Entrepreneurship reality check

Do You Really Expect Your Business to Get You Through Retirement?

Excerpted from above post:

Of the 6MM private companies, over a third of the US working population is employed at businesses with fewer than 100 employees business, 5% do more than $5MM and 2.5% do more than $10MM in sales.

Sell for 3-6x EBITA (which is in the 7-13% range). Simple example:
Revenue: $10 million.
Ebitda: $1 million.
Sale price of 4.5 times Ebitda: $4.5 million.
Taxes and expenses on sale (35 percent): $1.575 million.
Net proceeds from sale: $2.925 million.
Pretax annual income available at 4 percent of invested proceeds: $117,000 and this if you are in the lucky top 2.5%

TO CONSIDER: 

  • Fund a qualified retirement plan: put $40,000 to $60,000 in a retirement plan. At a 6 percent return and invest $50,000 a year for 20 years, you will generate a nest egg of approximately $1.8 million.
  • Own real estate: business pays you rent, which pays the mortgage

Small business statistics

Excepted from above post:

Over a third of the US working population is employed at businesses with fewer than 100 employees

STATS_SelfEmp-720x357

For business with fewer than 5,000 employees, the average employment is 13 people.

Businesses with less than five employees make up 62% of all businesses in the US (TODO: not sure how this was calculated)

Small business owners are getting older. 51% of small business owners are over 50 years old, while only 16% are under 35.

Americans still start their businesses on their own backs. 77% of small businesses rely on personal savings for their initial funds.

Business Employment Dynamics

Of businesses started in 2008, 41% of all and 47% of retail have made it so far.

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