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- Did you work on the right thing today?
- 3 Critical Rules for the day after you buy a company – to make sure you don’t miss a loan payment
- What about flipping a small business compared to real estate?
- Managing your Business in 2 Hours
- How we buy companies for under $5,000
KCs’ personal story on why ‘buy a business’ is critical
What is the End Number and why is that so important in your life and business?
KCs’ personal story on why ‘buy a business’ is critical to my family’s future.
At some point – work will move from mandatory to optional. On that day you have figured out what you want and how you are going to get it without doing the work yourself. We call that the ‘end number.’ We DO NOT talk about what you need, winners get what they want and we are winners.
Of course, our hope is that the choice is ours to make. If your health fails or outside forces collapse your income streams, the ‘end point’ is going to be far different then what you are expecting. A friend of ours died of a heart attack this spring and his family is going to be forced to make some massive adjustments to their standard of living now. Then, four years ago I met an 86 year old business man who finally lost a 28 year old tax case and the IRS took used the penalty clause to take 100% of his accumulated wealth, forcing him to move from his 5,000 square foot home with 2 live in nurses to a bed in the basement of his daughters’ home.
Because of the uncertainty of the future, you and I want to get to our ‘end point’ as fast as possible. We also want our income streams protected as much as possible.
However, we often times have emotional obstacles in your way…
As business owners we carry the weight of ‘being in charge.’ Others look to us for inspiration and guidance. Yet, in the quite times of the night we often find ourselves looking at what we have accomplished and comparing it to what we SHOULD have done or WOULD have done or COULD have done if only ________. What is worse, is that we can’t even tell our spouse or team because they won’t understand ‘the boss’ having any self-doubt. This is a burden we carry alone and it is a heavy weight.
The Dali Lama would call this living in the past. Tom Sullivan of the strategic coach calls it living in the GAP, your doctor calls it anxiety and gives you a valium. This focus on the difference between what is and what could be is the beginning of self-doubt and mental instability. We must stop, doubt.
We all suffer from this ‘gap’ between what we have and what we want. I too, find myself sitting on the porch late at night watching the Arizona stars blow around, drifting into ‘self-doubt.’ You that are students of the bible know that the ‘wedge of doubt’ is the only tool God let the devil take with him as he was cast from heaven.
Well, I am no pop physiologist, (and God knows I’m pretty illiterate of Theology) so that is as far as we are going down this crazy-talk-road. Let’s get back to the reality of the end number. Then we can review how small it really is, and what you must do right now to get there before the choice is no longer yours to make.
The end number is a preset amount of money you want to make work optional instead of mandatory. Once we have the ‘end number’ in mind you can start planning backwards toward today. This makes your goal much easier to attain and takes away the ‘fear and doubt’ about your ability to get there.
To make the story easier to comprehend, I’m going to use my own situation as an example.
Now you may recall from some of our earlier letters and blog post that I was financially wiped out between 2004 and 2009 by a series of events that included divorce, tort lawyers and the recession. I’ve always known that to retire the way I want, I would need $25,000 a month in income. By 2010 at the age of 56 I was becoming desperate and began doubting my ability to take care of my family the way I wanted. The wedge of doubt was making me ill and I did not even feel like I could tell anyone that I was failing them.
During those hard years I was scared to death by several financial planners who told me that my goal for retirement would require a war chest of $6,500,000 if I wanted to keep my current income after retirement. So to retire I was told that all I had to do was to make $13,000,000 and save 90% of everything left over after taxes. Well if that is all it takes, let’s get started. LOL
Since we both know I’m not smart enough to make 13 million in the next 4 or 5 years, I had to come up with some other idea.
What is my end number and how did I come up with it?
Now here is how I came up with my own ‘end number.’ When doing this exercise one of the first things that I was surprised about was how little I need and how easy it was going to be to move from mandatory to optional work. I certainly did not need to make 13 million.
Last year I simply started by writing down what I wanted for the rest of my life. The list was simple, a nice little ranch where I can play with my 4 year old son, and a place where my future grandchildren (from my older kids) will love to visit. I figured that the total cost of ranch payments and maintenance would run $8,000 a month. That’s an ‘all in’ number but hey, horses are expensive!
I never plan on owning my home free and clear – a fat piece of real estate is like a green target to tort lawyers and we must remember that in today’s world, predators are everywhere. If you want to own a million dollar ranch home, it will cost you $8,000 a month. It is far easier to build an income stream ‘on the side’ of $8,000 a month, then to make 1.8 million so you can ‘own’ your home after taxes.
Today our goal is to refinance our main home whenever we get equity built up over 10% of the market value. I want my assets to look encumbered and worthless to outsiders.
Then I knew I would need another $8,000 a month for taxes and medical care, and I wanted at least $8,000 a month for living expenses. These are my numbers and they are not based on my minimum needs, but on a full blown idea of what I want. There is no reason to accept less then what you want, when calculating your end number.
So to make $25,000 a month I would need $6,500,000 in cash or three little dependable companies netting $2,000 a week each. What sounds easier to do?
The truth is you are far closer to your end number then you might think. Fixing up a distressed company while turning your current business into a cash cow is inside or our skill set and mental picture of what we can accomplish between now and the time we can no longer work.
I guess all this comes from the realization that spending time with my family on a small ranch cost a lot less then sailing around the world and is a lot more fun. That probably comes from being 60 years old and realizing that world domination is no longer that attractive. The cost of doing it all exceeds the benefits in my opinion. The goal of owning 3 companies that are run by junior partners and paying me $2,000 a week just seems so much more do-able then trying to generate 13 million dollars income so I can have a giant war chest. You can buy a business with little cash out of pocket and do the same.
Now about that wedge of doubt. All of us have made $2,000 in a week multiple times over our life. It is not outside of our comfort zone. In my life I want 5 companies operating at this level as we know that some businesses will not survive us. I plan on 2 failures. But that will still leave us with enough income to live very well.
I hope that my personal ‘end number’ has made it easier to realize that you don’t have to look at retirement and say ‘how little can I get by on.’ With a few wise steps you can live like you want.