The First Million Is What Matters Most

June 4th, 2015   |    By: Wil Schroter    |    Tags: Emotional Support

Before you think about raising capital or growth strategy for your startup, ask yourself this question: “Exactly how much money do I need to feel rich?”

Raising capital implies trying to grow a business, and in many cases, creating a big financial outcome for you and your investors. But do you really need a big financial outcome? How big? Are you sure about that number?


This article is going to talk about how to spend money. You may want to save it all, you may want to make it rain in the VIP balcony at the club. I don’t care how you spend it. I care that you know exactly how much money you need to achieve your goals, down to the last dollar.

Map Out Every Last Dollar

Before you answer with the typical “I want a $100 million exit,” try this exercise. Map out every last dollar that you actually need. I’m talking every last dollar, down to the cost of the high def projector in that sweet home theater you’ve always wanted.

Unless you’re planning on living like Jay-Z, I have to tell you – it probably won’t be that much. In many cases it’s hundreds of thousands of dollars, not hundreds of millions. Even Jay-Z probably lives on a lot less than you think.

The Mis-perception of Riches

When you don’t have stuff like a house, a car, and nice furniture, the perception of its riches is extraordinary. You think that the delta must be some astronomical number that you could never achieve. But do you really know what that number is?

What you’ll likely find is that the delta between you being “rich” and where you’re at now is less than a million dollars. What’s blowing up your perception is that you’ve never actually taken home a million dollars, spent it, and realized that it covered most of what you ever wanted. So let’s go spend it – hypothetically.

Let’s Go On an Excel Spending Spree

Let’s open up Excel and figure out what we’ve always wanted. I’m not going to pretend to cover everyone’s expectations, so I’ll make up some and you can add or subtract to fit your lifestyle.

Start With a House. Home prices vary greatly, but in most of the country $1 million buys you a lot of house. In LA it buys you a condo. Houses are mortgaged, not purchased outright (it’s foolish to pay cash) so at 20% down, we’ll need $200k. We’ll also create a $7k per month mortgage. If that’s too expensive, buy a cheaper house. We all learned that lesson in 2007, right?

Furnish That House. It’s expensive to furnish a house, so we’re going to allocate a budget of $50,000 to buy everything from kitchen tables to that high def projector I promised you. Your budget may be Ikea or Roche Bobois. This is easy to adjust.

Find a Sweet Ride. Expensive cars are also leased, not purchased. Let’s go with the flagship BMW 7-Series. The sticker on 7-Series is $90k. The good folks at BMW have a lease deal that costs us about $6k down and yields a monthly payment of $880 per month before taxes.

OK, Now Stop

Before you start calculating the cost of a kid’s education and retirement, stop there. So far you’ve got a beautiful, fully furnished house with a brand new BMW in the garage. You’ve spent $306,000. You’ve got monthly payments of about $8k per month or less depending on your ongoing budget.

What you have right now is more than most people achieve in their entire lifetime, and that’s my point. Instead of spending your 20s, 30s and maybe your 40s saving every last penny for these items, you’ve swept through them in one shot for a pre-tax spend of a half mil. Nice.

Oh wait, there’s another $500k

Did I mention you still have another $500k that you haven’t gotten around to spending? That’s an awful nice cushion that can be invested, saved, or just converted into $1 bills to build your Scrooge McDuck swimming pool.

I won’t bore you with the compounding effect of saving $500k early in life toward building a retirement plan later. A financial planner will be happy to do that for me. But I will tell you that pretty much no one has the ability before 40 to not only have bought everything they’ve wanted but still have a giant nest egg in the bank. You did it for $1 mil, not $100 mil.

A Lesson in Net Income

Now something else fascinating happens. When you don’t spend your early years saving for all of these items, which dissolve your paycheck every month, you have what amounts to a whole lot more net income to save or spend.

This may be the greatest luxury of all, and ultimately why the rich get richer. When you’ve already got your bases covered, you have far more freedom to manage your extra income than others who have all of their income wrapped up in trying to buy the things you already have.

But I want to retire and buy a G6!

Stop that.

Trying to deliberately plan an exponential outcome like “enough money to never work again” is what sends you off in the wrong direction to begin with. Yes, it could potentially happen. But the probability that you can earn $1 million versus the probability that you’ll earn $100 million is vastly different.

I’m sorry to tell you, but you’re probably going to have to work for the rest of your life. But the good news is you’ll be able to do it in a much more advantageous position than 99% of America.

Andrew Warner, the Founder of said that selling his business didn’t buy him permanent retirement, but it changed his life as if it did. “For me it wasn’t about buying anything. It was about letting go. I read the books I always wanted to read but never got around to. I cycled for hours. I went out a lot. And I traveled with nothing but a backpack.”

That sounds like retirement, but it’s not. It’s the cushion that an initial win buys you the freedom that most people never see. Andrew still has to go to work every day, though.

Run the Numbers

None of the math favors retirement outcomes anyway. There were roughly 6 million new businesses launched last year. Venture capitalists, for example, funded about 1,174 new companies in that time period. About 180 companies went public last year. Are you still confident that you’re calibrating toward the most likely outcome to achieve super income?

Calibrate to the Most Necessary Goal

I’m not trying to tell you how to run your life. That was your parents’ job. All I’m asking is for you to consider three things:

Know Your Number. Figure out exactly how much money you need first. What would be life changing? If you absolutely need a G6, then so be it. I honestly hope you get it. But if you don’t, it’s critical that you know the number you are shooting for.

Calibrate Your Path. If your number is $500k, calibrate toward that outcome. You probably don’t need a $100 million exit and three rounds of venture capital to achieve that goal. You can probably get there with a healthy, bootstrapped $3 million business.

Achieve, Then Grow. Shooting for the stars, raising big rounds, and planning for billion dollar exits sounds awesome. But you can also hit short term goals that are more reasonable and grow into a big company, too. It’s not binary.

I’m not asking you to kill your dreams, I’m asking you to consider finding a path that achieves your near term financial goals sooner and in a more likely manner.

I’ve never met anyone that’s made a million dollars that wished he could give it back to take more risk. Ever.

This post originally appeared on the Forbes blog.

About the Author

Wil Schroter

Wil Schroter is the Founder + CEO @, a startup platform that includes BizplanClarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.

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