Any ERE related posts/info on doing a startup or a business?

Anything to do with the traditional world of get a degree, get a job as well as its alternatives
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Matt3121
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Joined: Mon Sep 09, 2019 7:45 pm

Any ERE related posts/info on doing a startup or a business?

Post by Matt3121 »

Quick Note: Sorry if this is the wrong forum, I couldn't find a better fit, if there is one let me know and I'll post it there instead.

I stumbled upon ERE about 6 months ago when I was trying to figure out how to reduce my expenses (and I have by 75%!), I've read nearly every article at this point but I wondered what info what out there on starting a business with a ERE related focus. Most businesses fail because ultimately they don't make money, or at least not enough to cover your expenses.

As a ERE adherent you would seemingly have a very large advantage over someone else since your expenses are so low. That's probably not going to fund the next Tesla level start up but it could work for all sorts of businesses I would think: Real Estate Agency, software development startup, etc. As an example I knew a guy in Seattle who lived a few houses down from Bill Gates (probably a 5-10 million dollar house today) and he came over as an immigrant with nearly zero expenses living on someones couch, worked a job, bought a used car he could sell, made money on it, and rinse and repeat. He ended up owning a number of car dealerships in Los Angeles.

When he moved to Seattle he bought a house with some land around it for about 200k an opened up a car dealership. He literally kept his expenses ultra low. He didn't wash the cars, he didn't have any fancy numbers or banners on the car. He literally just placed ads in the paper, set his goal to make 1k per car and just sold them as he went. He worked only 6 hours a day and was selling 30 or so cars a month. In that time I was there a major dealership down the street went out of business, but there he was making a lot of money, not working all that hard. And really it was only possible because he did follow a lot of the ERE principles in his life (later on he obviously spent a lot but before that he was very frugal).

So anyone have any info related to that? I tend to think a lot of the reason companies survive and do well is partly due to the fact that they keep expenses low. All these tech startups that lose money do probably have a very promising business models but their monthly burn is just way too high. I lived in Denver for a year and ended up going to the first Chipolte. And it kinda made sense why it was able to survive. The rent must have been ridiculously low, the space was very small.

Yeah so that was a lot of rambling but if you have any stories or articles I'd love to read it. Ultimately the same principle applies. If you have a great and very profitable business you can't out earn ridiculous spending (with maybe some extreme examples like Microsoft).

jacob
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Re: Any ERE related posts/info on doing a startup or a business?

Post by jacob »

The book discussed in viewtopic.php?t=8722 + the books in it.

Also the e-Myth (e is for entrepreneur, not electronic) and perhaps the Millionaire Next Door to some extent.

7Wannabe5
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Re: Any ERE related posts/info on doing a startup or a business?

Post by 7Wannabe5 »

I liked the "$100 Start-Up" and other books by Chris Guillebeau. Seth Godin also has written a lot on the topic of boot-strapping your way into business. Also, anything on the topic of "lifestyle business' would possibly be of interest.

Also, as I have noted elsewhere, if your core goal is self-employment, as opposed to financial independence or reduced work-for-money hours, then you are pretty much golden as soon as you have reduced your spend to level of 1 Jacob, because it is pretty darn easy to come up with 3 businesses that would independently produce profit at that level, if you devoted 60 hours/week to the endeavor and just a wee bit of start-up capital.

RealPerson
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Re: Any ERE related posts/info on doing a startup or a business?

Post by RealPerson »

Decide whether you want to create a job for yourself, or if you want to start a business. Creating a job for yourself can be inexpensive, like the example of the car salesman you gave. Creating a business where employees generate the income for the business is usually a more complicated and expensive endeavor. You will be dealing with payroll, OSHA, possibly HIPAA, maybe fair lending laws, discrimination laws, department of labor regulations, etc.

For any type of job or business, cash flow is king. Keeping debt low or zero helps tremendously in that regard.

What I learned from the e-Myth is the difference between doing a job and owning a business that does that job. These are 2 completely different things. In your example, selling cars is not the same as owning a car dealership. You need to be clear as to whether you want to own a self employed job or create a business.

Check out https://www.popupbusinessschool.co.uk/. Not recommending you sign up, just to look at their ideas.
There are excellent suggestions on starting a job or business for little to no money. For example, if you want to start a catering business, borrow or rent a van for deliveries instead of buying one. Use the kitchen of a restaurant over lunch if that restaurant is only open for dinner. A recently graduated graphic designer may be willing to design your marketing materials for free to get their own name out there. Demonstrate profitability of your business before spending any serious money on it. Maintain that spirit to continue to keep expenses low.

Matt3121
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Re: Any ERE related posts/info on doing a startup or a business?

Post by Matt3121 »

I should note: I'm less interested in actually starting a business and more interested in if frugality is a large part of the reason that companies become successful.

Yeah I pretty much figure that if you are living ERE then basically almost any business that isn't capital intensive WILL be profitable in an absolute sense. It's hard to imagine anything failing if the costs are low enough.

I looked at the E-Myth but I think that is less about frugality and more about running a small business and making it work without your having to do the day to day work (very valuable as it is). I guess I'm thinking more in terms of just the frugality aspect. I'll check out the $100 startup and the books mentioned in the other thread. Much thanks

7Wannabe5
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Re: Any ERE related posts/info on doing a startup or a business?

Post by 7Wannabe5 »

I wanted to note that the procedure outlined in "The $100 Start-Up" is not directly in alignment with "ERE", because the author sets minimum income earned to declare success at median income= median spend. It is also not nearly as robust as the procedure in "ERE", but it would become much more robust if success was set at 1 Jacob vs. median income, because you could exploit much smaller niche opportunities*. If you set up at least 3 reasonably independent business/streams-of-self-employment-income in this manner, then you would also be quite resilient.

*Most hilarious example of this I have witnessed was my ex-step-daughter's ability to make money buying and re-selling taxidermy on Craigslist and similar sites.

jacob
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Re: Any ERE related posts/info on doing a startup or a business?

Post by jacob »

@Matt - My takeaway from the e-Myth was that a functional operation requires vision + skills + management. I forget what the exact dimensions were, but the point was that most entrepreneurs are lacking in at least one dimension (e.g. for me it's management stuff like sales and dealing with bs) which then limits how successful the business can get, lest some other person is brought in (hired, consulting, advisor,...) for that aspect. Frugality or lack thereof would fall under management. Lots of starry eyed entrepreneurs with a grand vision of selling their unicorn craft beer online taking out great loans to make it happen ... and then get crushed. The "Million in the Bank" book is a management and vision reality check in this regard.

Matt3121
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Re: Any ERE related posts/info on doing a startup or a business?

Post by Matt3121 »

@jacob - Okay I see. That makes sense. I think that's a totally valid thesis. I've done a few businesses with varying levels of success, and they are a lot of work, but more than that they are a lot of stress. Normally because you (typically) have a high burn so you have to work pretty hard to get the amount of money you need to pay your bills.

Prior to discovering ERE my monthly burn was over 5k a month (I know, I know), and I now it's about 1k a month, so I was thinking how much easier it would be to do a business now. Earning 1k is more than 80% less when you factor in taxes. Earning 70k in first year take home? Idk, might be pretty hard. Earning 15k in first year take home? Quite a bit easier obviously.

I think it's an interesting proposition, all these startups with a massive early burn would (I would think) benefit by adopting a more ERE for business approach.

7Wannabe5
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Re: Any ERE related posts/info on doing a startup or a business?

Post by 7Wannabe5 »

I think the concept of “entrepreneur” as described in economics texts is just something made up to make some equations work.

Here’s another way to approach it “ERE” style. When I was a kid, cinnamon flavored toothpicks were popular on the playground. I liked them myself, so I figured how to make them from “scratch.” This required a not insignificant for 9 year old me investment in cinnamon oil. Then I sold them in the playground for a profit.

My point here being that anytime you gain a skill which allows you to go one step back towards “scratch” in making something you like, you just need to go one or two steps out towards market to sell it.

RealPerson
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Re: Any ERE related posts/info on doing a startup or a business?

Post by RealPerson »

Matt3121 wrote:
Mon Dec 16, 2019 11:10 am
Prior to discovering ERE my monthly burn was over 5k a month (I know, I know), and I now it's about 1k a month..
That is impressive! I am interested in learning what you did to accomplish that. Would you comment on that?

Matt3121
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Re: Any ERE related posts/info on doing a startup or a business?

Post by Matt3121 »

@RealPerson

I should probably do an introductory post and break it all down there. Believe it or not I didn't actually buy much of anything (ipads, etc). But my monthly breakdown was something like this:

2k for rent and utils
1k for gas, tolls + car payment (400 a month) - I drive a lot for fun 35k miles a year.
1k for food
1k for everything else, sometimes more. Golf, Clothes, random expenses, web services I pay for, cable tv, etc.

So first things first, I had a fair amount of money in the bank. Which is an unfair advantage I know. But first thing I did was look at rent. I was paying 24k a year on rent and utils. So I bought a cheapo house for under 100k in cash. It's small, 800 sq feet, but it's fine for me. I also got a family member in to pay rent. Win/Win for both of us. He pays 600 a month for rent which covers all my utils, property,tax etc.

Basically now I live for free. So that's 2k saved. I moved way further away from civilization (about 50 minutes from Philly) but now at least I save 2k a month. So purchased a house + house hacked with a room mate, without roommate though I still save 1400 a month.

Next was car. Now, I drove a lot to the area I now live because I play golf a lot, so by moving here I don't drive as much (still drive a lot though). I paid off the car, so that saves me 400 a month. So total now I'm paying about 200 (70 insurance, 130 gas). I also hit FIRE by reducing my expenses so I don't drive to work anymore. So I save money there.

Food, well I never considered that I was spending too much on food until I saw how austere Jacab was living. I tried to immediatly cut out the actual restaurants which was 30 bucks a pop if I went with a friend. I also cut out Starbucks and really ANY coffee outside unless I was desperate. After the first month I reduced expenses by half. Now I've got it down to about 200 a month but I could do better.

Health insurance was another big one but now that I'm not going to work as much next year my costs on that came down quite a bit, It'll be 115 a month rather than 350 (really I owe that to Jacobs site which kinda mentioned another article that explained a bit on how to reduce your cost).

Then I have the rest of the money for whatever else I want to do. I still play golf but it's winter. And now when I play golf I look for deals, instead of saying "Who cares, I'll pay 33" I'll wait and play later for 15 or something of that nature.

That's it in a nut shell, if I do an introductory post I can give a further breakdown. It was totally satisfying though. The best feeling is not having to be a slave to what others want you to do. You are free to do any business, write any book, sleep, etc.

I owe Jacob a lot, I went from burning 60k to 12k, really from just changing my perspective. Thanks @jacob!

RealPerson
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Re: Any ERE related posts/info on doing a startup or a business?

Post by RealPerson »

Impressive! Thanks for sharing the breakdown.

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