Sitemaps
Should Kids Follow in Our Founder Footsteps?
The Evolution of Entry Level Workers
Assume Everyone Will Leave in Year One
Stop Listening to Investors
Was Mortgaging My Life Worth it?
What's My Startup Worth in an Acquisition?
When Our Ambition is Our Enemy
Are Startups in a "Silent Recession"?
The 5 Types of Startup Funding
What Is Startup Funding?
Do Founders Deserve Their Profit?
Michelle Glauser on Diversity and Inclusion
The Utter STUPIDITY of "Risking it All"
Committees Are Where Progress Goes to Die
More Money (Really Means) More Problems
Why Most Founders Don't Get Rich
Investors will be Obsolete
Why is a Founder so Hard to Replace?
We Can't Grow by Saying "No"
Do People Really Want Me to Succeed?
Is the Problem the Player or the Coach?
Will Investors Bail Me Out?
The Value of Actually Getting Paid
Why do Founders Suck at Asking for Help?
Wait a Minute before Giving Away Equity
You Only Think You Work Hard
SMALL is the New Big — Embracing Efficiency in the Age of AI
The 9 Best Growth Agencies for Startups
This is BOOTSTRAPPED — 3 Strategies to Build Your Startup Without Funding
Never Share Your Net Worth
A Steady Hand in the Middle of the Storm
Risk it All vs Steady Paycheck
How About a Startup that Just Makes Money?
How to Recruit a Rockstar Advisor
Why Having Zero Experience is a Huge Asset
My Competitor Got Funded — Am I Screwed?
The Hidden Treasure of Failed Startups
If It Makes Money, It Makes Sense
Why do VCs Keep Giving Failed Founders Money?
$10K Per Month isn't Just Revenue — It's Life Support
The Ridiculous Spectrum of Investor Feedback
Startup CEOs Aren't Really CEOs
Series A, B, C, D, and E Funding: How It Works
Best Pitch Decks Ever: The Most Successful Fundraising Pitches You Need to Know
When to Raise Funds
Why Aren't Investors Responding to Me?
Should I Regret Not Raising Capital?
Unemployment Cases — Why I LOOOOOVE To Win Them So Much.
How Much to Pay Yourself
Heat-Seeking Missile: WePay’s Journey to Product-Market Fit — Interview with Rich Aberman, Co-Founder of Wepay
The R&D technique for startups: Rip off & Duplicate
Why Some Startups Win.
Chapter #1: First Steps To Validate Your Business Idea
Product Users, Not Ideas, Will Determine Your Startup’s Fate
Drop Your Free Tier
Your Advisors Are Probably Wrong
Growth Isn't Always Good
How to Shut Down Gracefully
How Does My Startup Get Acquired?
Can Entrepreneurship Be Taught?
How to Pick the Wrong Co-Founder
Staying Small While Going Big
Investors are NOT on Our Side of the Table
Who am I Really Competing Against?
Why Can't Founders Replace Themselves?
Actually, We Have Plenty of Time
Quitting vs Letting Go
How Startups Actually Get Bought
What if I'm Building the Wrong Product?
Are Founders Driven by Fear or Greed?
Why I'm Either Working or Feeling Guilty
Startup Financial Assumptions
Why Every Kid Should be a Startup Founder
We Only Have to be Right Once
If a Startup Sinks, Founders Go Down With it
Founder Success: We Need a Strict Definition of Personal Success
Is Quiet Quitting a Problem at Startup Companies?
Founder Exits are Hard Work and Good Fortune, Not "Good Luck"
Finalizing Startup Projections
All Founders are Beloved In Good Times
Our Startup Culture of Entitlement
The Bullshit Case for Raising Capital
How do We Manage Our Founder Flaws?
What If my plan for retirement is "never retire"?
Startup Failure is just One Chapter in Founder Life
6 Similarities between Startup Founders and Pro Athletes
All Founders Make Bad Decisions — and That's OK
Startup Board Negotiations: How do I tell the board I need a new deal?
Founder Sacrifice — At What Point Have I Gone Too Far?
Youth Entrepreneurship: Can Middle Schoolers be Founders?
Living the Founder Legend Isn't so Fun
Why Do VC Funded Startups Love "Fake Growth?"
How Should I Share My Wealth with Family?
How Many Deaths Can a Startup Survive?
This is Probably Your Last Success
Why Do We Still Have Full-Time Employees?
The Case Against Full Transparency
Should I Feel Guilty for Failing?
Always Take Money off the Table
Founder Impostor Syndrome Never Goes Away

How Founders Get Rich Without An Exit

Wil Schroter

How Founders Get Rich Without An Exit

Most Founders get rich without ever exiting their business. Yes, you read that right. We don't have to build a rocket ship that takes on gobs of funding for an IPO in order to have everything we want.

We just need to keep making money (and not even that much!)

While to most people this may sound obvious, in the startup world we tend to forget how this simple fact works. We keep thinking in terms of this big liquidity event where we get handed a giant check like we just won the Powerball. We picture ringing the bell on NASDAQ wearing the only nice outfit we own shaking hands with bankers and smiling for the camera.

And in the end, we picture having enough money to just do whatever the eff we want.

The Stacking Effect

I spend a ridiculous amount of time with Founders at every stage of growth and I can tell you this — there are far more Founders that got rich from running a profitable startup than those that sold. And incidentally, many who had the best exits were, not surprisingly, those that ran profitable startups!

Now, the folks I'm talking about weren't all insanely profitable — they were just consistently profitable. What's amazing about those Founders is that every year they got to enjoy the fruits of their labor. They didn't have to wallow in "Capital Raising Hell" in hopes they might somehow get back the next 10 years of their life.

What the profitable Founders felt was what I call the "Stacking Effect" where every year's profits (well in excess of what they would have made with a salary) just stack, and stack, and stack. $100,000 of additional profit doesn't sound like much, but when it increases by even 20% each year and then stacks in the bank — it matters. Now imagine what that looks like for Founders generating $500k, $1 million, or more in profit per year.

Eliminating the Big Ticket Hurdle

What's most important about those initial profits is that they quickly buy down our biggest ticket early items — a house, car, and educational expenses. But here's where Founders sort of mess this up — they think that those items can only be had for "millions of dollars", which just isn't true.

Most reasonable Founders can buy a house, car, and pay off their education for somewhere around $500k — $1 million dollars, with an obvious exception if you live in a few major cities. Now, if that's the case, imagine how quickly and reliably a Founder can get over the hump versus gambling it all, draining their bank account, and hoping for some exponential outcome to do basically the same thing?

The funny thing is that many Founders who do get to a big exit wind up spending roughly the same amount of money on those items as the profitable Founders. If all we need are 3 to 5 years of decent profits to generate the same outcome, no matter what size our startup, don't we sort of get to the same place?

Earnings Outstrip Need

What's more, when we do get to a place where we've finally paid off some of those items, we start becoming exponentially wealthy anyway. This actually follows 3 coinciding factors.

First, we've covered the big items. So when we no longer need to shell out 20% down on a home, there really aren't any big-ticket items that come close, unless we're hell-bent on flying private. Second, we start to get the compounding benefit of having that extra cash working for us in the market, so our expenses essentially come down (pro-rata) based on passive income. And last, our business itself continues to grow (ideally) which means those checks just keep getting bigger.

Even a small startup generating $3 million of gross income on $1 million of net income can make the Founder insanely wealthy just based on time and the stacking effect. And yet, our startup culture seems wildly focused on risking everything for a tiny window of hope.

Why not place our bets where we're most likely to win? Seems obvious to me — how about you?

In Case You Missed It

Let's Define Success By What We Don't Have To Do Anymore Why do we measure startup success by money? Is it the money we're truly talking about or the freedoms that money buys? If it's freedom, then how much of that freedom comes from money, and how much of it comes down to choice?

How Much Should I Be Working? (podcast) Wil and Ryan take a deep dive into the benefits of thinking quality and not quantity when it comes to your weekly punch card.

We Need a Strict Definition of Personal Success Every moment we spend pursuing an undefined goal is a complete waste of time — especially personal goals.

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BRUCE RYAN

Wisdom indeed. As we were discussing investment capital, our CFO pointed out that 5 system sales would equal $500k cash from an angel... yet retain 100% equity.

Reply3 years ago

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