
Ask HN: How Much Money is Enough... What's your Number? - elsewhen
It would be interesting to hear your specific financial goals, such as: "I would sell my startup if the net proceeds of the sale would exceed n."  I'm more interested, however, in knowing what factors you considered to come up with your number.<p>I am asking because I run a profitable internet business that has doubled each of the last three years; our metrics indicate that we can maintain that growth rate for the foreseeable future.  As with any business, there are major risks but the likelihood of them actually threatening us is relatively low; unfortunately, precisely quantifying the risks is impossible.<p>Since a significant chunk of my net worth is tied up in the business, I worry that a "rogue wave" could endanger our prospects.  We have been approached multiple times by serious acquirers offering favorable terms and a 5x revenue multiple; so far, have I rejected their offers.  We have no outside investors so the decision to sell would be entirely mine.<p>Since the M&#38;A market is beginning to show signs of life again, I am considering a sale.  The question is, how does one decide when to step off the train, and take a huge amount of risk off of the table?  Thanks!
======
timdellinger
A few thoughts:

1\. The rule of thumb I've always heard is that $2 million in the bank lets
you live off the interest with a salary of $50k/year. Which is all that anyone
really needs. $4 million for $100k/year, etc. These are the standard "I'm set
for life" numbers, as long as you don't do silly things with your money. Which
many many people do (trust fund kids, professional athletes).

2\. Just because you can retire doesn't mean that you're going to retire. One
of the ways I like to think about it is that an extra $50k/year from my
investments can turn a $20k/year job into a $70k/year job. So now all of the
sudden I can take all kinds of jobs that I wouldn't have considered doing in
the past due to low salary. Plus you don't _need_ the job, so you can walk
away from stressful or unpleasant situations much more easily.

3\. Personally, I think the remorse that I would feel if I had lost it all due
a rogue wave would outweigh the remorse that I'd feel if I had sold the
business "too early" and missed out on doubling my money.

~~~
baddox
I think your employer would find you to be a rather poor employee in that #2
situation.

~~~
nkurz
No, I don't think so. Or at least it depends on the job.

As an employer, I know that you are working there because you love what you
are doing and don't want to be doing anything else. I don't have to worry that
you'll move along as soon as someone offers you another $1.50 an hour. And in
a startup, I know that if we hit a rough patch we can probably come up with a
way to trade you equity for salary. For creative positions, I'd view financial
independence as a positive.

------
jhancock
I had 80% of my own company in the 90s. My outside investors were limited
enough that I could sell when I wanted. I walked away from $20M buyouts twice.
2 years later, things became unstable and then just fell apart. I kept pouring
funds in to save it for another 3 years until I was too financially crippled
to keep going.

My advice: at 5x, sell. That's over 2 years your predicted growth. The money
you've got is the best money you've got.

~~~
nazgulnarsil
I don't understand the mindset, but maybe that's because I've never actually
been offered that much money (studies show that money tends to accentuate our
preexisting biases). But I mean what sort of comparative outcomes could you
have been looking at to make you turn down $20 million? Say the company
tripled in value and you sold for $60 million...did you have plans of what you
needed to do with 60 million that you could not do with 20 million?

I'm sure you've done enough beating yourself up here and I'm not trying to
insult you, I'm honestly curious as to what your thought process looked like
at the time. That way if I ever have the same thoughts I'll know of at least
one example where they obviously weren't justified.

~~~
jhancock
I didn't have plans for $20 million, ephemeral or real. I didn't have a number
at all. But I think that's symptomatic of the problem. The problem seems to
lie in the "suspension of reality" that exists for many entrepreneurial
endeavors. I wasn't "in it for the money" when I started. I was trying to
"change the world". I hadn't finished changing the world yet, so a buyout was
only money to me. The correction of course, is to understand that your
business is for the purpose of making money first and other things second. But
its hard for most inventors to get motivated and work so hard for money. Its
much easier to do it for a grander purpose. The problem is this "suspension of
reality" bubble is hard to break once you've made it past the initial
successes.

Do I have regrets? A little, but not overwhelmingly so. I have plenty in life
to be thankful for. I put the lost money in the category of "yet another
multi-million-dollar-MBA" I've earned ;).

------
noodle
i have two levels: anything money, and nothing money.

$500k-$1m is my anything money. its enough money to allow me to do anything i
want, but not enough for me to do nothing. i'd still have to work, but i could
effectively make money by almost any means, i could do part-time work or take
a really low-paying but fulfilling job and maintain my lifestyle.

$2m is my nothing number. enough money that i can do nothing and live off the
sum. i could maintain my current lifestyle easily with $2m and never have to
worry about it.

~~~
wheels
You obviously didn't have money invested this year. You would have seen your
$2m become $1.5m. I had money in "stable" funds and it hurt.

~~~
noodle
i did, actually, and i'm about +15% on the year so far. and about the same for
the year before. i made some smart (read: lucky) decisions.

------
vaksel
For me personally, the goal is close to $4 million after taxes etc. That's a
large enough number to be able to live off interest. So you can do nothing
while you think about your next idea.

~~~
bkrausz
Wow, $4m is what you'd need to keep your standard of living? My father and I
always said $2m is the magic number. We also assume you can pull 5% APR, which
seams realistic but I honestly don't know for sure.

~~~
vaksel
The whole point of doing the startup is to achieve something you wouldn't have
had by working for someone else.

$2 million at 5% = $100,000/yr. You can achieve that by simply working as a
programmer for someone else. Without making any of the sacrifices it takes do
a startup.

If I'm going to sacrifice my youth(20s-30s) doing the startup, it better be
for a big enough payoff to make it worth my while.

~~~
dpcan
How do you figure that spending a 9 to 5 day working for someone else through
your 20's and 30's NOT a total waste of your youth?

I jumped the 9 to 5 ship at 23 and never looked back.

Your world-view is absolutely baffling to me.

~~~
foldr
Depends what you do outside of your job. There is more to your life than your
work. Some people may have important aspects of their life (e.g. families,
friends) which don't fit together well with a start-up.

------
mjgoins
Biggie was right. Mo' money, mo' problems. I'm sticking with a slightly below-
average income, and living simply.

Happiness is elusive, and in no way linked to money.

(I think I might be the most un-YCHN person on YCHN)

~~~
darnoc
Hear, hear. I live the Bay Area, am in my 20s, have a ton of programming
experience and also a strong math background. The temptation to play startup
roulette is high. But at the end of the day I can't shake the feeling that
spending the healthy & free years of my life working 90hrs a week on something
that no one will even remember in ten years is a fool's errand. Yes, there is
a small chance that I could get rich and never have to work again. But the far
greater likelihood is I'll just wind up in my mid-30s doing the same thing and
wondering what happened to the last decade.

So I work 20hrs a week consulting and spend the rest of my day reading,
studying (I'm getting a masters in my spare time), cooking or playing music.
There are definitely days when I am envious at my friends who work in tech,
what with their fat 401ks and rockin health care and 4x income. But usually
not. I'm in way better shape, have read 10x as many books in the past year,
traveled more, etc. Most importantly, every time we hang out I just sense that
they are unhappy and bored.

I realize most of the people reading this are going to be a lot more like
aforementioned friends than like me so I hope this doesn't come off as
insulting. When I think of my friends I really wonder what makes it worthwhile
for them--but of course I could never ask that without sounding like a jerk.
So if anyone is reading this I'd love to hear. Is it just the $$? Because I
feel like you need so much less of that than you think to be really happy.

~~~
nostrademons
"So if anyone is reading this I'd love to hear. Is it just the $$? Because I
feel like you need so much less of that than you think to be really happy."

In my case, it's not the money, it's the information. I work at one of the
large tech companies in the valley, as a full-time employee. I spend about 20
hrs/week (out of about 50 hrs/week spent at work) actually coding, and most of
the rest of the workweek reading & studying. After all, I can't write my code
without understanding how it fits into the rest of the system.

The thing is, I can't learn the stuff I'm learning now _anywhere_ else.
Universities don't have it. The open-source world doesn't have it. It's all
proprietary & confidential, and the only way to learn it is to work on systems
that require it.

It was the same way for my last salaried job - I wanted to know how the
financial industry worked, so I took a job at a financial software startup. As
it turned out, I _didn't_ want to learn how the financial world worked ;-),
but I'm glad I had that exposure, even just as a high-level overview.

The money is just an added perk - it's nice to get paid 4x more and have a
401k and health coverage, but really, the only reason I care is that everyone
else is getting it and I don't wanna feel like I'm being ripped off. I work
for other organizations because I want to work on interesting problems, and I
wouldn't have the opportunity to do so without the help of others.

I was a voracious reader in high school and college, and kinda feel like I've
"read out" what's available through the public library system. A lot of books
I check out now just feel shallow & superficial compared to what I've been
exposed to in a professional context. University libraries are still somewhat
interesting, but again, they often have the problem of being access-controlled
to people enrolled in the university. I'd rather have people pay me to learn
than pay someone to learn.

~~~
dkersten
Agreed. I'm currently working for a salary lower than what I'd normally accept
for two reasons:

1\. I like the people I work with and the work environment.

2\. More importantly for me at the moment: I'm learning things which would be
difficult for me to learn elsewhere. For example, in a few weeks, I'll be
going to the middle-east to install some hardware and train the customer (as a
software developer, I wouldn't normally get hands-on experience with the
customers, hardware, support and trouble shooting - all of which I think will
be useful if I do decide to go the startup route); I was also put in charge of
implementing a new interface for our system (and the accompanying test-suite),
so I got free reign to design and program it however I want, communication
with the hardware vendor and time to learn technologies which I never knew
anything about - all of which, I think, will be useful to me.

Having said that, I don't intend on staying here forever. Before I hit my
30's, I want to have taken two or maybe even three years off to travel, meet
people from around the world and do what I love to do (which incidentally is
software, but slightly different than what I do in my work - I might very well
go startup for this, because it would be something I enjoy, even if its never
profitable).

------
runningskull
$10 million after taxes and I never work again. Invest half in various
ventures and live comfortably off the interest from the other half.

~~~
astrec
Interesting.

It's after 9pm here, the staff have long since fled, but a quick look around
reveals Mr. $47m, Mr. $14m and Mr. $8m are still beavering away and Mr. $150m+
is still answering email (albeit tersely).

I've never yet met someone with FU money who wasn't working (and working hard)
- they just seem to be more selective.

~~~
davidu
This mirrors my experiences exactly.

------
mattmaroon
Is there any way to continue on but also take cash off of the table? Maybe
sell half of the business to alleviate risk but still have some shot at the
upside in the event none of the minor risks pan out.

~~~
elsewhen
I have already taken large dividends from the corporation and socked that
money away, but despite that, more than 80% of my net worth is still tied up
in the business itself. So, I still have a lot of risk concentrated in a
single asset.

------
jonmc12
Also known as the 'F-U Number'. Ask yourself how much you need to live the
rest of your life the way you want.

For me, I don't need much in the way of luxuries, but would want enough money
to secure my own interests regardless of whats going on around me (ie a war or
something).

~~~
elsewhen
That is exactly how I have approached this issue so far... I researched all
the different things that rich people spend their money on (and most of them
really bore me).

I'd like a nice house and a workshop, and some extra for non-extravagant
travel. None of those cost too much money, but there is one other thing on the
list: starting bigger ventures without requiring outside investors. The more
money I have, the more ambitious my future endeavors can be.

~~~
sachinag
Wait, why do bigger ventures without requiring outside investors? If you want
to do bigger things, you'll have to put more in, and you're going to end up in
a situation where the same percentage of your net worth is tied up.

Instead, if you have a profitable exit, it will be much easier for you to
raise more with giving up less from professional investors for your next,
bigger project. Then you'll be able to do something big and awesome, maintain
control, and still have more cash in the bank.

~~~
elsewhen
I am not a big fan of taking outside investors. I have been a self-funded
entrepreneur for my entire career and it has worked very well for me.

The proceeds of a sale would allow me to have ample money in the bank and
plenty left over for other endeavors. My issue is that the longer I wait (as
long as everything continues apace), the more that "plenty" becomes.

------
jacquesm
Risk mitigation is usually done best by splitting your bet.

In other words, sell a part of your business to limit your exposure, keep the
rest. If in the future it goes down the tubes completely you will not have
lost all. If it continues to go up split your risk again. And so on.

------
weaksauce
I would probably sell under one of the following scenarios:

1\. When you are bored of what you are working on and a sale would net you
enough money to live for enough time to startup one or more new venture(s)
that you are interested in.

2\. Not bored of the venture but think that in the immediate future your
business might come under attack by an incumbent and you are not agile enough
to fend off said attack.

Note: those are just two that I would sell off under. I am sure there are a
few more that would be a good time to sell but I am not able to conjure them
right now.

I would also wager that you should be able to get a fair sale price given the
growth metrics you are using.(As long as they are not too cooked.)

------
akd
The very fact that this question has been asked demonstrates the reason that
the biggest companies are founded by people who are truly "not in it for the
money."

Most of the numbers here are under $10 million. Bill Gates, Steve Jobs,
Michael Dell, Mark Zuckerberg, could have all sold their companies very early
and had plenty of F-U money with a few extra Lamborghinis to boot. But it was
the vision of creating something bigger than money that kept them going at it,
even though it could all fall apart, and that's why we have the amazing things
we do today.

~~~
elsewhen
Thanks for your comments, and I appreciate your point, but I think that it is
a little too simplistic. There have been many great entrepreneurs who sold a
company and then used their newfound position to go on to create even better
and more important companies.

Tony Hsieh created Link Exchange in the 90s, then he sold it to Microsoft, and
then turned around and created Zappos (which he recently sold to Amazon).

The paypal guys sold to eBay, and took their money to start all sorts of new
ventures (off the top of my head, I can think of Elon Musk (Tesla, SpaceX),
Max Levchin (Slide), Reid Hoffman (LinkedIn)

Is your suggestion that they should not have sold PayPal? Were they just "in
it for the money?"

An entrepreneur who sells and has enough money not to worry, can continue to
start businesses ad infinitum which puts them in a potentially better position
to create "something bigger than money." If Elon Musk had stayed at PayPal, I
doubt he would have started a satellite launching company as well as Tesla
Motors!

------
keanemachine
A great resource for working out the (monthly) income to do what you want with
your life is at Tim Ferriss' blog (author of the Four Hour Work Week).

<http://www.fourhourworkweek.com/blog/lifestyle-costing/>

I've read the book and I dont't agree with everything he says, but I found
this particular part really interesting. Tim advocates writing down all the
things you want to do (cars, holidays, house(s), travel, etc),working out how
much all these will cost per month; then mulltiplying that figure by 1.3 to
give yourself a nice 'cushion'. According to him, there's no point in 'a
million' or 'two million' or any other arbitary figure in the bank, most
people don't actually want to be millionaires per se, it's the 5-star
lifestyle that is attractive to them.

The monthly expense calculator is at:

<http://www.fourhourworkweek.com/blog/expense-calculator/>

Obviously you need to work out what you want from your life fist, more info on
that if you read the first link. Hopefully this will help you make a more
informaed decision.

p.s. I'm not affiliated to Mr. Ferriss in any way, I've just finished his book
and there's some great advice in there, you may wish to consider getting a
copy.

~~~
petervandijck
The idea that you could foresee what you want in life and that what you need
to reach that is money is astonishingly naive :)

------
hikari17
I would like to look back on the sale of our startup with the feeling that the
buyer and I could sit on a entrepreneurial conference panel together and talk
in a warm, genuine way about having come to terms that were fair to both of
us. So for me, "n" would depend to some extent on who the acquirer was (and
where I thought they could take "our" business.)

That said, I'd find it almost impossible to conceal my glee and satisfaction
with anything north of $2M.

------
jimboyoungblood
If everything you said is true (profitable, doubling each year, no end in
sight), I think you'd be crazy to sell in the current market. Since the goal
is to reduce risk, why not just sell a partial stake in your company?

With interest from multiple buyers, you can probably get a lot more than the
5x if you make them bid against one another.

But of course, if the price is right, just sell. If I were in your shoes, that
threshold would be around $50MM.

------
jodrellblank
How far is your forseeable future? Doubling is exponential growth and if you
change nothing it will significantly slow at some point - how far away is that
point in your predictions?

How long have you put time and effort into the company? A year? Ten?
Optimistically, what would you have earned in this time otherwise and how does
the sale amount compare?

Would you personally be tied up in the sale - e.g. you have to work for the
purchaser for 2 years? Does that matter to you?

If it's been doubling every year for three years, imagine yourself asking this
question on HN last year, having doubled for two years, considering selling
for half the price. Looking back, would you advise yourself to have sold or
held?

Do you have anything else pressingly interesting or important to work on, or
other plans for what to do with yourself post sale?

------
alaskamiller
Enough for a house, a car, and some leftover to take care of my family.
Everything after that I think is just greed. With those needs taken care of
you have all the time in the world to work on another hit.

~~~
elsewhen
Really? So if you were working on a successful startup, you would sell right
when you reached the point that the net proceeds of a sale reached say, $1M?

------
dennisgorelik
The sale should be done if it is mutually beneficial. For example, if the
buyer has skills or technology to scale the business up faster than original
founder -- then the price might be set in such a way that it would be better
for both buyer to buy and for the founder to sell. Another good reason -- if
founder is exhausted.

If the reason is just to eliminate risk, then it might make sense to sell part
of the business or simply invest part of the profit into something else.

------
mindhacker
[http://www.omnisio.com/startupschool08/david-heinemeier-
hans...](http://www.omnisio.com/startupschool08/david-heinemeier-hansson-at-
startup-school-08)

I agree with David that no amount will ever keep programmers from programming.
So instead of sweating out 14+ hours a day in hope that you can retire in 5
years, why not live your life as you go.

------
oldgregg
If you're asking the question then it's quite possible that no amount will
ever be enough.

~~~
elsewhen
I really worry about that. I have already taken a lot off the table, and am
very comfortable even though I live way below my means. The dilemma is when to
cash in when the business keeps growing... Its difficult to decide the right
time.

I met the founder of a website that sold to Demand Media, that has since blown
up into a large property. Of course, Demand probably grew it faster than the
founder could have on his own, but nonetheless, the founder was noticeably
distressed that he sold too early.

~~~
huhtenberg
As per Donald Trump - $12 million will get you comfortably set for the rest of
your life _and_ provide with lots of spare cash to do stuff that you can't
even think of now.

I.e. aim for twelve ;-)

~~~
trafficlight
Don't listen to anything Donald Trump says. He doesn't live in reality.

~~~
natrius
Don't listen to ad hominem arguments.

~~~
hc
GP is argument ad verecundiam; double standard much?

------
staunch
$4 million after taxes is minimum I'd sell for in that position. I'd aim for
$12 million after taxes, if possible. Anything over that is gravy and not
worth taken much risk for.

------
cunard-n
Congratulations, elsewhen. Good luck.

------
quizbiz
How much money is it worth to you? Consider the value.

~~~
elsewhen
I think the offers I have received in the past were fairly valued, but it is
just hard to sell when I am relatively sure that we can double again in the
next 12 months. Our revenues have been very stable and predictable, so it
really comes down to deciding when to pull the trigger.

~~~
quizbiz
May I ask what exactly the business is? I would love to hear more about your
story.

~~~
elsewhen
Thanks for your interest, but I do not feel comfortable disclosing that yet.
Once I sell though, I will be happy to divulge the details (provided that the
buyer allows for that).

~~~
staunch
I think it's smart not to divulge your actual company name. It could give a
potential buyer too much insight into your bargaining position.

But...how about telling us what general type of business?

------
pclark
$300M.

~~~
jodrellblank
The question might say "what's your number", but the number isn't the main
focus, the thinking around it is. Why $300M? and not $200M or $400M?

~~~
pclark
oh, $300M is enough to become a competent angel investor, secure family future
and to have enough to do _anything_. When you start looking at yachts and
houses, you'll soon spend $15M.

The investing is the bit that really interests me, you'd be able to properly
do seed investing and "give something back" to the community. Really be
disruptive.

Similar to the founder of Ubuntu.

~~~
jodrellblank
It's not enough to do _anything_ , you're still limited to things a wealthy
private investor could do - but a state can still do a lot more.

In the late 1700s, John 'Iron Mad' Wilkinson, British industrialist and
inventor of the first iron boat _offered to pay off the entire national debt_.

With a mere $500M you couldn't build a motorway of any significance, you
couldn't buy so much as a medium sized town, you'd struggle to build the
world's tallest building unless it was just a spike, you couldn't jump start a
large company such as an Intel/AMD competitor or an Amazon competitor or
create license and market a new cellphone unless you had a very low cost
startup/bootstrap approach.

You couldn't amass a world class art collection or establish an underwater
city, fund a significant amount of anti-aging research or push a bill through
congress or have your own Formula 1 team or brute force your way to the moon
with some Flanderys domes, some GM plants and a seed terraforming plan.

In short, you _could_ live a hedonistic life, become famous, seed invest,
philanthrophise, give something back, make local successes, but you couldn't
"really be disruptive" on the world scale.

------
pkrumins
$1M

~~~
jodrellblank
You live in Latvia, yes? I imagine that to be a generally cheaper cost of
living than many places represented on HN, and your answer is less than many
peoples. Coincidence? Or are you a frugal person? Or are you considering it as
a nice start that could carry you to something else more profitable?

If you had a company you could sell for $1M and were predicting it to be worth
$2M in a year, as the original question predicts a doubling every year, would
you be tempted to hold out another few months for $1.5M?

~~~
pkrumins
Yes, I'm from Latvia. I calculated that if I had $1M, then on 2.5% interest
rate it would give me $25.000 per year, which is $2.000 per month, and since
my favorite activity is self-education, $2.000 seems enough to live
comfortably and do what I love. I am not sure if it's a coincidence or not.

Well, if I had a company that was worth $1M, I think I'd push its value to
$10M and then sell it. ;)

------
steve_mobs
10 million. i can easily get a 10% return investing every year and 10% return
on 10 million is more than enough to live on every year.

~~~
akd
If you can easily get a 10% return on investing every year, you can make MUCH
more than $10 million by getting a job at a hedge fund :)

