When People Doubt You, Just Keep On Winning

Dear Sam,

Congrats on all your successes and thanks for sharing them – it’s inspiring and motivating! I also appreciate your perspective – it’s refreshing and a good solid alternative to a lot of info online about investing/career/life.

I too have a friend that just had great business success. He took about 1-2 months “off” and now he’s working on a new business that he wants to grow like the last one. Besides travel adventures, starting a new, high-quality business is probably one of the most exciting things a person can do in modern society, given a specific personality-type.

Coaching sports is a lot of fun, too (I was a coach for a 1 year/ tutor 2 years), and I still remember all my coaches (and teachers) from 10-35 years ago – so congrats!

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Off-topic -> My (un-expert)2 cents/questions – I’m reading some of your articles and it sounds like you’ve thought about/at least considered selling Financial Samurai and starting a new job. Please allow me to share my (highly biased (as a FS fan), fairly uneducated) opinion (that it would probably be better to continue developing FS.com than to sell, assuming you continue to enjoy creating FS.com).

I made a spreadsheet b/c I was curious about the results. I’m sure you’ve done similar projections, etc.

Again I’m not an expert, nor is it really my place to decide. It’s just the biased two cents from a fan/reader 🙂

OVERALL

Basically I think this is a great website/business.

If you want and like to continue creating FS, I think FS.com could be great for a long time, in terms of finances, personal fulfillment (hopefully), quality, and reader/customer appreciation.

There’s tons of possibilities:
– new books,
– edited /curated books based on past FS.com content,
– consultations,
– coaching (it sounds like you’ve got some skills),
– conferences,
– other products,
– your own app :), etc.

In terms of additional types of FS.com content (I like content as is FWIW):
– success stories from readers that have followed FS.com principles,
– occasional guest posts,
– “outsource” certain aspects

NUMBERS

I’m sure you’ve run the numbers.

But I ran some numbers just for fun 🙂

Based on your article (https://www.financialsamurai.com/ranking-the-best-passive-income-investments/), I see that you rank:
#1 Your Own Products (To earn $10,000 a year in passive income would therefore need roughly $250,000 in capital),
#2 Real Estate Crowdsourcing (7 – 13% annual returns based off historical data),
#3 Dividend Investing (~1.8% dividend yield … to … 6.5%).

So after taxes, to make equivalent numbers in the other types of passive incomes, the business would need to sell for about between 7x-55x (based on between 1.8-13% returns) to return the same amount. You use 25x in your example in Your Own Products.

Not being a business consultant, but just a casual reader, I bet you could probably bring a smaller product to market once a year. Maybe consider writing 2x/week for the “blog” and 1x for the book/product?

NEW PRODUCT DEVELOPMENTS

Let’s say FS.com had 1 new book a year – with an optimistic, but conservative, continued sales number of $10K/year.

In 10 years, FS.com could increase pre-tax sales by $100K/year and value by $2.18-2.5M(25x). Of course, you’d have to take into consideration time/energy invested. In that 10 year period, you’d also (pre-tax) earn an extra $419K.

JOB EARNING VS FS.com EARNINGS CALCULATIONS

Say you sold FS for 25x.

Then got a job, etc and spent the same amount of time/energy on job as you would have spent on FS.com.

Assuming interest/investment rates were 4% ( basically 25x), then the sale of FS.com vs holding would result in the same amount of money earned.

Still assuming passive income earned 4% – to have equal financial returns, that new job (in theory) would need to net (in 10 years) 25x whatever long-term passive income you could develop on FS.com, (with the same time/energy) though obviously there’s tons of other benefits, etc, too (in either scenario).

I’m not taking into account risk/diversification, etc. Also, I don’t really know how much time/energy would be spent on FS.com vs Job, so I don’t know results for sure. And, of course there’s tons of other factors, such as personal preferences.

But here’s some numbers to get a feel for possibilities (though I probably messed up calculations in someway)-> from https://docs.google.com/spreadsheets/d/13DLrhiM2nHpv39w558hiXAvUWD9hXnBkZSzbSTaHwkw/edit?usp=sharing

After 10 Years =>
SCENARIO #1 ($270,000 job, 4% Interest on Investments, 25x valuation, 30% tax rate (on earned/unearned), $10K new yearly product)
#1 $270K Job = $2,146,822.36 Value, Yearly Passive Income = $53,325.90
#2 $10K/year FS.com = $2,169,224.06 Value, Yearly “Semi-Passive” Income = $79,511.94

SCENARIO #2 ($480,000 job, 5% Interest on Investments, 20x valuation, 35% tax rate (on earned/unearned), $20K new yearly product)
#1 $450K Job = $3,392,048.73 Value , Yearly Passive Income = $97,564.49
#2 $20K/year FS.com = $3,389,456.85 Value, Yearly “Semi-Passive” Income = $150,757.72

RISK vs REWARD

I don’t really know – obviously it’s a personal decision but as a fan of FS.com, I’d thought I chip in my opinion!

Passive Diversified Income has tons of upside in terms of lowering risk and energy expended but not as much income potential/risk as personal business income such as FS.com.

OTHER FS.com EARNING POSSIBILITIES

And that’s not including joint business ventures, t-shirt sales :), conferences, coaching fees (probably easily $100-300/hr), etc.

I also think there’s probably niches for products for/coaching/advising people who just IPO’d, and for people who are experiencing inter-generational wealth transfer. You’re probably well-positioned to coach these people, as well.

Obviously you have a more experience with FS.com, valuations, etc. But I thought I’d lend my 2 cents – I hope you don’t mind!

Anyways, thanks for all the great content and best wishes in all your current and future endeavors!

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