A new way for aspiring entrepreneurs?

I was considering something today when I was reading some question and answer sessions online: many people want to become an entrepreneur.  It has a glamorous reputation, when the job itself isn’t always a million miles away from working on commission.

In the early days, an entrepreneur is sometimes the firms only employee, and needs to make sales.  It is a lonely existence, and something I have done before.   I remember my days living in Cambodia, and how hard it was.

I am not saying it isn’t good to be an entrepreneur, and it is incredibly satisfying succeeding after a lot of trouble and hard-work, blood, sweat and tears.

The point is people should know the facts.  In most countries, at least 80%-90% of start-ups fail.  Many of the businesses that remain only make modest profits.

How many entrepreneurs do you know who have $1M?  Less than 5% of the total I imagine, unless most of your friends are wealthy.  How many do you know who have $5M or $10M?  Less than 1% I imagine.

And yet, 100% of people on middle-class salaries in the developed world ($40,000-70,000) can be worth $1M-$12M if they:

  1. Follow the academic evidence
  2. Start saving and investing at a young age into a low-cost, diversified portfolio of stocks and bonds that are linked to their age.

Let me give you a few examples.  Somebody earning 70K who saves 30K, from age 25 until 65, would be worth around $10M in today’s money, if they simply get 6.5% after inflation, which is the market average.  $10M from saving $2,500 a month.  Somebody who saves $500-$1,000 a month, will be worth $1m-$2.

Moreover, it doesn’t need to always be an either/or.  A second option is to save and invest hard at a young age, before starting your own venture.  Save and invest as hard as you can for 10-15 years.

Accumulate $500,000-$1M , or more.  Based on the 4% rule, you can now live off $20,000-$40,000 as the business owner, safe in the knowledge that if the worst comes to the worst, you have achieved financial freedom, provided you don’t overspend.

I am not saying don’t start your own business, but know the facts before you do.  If you already have your own business, be sure to diversify.  You never know when it could come crashing down.

My first boss overseas in Shanghai is from the UK. He was in the property industry, and doing extremely well. By well, I mean he was already a multi-millionaire.

Of course, his ego grew with success, as per human nature. He went on a huge expansion across Eastern Europe, as asset prices were primed to increased after the introduction of the Euro.

Things went well at first, and then Lehman happened.  The property business depends on leverage and getting credit, which dried up.  One thing lead to another and he was left with only one family home in the UK, and needing to find new work for the first time in 20 years.

Nobody knows what the future holds.  Be careful and know the facts, otherwise you may need to work until you drop.


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