Okay, next up is a question from Chip. He says, "My current job makes 50k, and my side hustle makes 40K in less than half the hours, so he's wanting to make it his full time. He's wondering, do you have any general investment advice for entrepreneurs? I'm guessing he's a financial mutant and was thinking about what this is going to look like if he does take this full time."
Investment advice for entrepreneurs... I don't know that I have so much investment advice, but there are two things that I think could be valuable for you to speak to Brian. These points immediately hit me in Chip's situation. Number one, set a realistic expectation. If I make $40,000 a year working half the time, is this side hustle linear or exponential in its progression? Meaning, if I work full-time, does 40K turn into 80k? Is that realistic? That's the first thing I would think through. So, there's probably some 3D planning in there that I think it'd be cool for you to speak to.
And then the other thing I would say, and this is not so much investing advice, Chip; this is more like entrepreneurial advice: Cash is your friend. If you are making the thought around leaving the guaranteed income, leaving that salary, and focusing solely on my side hustle, you probably want to make sure that you have enough cash built up to get through the third D that Braun's going to tell you about.
Yeah, I'm going to do two of these, and they are related to each other: cash and the 3D planning are important. Depending upon when we say 3D planning, we're talking about your dream plan, your down-to-earth plan, and your "doom" plan. I hate to say it like that, but this is the plan where, "Oh my goodness, how was I so silly to think that I could make a living doing this?" You need enough cash to bridge that gap.
My own experience here was that it took me 3 years to replace my W2 income. So, I had to have a cash bridge to get me over that. Also, something that came up when we were having a conversation even in our show prep, Daniel or somebody showed me somebody who had started a new business or something and they were charging an hourly rate. I was like, "Yeah, but the problem is, and this is what you were alluding to, what's the scalability of that?" Because just because you make 40,000 on a side hustle, if you had to actually turn that into a full-time job, could it actually scale to the size where it not only replaces your day job but gives you a career for the future? Because if the top end of this is 40,000 to 80 but you're stuck at 80 for the next 6 years, whereas your day job could have turned into 120 to 150,000. You need to think about the 3D plan because it's not just this moment in time; it's also the long-term future. So, you can figure out if there's an intersection or even a separation point.
I think a lot of people will look at just the money and time in the moment and not think about whether this is actually a viable business that can go beyond. We saw a research study that 95%, I can't remember where, but it's like 95% of small businesses don't reach a million dollars of revenue. And then, I think about when I see stuff about financial planning and other things on the internet, and I'm like, "Yeah, but if people saw how much we spend on seven figures towards all of our software and all the employees, what's the scalability of the business is something you need to pay attention to. You want to make sure you get the separation point and not just replace your day job with something that now you're working 60 hours, but you never can get to that scale that lets you live a fulfilled life.
I love entrepreneurship. Look, I've done it several different ways. But the goal of entrepreneurship is that you have such a passion that the "why" takes you past all the challenges of the "do" part of the 3D plan. Yeah, make sure that you want the side hustle to be your full-time gig because treating something as a side gig versus treating it as a full-time gig is different. So, if it is something you're passionate about and love, will that be tainted if it becomes something that you have to do full-time to put food on the table? There's nothing wrong with doing this, Chip; it sounds super exciting. Just make sure you go into it with your eyes wide open, knowing exactly what you are getting into, and prepare yourself well for that. For more information, check out our free resources