In a previous post, I explained that I set a goal to have the option of retiring within 15 years of my college graduation.  This post shows how things have gone to the halfway point.

One of the keys to goal setting is to set SMART goals.  In case you are not familiar with this term, SMART goals are defined as goals that are:

  • Specific – What exactly do you want to accomplish?
  • Measurable – How can you evaluate your progress and know when you have achieved it?
  • Attainable – Is the goal a little bit of a challenge but still within your ability to reach it?
  • Relevant – Is the goal tied/connected to what is important to you and your other objectives?
  • Time-Bound – Is there a target time frame for completing the goal?

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Let’s take a look at how my goal (to retire from working for someone else within 15 years) measures up with the SMART criteria.

  • Specific – I don’t want to work for someone else.
  • Measurable – I have a time-frame for achieving the goal.  I also know (in dollars) how much money I need to be bringing in each week to be able to leave my day job.
  • Attainable – When I started I had no other source of income and plenty of expenses, so it was definitely a stretch.  But there are a lot of entrepreneurs who have been able to do it.  If they can do it, why can’t I?
  • Relevant – One of my core needs is to enjoy life and spend it with the ones I love.  Not working 40+ hours a week for someone else definitely ties into that.
  • Time-Bound – I specifically stated a time-frame of 15 years for achieving my goal.

So from looking at my goal through the lens of the SMART criteria, it looks pretty good.

Halfway There – How Do I Look?

I recently hit my 7 year anniversary for my job.  As we approach New Years, I figured it was a good time to evaluate my progress towards my goal and see if I was on track.

The past 7 1/2 years have been busy.  Ariana and I bought a house, got married, began investing in real estate, had a daughter and opened a wine & liquor store.  Ariana was also able to quit her job and be a stay at home mom, which was one of our milestone goals (since I made more money, we figured if she could quit her job first, that would be easier than having me try to quit my job).  We have been busy, but what does all of this mean related to my goal?

I pondered this question why driving home from work and listening to a podcast (Entrepreneur on Fire to be specific).  The results were less than impressive.  Even though  we had multiple businesses, they were not directly working towards the goal of allowing me to retire.

Real Estate (Sylvester Enterprises)

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  • What We Were Doing
    • Buying run down or vacant property, renovating it and renting it out.  These were mostly duplexes, but we did have one single family home and one mixed use property (2 residential apartments and 2 storefronts).  We were taking the profits and investing in additional properties.
  • Our Mistakes
    • We had made some mistakes early in our investing career.  Mostly these equated to not understanding After Repair Value (ARV) and spending too much money renovating the properties.  We also made some hefty investments to support the business (such as a boom lift) which helped the business, but did cut into our short-term profit.  We also did not clearly delineate roles, which meant some duplication and inefficiencies in the early years.
  • Was It Helping Achieve My Goal?
    • Yes, but I was not sure how much.  Over the past 7 years we have been able to acquire 23 units.  Part of how we did that was to take all profit and reinvest back into the business to grow it.  This strategy has been working very well (and is one of the reasons that having a full-time job is great).  The problem that comes in is that our business did not have SMART goals.  Instead we were just purchasing as many good deals as we could handle.  As long as we were reinvesting 100% of our profits back into the business and without a strategy to begin taking some profits, it was not clear when/how this business would contribute to replacing my income from a full-time job.

IT Consulting Business (Black Rhino Consulting)

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  • What We Were Doing
    • I started this business with another partner.  We initially focused on building websites for small businesses and real estate investors, but expanding out into small business consulting and application development.
  • Our Mistakes
    • I believe we made several mistakes with this business.  The first one was lack of goal setting and focus.  We did not set long-term goals and work backwards to determine our actions.  As a result of this, we lacked focus.  What started as a website development company morphed into a CRM installation provider, a consulting company and a VoIP service provider.  Now, expanding into different markets is not a bad thing, but without a goal we could not be sure that these aligned with out overall business strategies and target market.  We also tried to start the business without taking on debt, which severely limited our growth since we were both working full-time jobs and investing in real estate on the side.
  • Was It Helping Achieve My Goal?
    • Not directly.  After 2 years of business, I realized that it was taking a lot of my time and would require a lot of time and effort to really turn a profit.  I decided to sell the business to my partner at the end of 2010 to focus on other ideas/ventures.  The great news was that my partner and I parted ways on great terms and still meet to help either other with our businesses.

Wine & Liquor Store (Warsaw Wine & Spirits)

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  • What We Were Doing
    • We opened a boutique (read small) wine and liquor store in one of the commercial units of our mixed-use 4-plex.  We had been open about a year and focused on selling local New York State wine, as well as wine from other regions and liquor.
  • Our Mistakes
    • It takes a lot of money to open a liquor store.  Between start-up costs (license to sell liquor, insurance, point of sale system, shelves/storage racks, front of store sign, cooler, etc.) and the actual product (wine and liquor).  We spent more money than we initial planned on for the equipment (ex. we bought more expensive shelves that looked a lot nicer and held more products) and bought a really nice sign for the front of the store.  In addition, we had to purchase all of the actual wine and liquor to sell.  In this business, volume leads to discounts.  Because we had a limited budget but wanted to have a nice selection, we only purchased a single case or a few bottles.  This meant that we were paying the highest cost for our product (compared to buying multiple cases).  If we had a higher starting budget, we could have benefited from being able to sell in higher quantities.
  • Was It Helping Achieve My Goal?
    • Just like with the real estate, not much in the short-term but (hopefully) yes in the long-term.  In order to open the store, we invested some money of our own and borrowed money (both from a bank and from a private investor).  These loans were for 5 year terms, so we would be paying on them for the first 5 years in business.  Additionally, in order to grow the store and generate new customers, we needed to expand our product selection.  This meant that profit from the business was reinvested back into the business.  So once our loans are paid off and we got to a comfortable place with with our product selection, we could then take some profit that would help replace our monthly income.

Blog (Entreprenewlyweds)

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  • What We Were Doing
    • We started this website in 2014 to help fill a gap which we saw in the market, which was real life information for how to manage a business and a relationship.  We started with a blog and have a lot of ideas for expanding this concept in the future (so stay tuned).
  • Our Mistakes
    • We haven’t made a ton of mistakes yet since we took lessons from our other businesses, but I’m sure they will be coming in the future.  We followed The Lean Startup model to launching the site.  We did goal planning and are measuring/working towards those goals.  We have some near and long term strategies and are working towards them.
  • Was It Helping Achieve My Goal?
    • This website is really about giving back and helping others succeed.  Ariana and I have had quite a journey over the past 7 1/2 years, one filled with many mistakes.  At the same time, we have had many successes.  These successes have not only been for us, but also for many of the people that we have helped get their business started.  We are focused on providing a ton of valuable and free content to our audience to continue their success.  We also plan to create and offer some items for purchase as well.  These for purchase items will provide even more value to our audience and contribute to our goals.  On top of it all, blogging is great in general (and we think everyone should do it).  It forces us to have discipline and really evaluate and think about the things we have done and the things that we are going to do.  And finally, we get a deep sense of fulfillment from helping others.

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Am I Any Closer?

A lot of people assume that Ariana and I are rich.  They believe because we invest in real estate and own a store that we have a lot of money.  Now, it’s not like we are eating Ramen Noodles every night, but the real truth (that every entrepreneur knows) is that the vast majority businesses take time to become profitable.  These businesses will allow us to live the life we want (Lifestyle Design) eventually, but they are not currently contributing to our monthly income.  Part of that is because we set it up that way.  Our strategy is to live off our W2 income (full-time job) while taking all business profits and reinvesting them back into the businesses to grow them at a faster pace.

One important lesson that I learned early on while playing Cashflow 101 was that in order to get out of the rat race (quit your day job), your passive income needs to exceed your monthly expenses.  Meaning if you stopped working, you would need enough income to still cover all of your bills.  Because the businesses above are not currently contributing to our passive income, they are not directly getting me closer to retiring.

The one thing that I realized was that even though my goal was measurable, I was not actively measuring it. I was doing a bunch of work to build passive income, but was reinvesting all of it and did not have an “exit strategy” to shift that profit and actually collect the passive income.  Just like in Cashflow 101, we need to clearly know our income (including passive income), as well as our monthly expenses.  Once we know those, we can focus on “getting out of the rat race”.

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So Where Do I Go From Here?

I have passed a very big milestone: I know where I am.  We have an accurate picture of our financials (both personal and businesses) and put together some goals/plans for the businesses to begin taking profit in the future.  This doesn’t mean that we will stop growing, but instead we will shift some of our strategies to allow us to take a profit and still grow (more to come on that in a future post).