FIRE and Focus on a Startup Company - Insight appreciated

[wazoomann]

Hi all

Been on the forum since summer, doing the daily analysis while watching portfolio / market / and analyzing some more (does it ever stop? guessing no )

Appreciate comments from those that might be in similar situation:

58 years young , married (wife is 50) and I have been self employed over a decade now, earning on average a low six figure income, avoiding the corporate environment (had many lucrative offers, but preferred my lifestyle with home office of 30 hrs/week and taking life and vacations before it's too late to enjoy life).

I have an opportunity to start a company that I'm 95% sure will provide at least a decent income ($50k plus) in 12-24 months, perhaps more income, with the ability to live wherever I want (very appealing given Great Lakes weather!). But it will take a at least 12-24 months before the company is cash flow positive - so maybe a couple years before I can draw a small "salary" as Founder ($50k or so, going up if it takes off with at least 33% equity). But it's a "life's work" kind of opportunity. Tying together all the things I care about and have been working on for 30 years.

My wife plans on working another 5-10 years, earning $30-$60k / year depending on location(s)

After a lot of analysis, it looks like $500k in savings and about $50k in cash (two years of expenses assuming wife works) will more than suffice if I start withdrawing after age 59.5 (occurs next year). We live a frugal lifestyle, one car, rent a small house and have always lived below our means to save the $. We have zero debt, 800+ credit scores. If necessary, we can cut back more as our minimal living expenses can covered with her income and minor withdrawals from my savings at 59.5 can cover any discretionary spending (a vacation or two, business trips etc). Our kids are adults.

I'm currently 60/40 (ETF, Vanguard Global). What are things we should watch out for? My #1 concern is health care/long term care. Am I missing anything else? We have term life insurance policies but no long term care. How are you handling / thinking about long term care?

Appreciate any thoughts, comments, insights on the FIRE and work on a startup company instead of continuing consulting. I can't do both. Thanks in advance for your comments.

 

[Sunset]

My thoughts...

So this startup will be a partnership ?
Besides working for free for 2 years, are you expected to pony up cash ?
Often a startup means your work will at least double from what you are doing now, so expect 60 hour weeks and maybe 1 week holiday/yr for the next 3 years. This will be quite a change from your current laid back schedule.

 

[Brat]

My mother started a business and her planning assumed that it would not be cash positive for 3 years. I think your planning should assume that time horizon. There are expenses in building the legal structure for a business, build that into your start-up costs.

 

[OldShooter]

Thoughts:

For a corporate fiduciary like a trustee, anything above the 10-15% range is considered to be an imprudent concentration of assets. Where will this investment sit versus your whole portfolio?

Said another way, how badly will it hurt if this venture tanks and takes all of your cash investment and personally guaranteed loan amounts with it?

95% probability of success? Really? You have observed that 95% of similar ventures have been successful?

 

[Teacher Terry]

I wouldn’t do it at this age because if it fails you don’t have time to recover. What if you got really sick and this company is dependent on you to succeed?

 

[wazoomann]

My thoughts...

So this startup will be a partnership ?
Besides working for free for 2 years, are you expected to pony up cash ?
Often a startup means your work will at least double from what you are doing now, so expect 60 hour weeks and maybe 1 week holiday/yr for the next 3 years. This will be quite a change from your current laid back schedule.

-Yes, it will be a partnership (potentially 2 partners, I will be the most active to start)
-Not providing cash, but essentially setting up company, product development and sales/marketing
-My hours will def. increase!
-I've gone through cycles where I was very busy for weeks or a month at a time for up to 60-80 hrs, and then back to 30, boom and bust so to speak, but with control over my time.

Thanks for the feedback!

 

[wazoomann]

I wouldn’t do it at this age because if it fails you don’t have time to recover. What if you got really sick and this company is dependent on you to succeed?

My health is great, but I had not considered that, Thanks!

 

[wazoomann]

Thoughts:

For a corporate fiduciary like a trustee, anything above the 10-15% range is considered to be an imprudent concentration of assets. Where will this investment sit versus your whole portfolio?

Said another way, how badly will it hurt if this venture tanks and takes all of your cash investment and personally guaranteed loan amounts with it?

95% probability of success? Really? You have observed that 95% of similar ventures have been successful?

-My investment is mostly my time, in other words, lost income potential so...I'm thinking it would be an investment of about 15-30% (assuming no "salary" for 1-2 years) - I would be evaluating the start up on an ongoing basis, making sure we are headed in the right direction.
-I don't think it will hurt badly, but I would evaluate on an ongoing basis.
-Agreed on 95% success, the start up will work, just a question of how well (in other words, is it worth my attention given the revenue / profit it will provide)

Thanks for your reply!

 

[wazoomann]

My mother started a business and her planning assumed that it would not be cash positive for 3 years. I think your planning should assume that time horizon. There are expenses in building the legal structure for a business, build that into your start-up costs.

That's helpful. I've done these before and the timing horizon can be 3 years. I've had decent success getting cash flow break even/positive in 6-12 months (in one) and 12-18 months (in another). All depends on how long the product takes and customer acquisition/cost of sales, of course. I think with low investment, this can be done in 12-24 months. And I'd evaluate on a daily/weekly/monthly basis the ramp up potential/results.