Seriously, it's bordering on the most lucrative profession in the US. If "Selling Hotdogs" sounds like it might make you even 1/10 as much, you're simply not charging enough.
So if you're looking for a business that doesn't involve selling your time for money, your best option is Software Product Company. Build something people need enough to pay you $50/month for it. The math works out quite nicely.
> If "Selling Hotdogs" sounds like it might make you even 1/10 as much, you're simply not charging enough.
Actually, my side biz is selling food. Unless you propose that I make way over a million dollars a year while contracting (no thanks to that stress)...I think my restaurant does okay. If I sunk the same amount of time in my restaurant that I did for contracting, then I'd definitely make more money with the restaurant than with contracting. I'm fairly confident I can compete with many bay area salaries at those numbers, and I could sink more effort and money into opening more restaurants and.... you see where I'm going with this, right?
My business is fairly small fry anyway. Had I a couple million bucks in the bank, I'd be looking at running restaurants with $40k+/month net profit. (How many engineers make that, before stock options and ignoring the value of the business itself?)
There are a LOT of other ways to make bank and saying being a developer is the only way to do it is incredibly narrow.
Yes. While I haven't actually looked at financial statements for those businesses since they were way out of my budget, I'd get the occasional listing with numbers like that. Businesses like http://www.bizbuysell.com/Business-Opportunity/Sushi-Restaur... - nearly $700k in earnings in one year is not bad at all.
It's up for debate how much the owner actually makes and how much of the sales goes unreported to the BOE, IRS, etc., but it's within the realm of possibility.
> What makes your restaurant so succesful, isn't that industry plagued with 80% shutdown wiyhin 5 years?
I can believe the failure rate is that high for brand new restaurants, but that is why you buy already established businesses instead. I also don't think that number is too strange in the context of all brand new businesses. Think of how many startups fail. Imagine if there was a market for buying and selling "matured" startups - that's basically how small business sales work. (Hopefully) all the bad ones will have died out already, the ones the owners are trying to flip as fast as possible before they die are dead obvious, and you'll maybe be left over with a few sustainable businesses to choose from.
I think the only difference between running a restaurant and starting a startup is that there is no restaurant equivalent to winning the jackpot (read: selling your startup for mega bucks) and just keeping the business in the black is the norm (although, now that I think about it, I'm not sure how a lot of startups can even dream to accomplish that...).
As for what makes my restaurant successful? My takeover may have been this year, but it's sat at the same location for decades (older than I am, even) and we have big servings and tasty fries. :D
That's some good points, and I never thought of it in terms of restaurants that have been there longer may not be part of that statistic.
Some caveats though:
-Even large billion dollar corporations that have been in business go bankrupt
-My perspective has always been that if a profitable restaurant is selling, its because it really isn't that profitable. The usual reasons given for the sale are can't spend the hours or health, but the reality is that if a restaurant is profitable, they could just hire a manager for 40-60k who could manage all aspects of the business, while the owners collect their checks every month.
My feeling on why that doesn't happen is because the business isn't doing as well as reported.
Cutting spending and keeping my programming job instead of starting a new business has worked out really well for me. Passive investing of my savings earns me $500/month and I don't have to do any work at all. Other options for those outside of SV is landlording. In some mid-west cities you can earn over $10,000/year/house after all taxes and expenses (including saving for long term expenses like roofs).
Not exactly traditional small businesses, but honestly, both options have much higher probability of success (or at least not losing all of your money like restaurants)
"In some mid-west cities you can earn over $10,000/year/house after all taxes and expenses (including saving for long term expenses like roofs)."
Possibly true anecdote. However with the median family income for the country being $45K or so, thats implying the profit alone exceeds something like 25% of the median tenant gross income. So thats like a $1M CEO waterfront house not joe6pack's house.
Somewhat more realistically, you can expect your average family to spend maybe 1/3 their income on housing, and your profit will probably be a fraction of that, and you'll only have tenants a (large?) fraction of the time, so from a scalability standpoint to earn a median income you probably need to rent out one to two dozen houses, which rapidly becomes a full time job and is quite a capital investment. Also it becomes interesting to express various typical maintenance costs as "months of rental profit" rather than $. A furnace might be more than a years gross profit, yet only guaranteed for 20 years... times ten other major appliances all carefully value engineered to fall apart...
One worrisome part about long term prices is a Z percentile resident will more or less always live in Z percentile housing. Now the capital cost of that housing solely depends on about 1/3 the resident's income put toward the mortgage interest payment... and that rate was at multi-generational lows aka prices were at multi-generational highs. J6P can afford to pay the bank $2K/month means he can borrow how much, depending on interest rate? So what happens to your capital investment when median income inevitably continues its multi-generational decline, while at the same time, interest rates inevitably rise resulting in crashing sale prices? There are other cultural effects like retiring baby boomers wanting to downsize, kids having mortgage sized school loans therefore unable to afford a mortgage, etc.
Just saying, focusing on return OF capital is probably more important than return ON capital, when you're doing long term real estate investment. From a diversification stand point it can work if you have 100 or so houses, but its rough at a smaller scale.
Landlording can be very profitable in some areas or a huge money pit in some areas. My parents did it for years and barely broke even, or lost a ton of money if you include labor costs.
Plus you get people waking you up in the middle of the night when they lock themselves out.
I agree entirely with the fact that real estate it is very hit or miss. But worst case scenario (assuming you have insurance) is you have to sell the house at a depressed price and take a loss on your time. With a restaurant (where 50%+ are out of business in 3 years) you rent the space, lose all the money you spent on rent, and on food and on employees etc. Very easy to lose everything with a restaurant, but you need to be fairly unlucky to loose more than you put into a house (i.e. you bought in 2007)
That being said, saving lots of money and living off of dividends is the way to go.
Assuming you can find a buyer for the house. My parents could absolutely not sell theirs, there was no buyer, because anyone could see there was no money to be made. You need a buyer to sell.
I just do US stock index investing. There has never been a 25 year period where the US stock market did worse than 3% if you include dividends. Let me know if you want sources. This year alone it is up over 10%. That being said there will definitely be down years but that is ok with me as they will even out over the length of my career.
Just be aware that saying used to be 10 year period, until it broke. It hasn't worked in the last decade or so, therefore roughly speaking durations keep expanding to reach the eighties. I suspect in 2030 the phrase will be something like ... never been a 50 year period ...
The part that worries me is hearing about all those boomers having to cash in equities and real estate over the next couple decades to pay off the medical sector... Who, exactly, is supposed to step up and buy that stuff at current prices / PE ratios? AKA where's the demand?
Interesting. If you're into repo'ing property I could maybe see it working. I feel like it would be easier for a similar reture to use something like LendingClub to loan money to people who actually want to pay it back, as opposed to people who are 1-2 years late on their taxes.
Seriously, it's bordering on the most lucrative profession in the US. If "Selling Hotdogs" sounds like it might make you even 1/10 as much, you're simply not charging enough.
So if you're looking for a business that doesn't involve selling your time for money, your best option is Software Product Company. Build something people need enough to pay you $50/month for it. The math works out quite nicely.