Everyone Has An Annual Income That (They Think) Would Make Them Happy. What’s Your Number & Why?
In 2010, a Princeton study was released claiming that when individuals made $75,000/year they were the happiest. Making less than $75k added stress to people’s life, like not being able to pay bills, and not feeling fulfilled or appreciated in their jobs. On the other hand, if you made more than $75k it didn’t add any significant benefit. The bills were paid, people felt fulfilled, and everything was rainbows.
Ooooofff! When academics get things wrong they sure do it with style.
Granted, this study was done over 11 years ago, so when adjusting for the average 2.02% inflation since 2010, that $75k becomes $93,449.39 in today’s dollars. This begs the question, “Would you be happy at that pay level?” “Are you”, if you already make that much, or more? Would you be sad with less, or not care if you made more?
What I’m really asking is, “What’s your number – financially speaking?”
Personally, mine is a (passive) $250,000/year right now. How do I know that? Because I know it’s a comfortable amount that would allow my family and I to continue enjoying our life, while being able to invest in other endeavors.
More importantly, I know earning a passive $250k/year will deliver the freedom I truly want in life. The freedom I discussed in the previous post about, “Why am I doing this?” If you haven’t read that yet, please go back and do that exercise. It’s vital to this process.
Ok, so why would I want you to answer, “What’s your number?” Well, because I think it’s the second most important question you should ask behind, “Why are we here?”
Don’t get me wrong, I don’t believe money should be the focus of running your business. Quite the opposite. Answering this honestly will help frame the type and size of business you should really be focusing on building.
It’s easy to get lost in the idea that we all want to be the next Jeff Bezos or Bill Gates, but do you really want that? If so, that’s great! Focus on building the next big “thing”, take it public, and hit the top of the Forbes list.
Apple was started in 1978 and was the first company to hit a $1 TRILLION valuation in 2018, 40 years later. Two more years later Apple hit $2T. WHAT?! Amazon crossed the $1T mark in 2020 after just 23 years in business. How fast can you pull it off?
If building a multi-trillion dollar business is not your thing, that’s totally fine too. You don’t have to have the “Bezos-billions” to be the master of your universe.
Either way, it’s really important to know “what your number is” so you can focus on building the right size and style of business that’s right for you.
For example, I know I want to make $250k/year, but I also know I don’t want to work my whole life. Therefore, I have to make $250k/yr, while working as little as possible. Who doesn’t, right?
To achieve this I know I need to build a business that delivers something people love, empowers them with the tools and techniques to find success with it pretty much on their own, and inevitably earns my business at least $750k/year. Hit all those marks and I’ve hit my goal.
To be honest, creating a business that earns $750,000/year online is very achievable. People do it every day and it doesn’t require time-consuming investor negotiations, Initial Public Offerings (IPOs), etc. All it takes are implementing the automated business fundamentals we’ll be discussing later.
But wait, why did I say the business needs to generate $750k/year when all I want to make is $250k? Well, businesses run on margins, and the costs of developing, maintaining, marketing, and supporting my service will cut into revenue. Therefore, clearing a 3:1 ratio of Revenue-to-Pay gives me enough of a cushion to cover my expenses, reinvest in my business, while also taking home a decent paycheck.
In the movie Wall Street : Money Never Sleeps you may recall Shia LeBeouf’s character asks James Brolin’s character this same question, to which he answers simply, “More.” Given the sleazy nature of James’ character, that was a fitting response. For the rest of us who aren’t raging narcissists though, that response won’t cut it.
Be honest with yourself here and choose the size and type of business you want to build now, so it doesn’t become an issue later. If your business explodes and you feel like it’s become bigger than you want, then this will help when it comes time to implement your exit strategy. If it never reaches the point you were looking for, it’ll be a clear indicator that it’s time to adjust the approach, or move on.
What’s an exit strategy? It’s simply the plan for getting out of your business when the time is right. This might include selling the business, merging with a competitor, or handing over the day-to-day responsibilities to someone else. Don’t worry about that now though, we’ll cover exit strategies in more detail later.
Anyways, I’ll ask again, “What’s your number?” Take a second to write it down, multiply it by 3, print out the equation on paper, and put it right next to the “Why” responses. Remember, those are the ones you’ve already taped onto your bathroom mirror, fridge, and more places around the house. You already did do that from the last post, right?
With your “Why” and “$$ Number $$” now plastered on the walls, becoming deeply rooted in your subconscious, we can now move on to discuss the elements it’ll take to build that business.
It doesn’t matter what your number is either, because the fundamentals we’re going to be discussing work for $100/yr businesses, and $100M/yr businesses. Get these right and you can scale your business to any number, while never having to worry about what some ridiculously short-sighted “academic” study from Princeton says.
Talk again soon,
Thomas Buttino, $250k+ Seeker