tiny amount of truth buried in there.

I’ve started quite a few businesses in my years and a lot of them have been partnerships. It just makes sense for a startup that is cost conscience that rather than hire someone and having to pay them every week you can instead join up with them. The first few years of the growth you have the benefit of an overqualified individual working for less than they are worth in exchange for ownership and future potential. In my time with partnerships I’ve had quite a few different approaches with varying degrees of success and failure.

  • Working for a sole proprietor to learn the craft then joining them – This one was a big mistake as I knew he was crazy. I never lost any money, but the headache every day was annoying and I wanted out in the end. I will never talk to this Qanon conspiracy crazy bastard again in my life and I’m better for it.
  • Joining up with someone that I only knew professionally. This worked out quite well and only ended because they wanted to bring their spouse in and I didn’t want to be a third wheel in a power dynamic where my voice effectively would be worth less. I moved on and am happy about everything that happened for the most part.
  • Starting businesses with your friends – This is the golden ticket to success. I avoided this for years because of the stigma. Everyone in your life, media, books, writers, gurus, bullshitters will tell you that starting a business with your friend is the best way to lose a friend and money. Those people are idiots.

Starting a business with your friends is the best thing you can do if your friends are decent people.

That’s the key to success with going into business with friends. Nothing really matters as long as you respect each other to begin with and have similar values. The mistakes I’ve made in starting businesses with people has always been working with people who didn’t have the same philosophies in life and business. That’ll dick ya down everytime, but if you work with your friends and are all driven towards having fun and making something awesome then you’ll have a blast and make money. 

As we are approaching FI I have gotten so much less tolerant for any work related bullshit. This also relates to any business I own a stake in. If I don’t enjoy it then I am out. With this scaling back I’ve noticed that the only businesses I am excited to work on each day are the ones that I’m doing with my friends. We are doing cool shit and are trying to be on the cutting edge every day if only for the sake of figuring out the best way. We invest aggressively on ideas we think are awesome and every ownership call is a goddamn blast because I’m just hanging out with my buddies bullshitting. It’s just rather than talking about politics we are talking about how to make our business the best it can be.

That’s my dad advice for the week – Get friends that are good people, then go into business together on something you would all have fun doing.

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Optimization

If there was a single word to describe my entire philosophy in life it would be Optimization. I’m at the point where I work a full-time job as a CFO, in my events company I am the lead consultant and run the org as President, I own and manage a retail speciality running store, I own and rent out ½ of the duplex we live in, I own another rental property and at this time have built an indoor grow room to learn hydroponics to start a produce business. There is really only one way I got to this point where I can keep track of everything on this list and that’s optimization.

Even our FIRE dream of homesteading is built on a foundation of optimization and the most affordable way to live a sustainable life.

My work life is really where this started as I just found myself bored quickly in my first office jobs. Those early jobs in accounting had such old school approaches that when I took over from Joe Boomer who was retiring who took 45 hours a week to do a job that only takes 20 with a computer and the ability to type with more than two fingers. Still, I was stuck there in this office with 20 hours a week to do nothing. At first I browsed the internet and read articles, because I was so committed to being available I didn’t want anything I couldn’t instantly shift focus from. As time went on I learned the value of turn based card games like Hearthstone. If this sounds like the perfect job to you then I promise you it’s not what it seems. At a certain point, no matter what freedom you have, being forced to sit at a desk for 20 hours a week with absolutely nothing to do or accomplish is soul sucking.

After 6 months I took the approach to do my job the best I could and that meant to come up with the most efficient and accurate way for everything. Over the next few months I tediously and relentlessly went about automating every task I had. I was the only accountant for a K-8 private school. Here is an example of what I would do:

There was this super complicated report that I prepared for my Board of Directors monthly. I learned how to make a plug in that allowed me to export from my accounting system into a series of excel spreadsheets that all compiled everything into a pretty template. Took me about 2 weeks to learn how to do all the steps I needed to get what I wanted. My predecessor would spend almost 2 days making these reports, I had it down to about 2 hours a month, then I built a program that made it 2 minutes.

I applied this approach to nearly every single task I could. By the time I left this job I had my core duties down to 8-15 hours a week. The other advantage was the quality of my work was better. I got really good at solving problems because building the structure of how to make my job efficient gave me really good problem solving skills.

Once the free time really started piling up but still having to sit in my office I had to get creative. This led to me starting companies while I worked a “full-time” job. From there it’s a series of different full time jobs with me starting and running more and more businesses “on the side.”

Over the last 15 years my approach has evolved and I expect it will continue to evolve. After I recently hit LeanFIRE my priorities shifted away from ruthlessly pursuing money towards more fun ideas and tasks.

Here are a few of the things I do:

Payments, utilities, communications, filings, investments, and even shopping should be automated at the maximum level you can. Use a bag of dog food every 4 weeks? Sign up for an auto-delivery and you will never spend a thought on it again.

Everything in your life that happens regularly that you need to be involved in gets a calendar reminder – always. For an accountant this is tax filings, budget work, planning, payroll, check runs, etc. Anything that you actually have to be actively involved in at any regular interval gets one.

Your calendar reminders should be set for a realistic time on a day that you have time. When they pop up you should always complete the task or the moment you hit a wall you then stop and make another calendar reminder. 

When you are working on a joint task that has a lot of back and forth you want to always 100% finish what you can and then pass it back. I typically check my email 4-6 times a day, with notifications turned off because they are distractions from whatever I’m currently working on. During those email times I delete all the junk, then work my way from the oldest email through to my newest and do one of three things:

  • Fully complete whatever task the email is asking of me
  • Set a reminder to complete the task at a later, but specific date
  • Delegate the email to a subordinate

When email time is over because something else comes up or my inbox is 100% empty I then can move on.  

When I’m working on a task I’m hyper focused and don’t let much distract me. What I’ve found, in the white collar world at least, is that most people tend to do the opposite. They let little distractions pepper their day and let the work pile up. They float in and out of tasks over a 10  hour work day, but never seem to accomplish much. Now I’ve read books that would call those people lazy. The truth is that I’m the lazy one. I value my free time so much that whenever works needs to be done I want it done and over with so I can focus on either my own businesses more, my leisure time or my family. Procrastinating is the enemy of the lazy person.

Optimization is the lazy man’s best friend as it’s the best way to maximize the amount of time you get to do whatever you want.

So go on, be lazy like me and optimize every single thing you can.

The plan – done in 5 years or less

Over here at the FIREdad house we have shifted gears into planning for our retirement which seems to be getting closer every day. The journey of FI/RE has been pretty short for us compared to most and that is in large part to some major upticks in income in recent years mostly from businesses that I have started. I started about 8 years ago and should be done in the next 5.

We have gone from an initial goal amount of $750,000 in assets with a paid for house to thinking we would want $2 million. At this point we have scaled it back and the FI/RE goal for us looks something like this:

$60,000/yr in income from various sources
$400,000 in pre-tax retirement savings
A paid for homestead on 40 or more acres of timber

Today I’m going to dive deeper into each of those goals, how we are going to achieve them, where we are on the path to that goal and what the future holds.

$60,000/yr in income from various sources

I expect that point is 2-5 years away depending on where life takes us. Most people would look at those lists above and say something like “They want $60k a year in income, sounds like work to me!” and snicker because they outsmarted me. When I think about FI/RE I rarely think about the Retire Early part. The end goal for us is to live life exactly how we want without needing money to be a part of the equation. 

When I write that we want $60,000 in annual income to be FI that sounds like a conflicting statement, but here is what I mean by that and the breakdown. We currently own multiple businesses that I have built up while working full-time in Accounting & Finance. At this time I have two that are producing fairly well with minimal involvement from myself.

Running Wild

Retail Running Speciality Shop – This business has been around for 30 years and is quite established. It was one of the first jobs I had after graduating college doing their accounting and selling shoes in the store. Over the last 10 years I became very close to the family that owned and operated the store. Last year the owner passed away suddenly and I offered to purchase the business. We had been talking about it for years, but that unexpected incident really lit a fuse. As of today I spend about 10-15 hours a week as the owner of the business. I have an extremely reliable manager and staff that run the business day-to-day. 
$40,000/yr – This will vary greatly as the health of the shop financially is my main goal

Racing Consulting Business – I also run and manage a race timing/consulting business. I’ve sold ⅔ of the business over the years to 2 other partners which has been both rewarding and challenging. Until 2020 I was President and lead consultant for this company and at our peak we were supporting around 100 events annually. With COVID there is no telling when this business will come back. When it does come back I’ll be scaling my involvement in this business back quite a bit by hiring a President and other employees. I’ll just be doing the events I want.
$0/yr during a pandemic – Roughly $20,000 when I hire out all my current work

Rental properties – We own 1 fully paid for condo worth $130,000. I use a property management company to make this as passive as possible which is great, especially considering the condo is 800 miles away from our home. I would really like to purchase 1-3 more before reaching retirement age. We also rent out ½ of our primary residence. Our attic is remodeled to be a studio apartment and the COL is so high here that it generates $1,000 a month. Our homestead dream will reduce this income by $12,000/yr as we will sell our current residence and lose that studio rental.
$21,600/yr Now
$9,600/yr post FI

CFO – I am also still working a full-time accounting/finance job. I am 2nd in command at a Destination Marketing Organization. This is a really rewarding position that is quite fun at times. However, quitting this job is the main driving force of FI/RE for us. This is more of a traditional job and that is the thing I am trying to get away from. When we reach our goals I will quit this position, purchase our homestead property and make homestead our primary “job”.
$110,000/yr

As you can see when we review the list of our FIRE goals that the income side is already met with my businesses and rental properties. That means the CFO role is currently being held to supercharge the savings rate to accomplish these other goals.

$400,000 in pre-tax retirement savings

401k,457,IRA, Roth IRA, CO PERA (pension)- As of today we max both a 401k and a 457 as well as the maximum allowed in IRAs each year. The CO PERA pension will be multiple posts in the future but it currently automatically takes 8.5% of my salary and goes into that bucket.

$220,400 – All retirement accounts including cash value of pension 

When you look at our income and see we ‘only’ have about $220k in retirement it might seem like we have a terrible savings rate. The truth is that we do save quite a bit of money but I have used that savings over the years to invest in businesses, rental properties and other ventures rather than just pure retirement savings. 

$400k in pre-tax accounts that are left alone until we reach retirement age will turn into $1.5-$2.5 million by the time we turn 59.5. The plan is to get that to $400k then let it sit for the next 25 years in VTSAX, international and a small % of bond funds with an annual rebalancing. 

In 2020 we will have contributed $58,000 to our retirement accounts. Assuming we aren’t faced with a major economic collapse (apart from COVID) this goal should be met by 2023 and with average returns will be even sooner.

A paid for homestead on 40 or more acres of timber

We have set a budget of around $400,000 and not to exceed $500,000 on our homestead plans. This is the land, home and improvements we want to do.Our list for the homestead phase of our life is far more luxurious than I’ve seen on most homestead bloggers and YouTubers. It’s why I am such a big proponent of living the life you want to life, but just being intelligent about it.

Our list includes:

  • 40 or more acres, mostly timber where I can build MTB and running trails
  • Water on or accessible from the property: lakes, streams, rivers are all acceptable
  • 3 acres or more of semi cleared land near the home for agriculture
  • Outbuildings – at least 1 but more is better
  • A mostly or fully remodeled home with 3 bedrooms, 2 bathrooms with significant space for food storage

This is the part of the plan that is going to take the longest. While we could afford a mortgage on this dream property it is a personal goal to have no mortgage. Our current home is worth $75,000-$100,000 more than what we owe. We also have another $30,000 in after tax savings.

I put a lot of my free time into working on projects at our current home to raise the value as well as living frugally to save as much of our income as we can.

We currently save 100% of the income from all our businesses towards this goal. There are a lot of variables but this should be achievable in 3-5 years depending on market returns and if we can maintain these income levels.

When reviewing this plan there are people who would say it’s too conservative that with our income, savings and expenses that we could quit today and go homesteading now. There are others that would say I’m not going to have enough of a cushion should things change. All of those perspectives and opinions are equally valid. The plan above works for us. Both my wife and I have serious anxiety issues and this very conservative plan with multiple revenue streams along with a very comfortable retirement account is what works for us to sleep at night. If we needed to we could live on just the retail business income, if that needed to stop we could live on just the investment properties income, if that didn’t work then at least we own land that is producing a majority of our food and water needs. 

That’s the plan. Keep maxing the retirement accounts and save everything else to buy a homestead with cash. Then spend our days teaching our children how to live off the land, growing your own food along with selling at farmer’s markets/roadside, and hiking on our private slice of rural America on trails we built ourselves. I can’t think of a better dream to be able to pursue.