If it's a sustainable pace and you don't become so visible as to be a patent or other legal target you can quietly live very well on that or half that, etc.
Bottom line, there are an infinite number of places to end up between being nobody and being a Zuckerberg/Gates/Jobs and really, most of them can provide a good quality of life.
The only thing I would add though is that many of these businesses were not started by the person running them they were passed to a family member who got something that they could expand upon where the risk had already been taken.
To reach $1 mil or more in revenue, these businesses use 1099 contractors or corp-to-corp sub-contracts to meet their labor demands.
What that means is that if I want to have a long-term high-security relationship with a couple of key clients, I basically hit a ceiling in hourly rate (a good rate, but slightly below what your general multi-person agency will charge) and I've been at that ceiling for a couple of years now - nowhere close to $250k .
It appears the way to transition out is to bump the rate up significantly so it doesn't appear you're trying to compete with agencies - maybe around $200/hour or 6k-8k/week. But the problem with that is that the long-term relationships can go out the window. They only want to bring you in for shorter periods of time, and you have to hustle more. So the marginal benefit isn't awesome. And I really like my clients and I hate hustling, so I stick with where I'm at. This higher rate I've had for the last 2-3 years is nice and all, but practically what it means is that I'm projected to be able to retire at age 65 instead of age 75. It's not a dramatic difference in lifestyle.
So instead, I've just been trying to amass a larger emergency fund outside of maxing my retirement savings every year. And then I'll do something with it... what, I don't know.
I know, first-world problems, but it seems that now that I finally have a bit of a nest egg, the income-maximizing move would be to use it to invest in one of these other careers the forbes article mentions. But what? Nest egg money isn't really the limiting factor behind a retail operation, it's the actual retail product idea, and I don't really think that way. What's left is real estate, but I'm regularly told I shouldn't even bother if I'm not a fix-it handyman sort, which I'm not. So I'm sort of in this state of perpetual mulling. I wonder if I could just find a talented-but-poor subcontractor, get my own general contractor license, and handle all the business and project management parts (which I love) despite knowing nothing about construction.
Re raising your rate, I suspect that once you break through the ceiling for general-purpose skilled developers ($100-150/hr?) into the "specialist" range ($200-500/hr), your billable hours actually drop, because to justify that rate you need to spend more time giving talks, publishing papers, updating/promoting a blog, contributing to open source, prospecting for clients, etc. I'm personally contemplating making the jump to specialist work, but I don't have real experience there.
So I don't know if this helps you, but I feel like we're in a similar situation, and to me this line of thinking at least helps clarify the territory.
You may qualify for the Foreign Earned Income Exclusion (~$96k) if all of your work is performed while you're physically outside the U.S.
I've been researching this topic religiously for the last 9 days and have contacted companies to help me structure everything. I'll write a detailed article when everything is said and done.
As far as Real Estate investing goes, find something that has good bones (layout, HVAC, plumbing, electrical, etc.) and bad aesthetics (overgrown shrubs, needs paint, etc.). Make a low-ball offer, hire someone to fix the aesthetics, and execute a 1031 Exchange to move up the ladder.
If you implement a system that will increase revenues, you should be charging based on that value. Just because you're implementing some back-end system does not mean you're not having an impact on the bottom line. Sounds like you've gotten stuck into thinking your old clients are your friends. Do you not have the confidence to pursue / win new clients if you're 'key' clients disappear?
I posted a few things in Patrick's thread that I won't repeat here regarding the move from a simple hourly rate to the ~$1m+ range.
The thing I would work on in your case are your basic assumptions. I would try to get past the "long-term high-security relationship."
It's good to have long term relationships but they are never going to be highly secure. Instead, work on maximizing your value and adjust your income accordingly. If you do think of relationships, think of it in terms of your reputation and your network. If you went to a decent school, use the alumni network. If you worked at a company that has a "former employees" network, use that. Keep in touch with people you've worked well with, even if it's just watching them on LinkedIn and congratulating them on a move or helping them find a new job/gig/whatever.
It's something that can be tough to crack the first time, but you're in a good position already. "Enterprise-level architectural programming" is nerdalinga for "Enterprise Architect," "Consulting CTO," etc.
Getting the first big "gig" is usually a matter of timing your availability with opportunities (i.e., what unlucky people call "luck"). Reach out through your network and have people recommend you. The first strategic position you take will probably be similar to what you have now, but at least you can put your shingle out as "Consulting Enterprise Architect".
Then you should work on getting a couple marquee clients to put on your NASCAR slide. They don't have to be massive, but they should be respected companies. I targeted the top of the Internet Retailer 500 and established build, launch, replatforming, infrastructure, scaling, and security relationships with enough > $1b/year sites that new clients ask about what "leaders" do in the industry. Enterprise work is mostly about minimizing perceived risk.
It's good if you can build partnerships with platform vendors. For example, Oracle PS don't really like to touch projects below a certain size, so I get a lot of semi-qualified leads in the ~$1m range that I can knock out in about four months with a few fellow consultants/friends. If you bring in the vendor to one of your clients, they'll usually keep in touch and mention prospective clients even if they're not going to go out on a limb and drop your name on the desk. I wouldn't knock myself out on this, though – just make sure you are the one making the introduction and are present at the pitch meeting.
Also, you'll need to be solid when talking at the C-level. Get your presentation skills down, have a suit or ten made (cough go to Anderson & Sheppard once and Shanghai soon after), and gain confidence that you know what you're doing.
You're going to have to get out of your comfort zone a little bit. I actually loved interviewing (both sides) so the sales process (which is generally just letting someone validate claims made by a referring member of the network) is not unpleasant.
I'll also tell you the biggest secret of "consulting": find out what people are complaining about. Write that down on slide one. Find out (or know) how people resolved the top three problems on that slide and put them on slide two. Make those slides beautiful and extremely succinct, so you're conversing, making eye contact, and reading body language. Make it look easy.
One last thing: You should become aware of the product market in this area. EAI is a massive opportunity and even if you just build a toolset leveraging Mule/Camel/ActiveMQ/etc., that's a product you can license to clients. I don't often advise this, but saying there's no productization opportunity leads me to recommend one of the Enterprise Integration Patterns books.
Yes, the last year has included a lot of prototype experimentation with stuff like EIP (spring integration), amqp (rabbit), jax-ws (cxf mostly), Drools. I can see how pulling the thread on these could eventually turn into a product, but in the meantime it's really just been more about making the recommendation and then doing the implementation. I feel like I'd need a handful of more successful implementations before I can call myself the Consulting Enterprise Architect, but it's getting there.
Real estate investment is good to get into because its cycle is long and very predictable. Just follow the trend. Once the housing price goes one way, it takes huge amount of effort for the market to turn it around. We are just bottoming out and starting on a upward trend now.
Read up on the topics and take some classes if needed. Community colleges have night classes that cover lots of topics. You don't need to agent related topics, just the economics and investment parts.
Real estate investment is a leverage game and as such, it's advisable to be well capitalized so that you can weather the up and down of the market. A down market can last 6 to 8 years.
On top of that, the media is full of inaccurate stats of how good an investment the stock market is, long-term. They'll say things like 8% net (after inflation is accounted for). I did my own study(1) and over my investing lifetime it's been around 3.5 - 4%. That makes a huge difference in all the sample spreadsheets out there - for someone who maxes out on the Roth since age 18, that's basically the difference between being able to retire at 62 with $2 million, and having to continue working at age 62 with savings of $500k. I guess it seems like there's more control in investing it in my own business.
(1) - Looked at dates/amounts of my entire retirement contribution history, pretended I bought S&P-500 index fund each of those dates, backtested using Yahoo's "Adjusted Close", ran an APY/XIRR calculation, subtracted avg yearly inflation over same rough time period.
I agree that getting into technical / behavior based trading is a much bigger hurdle due to all the specialized data and algorithms that go into it.
You don't need to do the fixing yourself... My advice would be to read 3+1 Plan book (http://en.wikipedia.org/wiki/The_3%2B1_Plan). You can get it for free in PDF from the author if you sing up for one of his websites.
I think I'm looking for more detail from a hacker perspective - how to get access to RMLS systems, mine the data, what kind of criteria to look for for best arbitrage, what kind of moves you can make if you have $x in capital, etc.
For casual investor, the best approach is just buy and hold from the regular market, utilizing long term leverage to gain the profit. You want to buy into a trend and RE has very long trend. A rising tide lifts all boats. Doesn't matter which house you buy. It will go up in price in a uptrend. Also established neighborhood is easier to predict up and down. The whole neighborhood will go up in union. New development might turn out good or might turn out bad, depending on the people moving in.
For RMLS, the regular listings have a lot of information. The regular websites like Trulia or Ziprealty are good. Insider knowledge will not give much advantage because RE is a heavily regulated industry and once a house is listed, the agent has a duty to get the best price.
Real Estate is all about information. That information isn't in the MLS system.
Examples: How long is the old farmer by the interstate going to be around? What neighborhoods have weak neighborhood associations who won't protest my hacking a 2 family into a 4 family to maximize section-8 revenue?
Avoid premature optimization.
Also keep in mind that brokers take ~6% on both the purchase and the sale of a property, which means that the property has to increases in value substantially for you to be able to effectively "flip" it. (rates are negotiable obviously, and I think you can get a certification to be able to handle some things yourself instead of getting outside service)
It was refreshing to read that. Even for an apartment it's almost foreign to most building managers when you say you are self-employed (they might even have an unwritten rule that this means unemployed lol). Even after showing a good transaction history your chances are still pretty slim, it's almost as if they have never heard about anything other than W2 and pay stubs.
I'm considering incorporating and granting myself a EUR salary just so there is a steady pay stub.
But the best advice I can give is to rent from an individual. You get so much more for less, because a lot of private party landlords just need to cover a very low mortgage from 10+ years ago, and getting peace of mind by renting to a professional is a good trade-off for below market rent.
Although the fishing boat was incorporated as an S-corp with just my dad as the sole owner and 100% owner of stock, he did employ a crew of people. I mean, there was a boat captain, and at any given time, 7 to 8 guys on board. We had fuel expenses, salaries (which were a portion of the catch), food expenses. If you looked strictly at our sales, which I used to do the bookkeeping for, we would easily net 500k to a million a year in today's dollars. After all expenses were paid and done, my dad would make about $100-120k a year on a decent year.
The popular culture seems to use net to mean "total in the income category", but in accounting it generally means EBITDA, i.e. your dad would gross $1m and net $100k.
If you have a 15 to 40 person business with lots of overhead and you have a few bad years you can lose lots of money. Because of that overhead.
But if you are running a small operation out of a small office (or even your house) you might not have a big top end potential but you also aren't going to lose much either.
A bad year might mean breaking even or making very little but your probably not going to lose your shirt (at least in 1 or 2 years if you have built up a reserve).
Plenty of 1-man "professional services" businesses are functioning as middlemen between big companies, or big companies and government. They have low overhead, but usually have a fixed, immovable deadline for paying their downstream companies. As long as the good times roll and the customers pay in time, life is grand.
a) modest real estate holdings: a block of apartment buildings and a couple commercial properties.
b) a large, successful construction company.
c) operator of roughly a dozen franchise locations.
d) is anyone's guess; outlier software firms, well-compensated financiers, CEO maybe.
I know this doesn't address your question. Modest landholding is a common way to be in the 99.5.
I have to agree, since I find it mind boggling that one-man construction firms are making millions.
That's not that uncommon for a general contractor: you do project management and client relations, sub-contractors hire the people who string wires and swing hammers.
Most small construction firms are staffed with 1099s.
At 6.60 / bushel corn @ 200 bushels per acre, it "only" takes 760 acres of corn to break the $1M revenue barrier. 760 acres isn't necessarily a lot and can be definitely run by one person, especially with some contractor help.
It probably has something to do with what's classified as a Non-Employer, but it just seems like it should be there.
That's really not that many. And not that big of a rise considering the recovering economy.
- Point 1
26,744 had sales between $1 million and $2.49 million (up from 24,945 in 2010)
It's a 7% rise, in a year. Those who are in the $100k-$250k range, rose by 6%; not much of a difference.
When we talk (or at least from my perspective) about the rise of a group or minority, it means their growth is much faster than the average and they are probably doing some kind of disruption.
- Point 2
The author talks about the revenue. The revenue means little. Some solo-entrepreneur are selling their craft. A Software developer working remotely has almost no costs. Some are trading stuff. So their revenues are high, but not really their profit.
I know the IRS 15-A rules have a carve out for "computer programmers, etc" that limits how such employees can function as 1-person LLC's for the purpose of 1099 employment with a corporation. (That is, the IRS says in such cases we're employees and a 1-man business won't save you from that, so we should be W2'd). But that doesn't affect double taxation?
LLCs pass through the tax burden to the individual partner so whether that's RE or software engineering, there won't be double taxation on the partnerships profits.
Am I missing something else that affects this?
Let's stop talking about revenues and figures of "$1 million per year" (because there are a variety of context factors-- geography, profit vs. revenue-- that make us question what that really means) and instead talk about growth. This is where it gets interesting. We can look at the growth/risk spectrum between gambler's ruin (take all nonnegative-expectancy risks; thus take over the world economy or die) and non-participation (take no risks; no growth above the risk-free rate-- minus management fees, of course). Most business activity is between those two extremes, but the very middle of that spectrum is underfunded and undersubscribed.
If you want to push for 150-percent-annual-growth-or-sudden-death outcomes like a sociopath gambling with others' money, ambitions, careers and dreams, then there are VCs will fund you, your pathological gambling, and (in most cases) your shitty personality cult. (That's the high-risk, high-growth route.)
If you want to work for some horrible, authoritarian corporation doing shit-ass-boring mediocre work and growing your salary at 7% per year (mostly, a reward for getting older because you're so disconnected from the real work that no one knows what you're worth) then... good news, that is available too. (That's the low-risk, low-growth route... except the long-term existential risks are pretty disgusting because a career of mediocrity, coupled with age, makes one untouchable. See: what fucking academia does to those who don't make it.)
What no one is talking about is the mid-risk/mid-growth range... 20 to 40 percent annual growth with some volatility, but not likely to ruin lives en masse. (You might have a thin year, but your average outcome is strong if you work hard, have the talent, and do the right thing. You just need discipline in your strong years.) The problem is that no one is funding that region of the spectrum. But that's the natural home for technology, research, science, as well as the yeoman capitalism that most of us would find much more rewarding (and scalable, and beneficial to society) than this VC-istan, Hollywood-for-ugly-people, bullshit.
You can get jobs at stagnant corporations and jobs (probably not founder jobs, unless you have the connections to partake in Stanford Welfare, but jobs with "equity") in the high-risk VC-istan space. No one seems to have any clue how to fund the mid-risk/mid-growth space, but that's where the future actually lives. See: http://michaelochurch.wordpress.com/2013/03/26/gervais-macle...
Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.