Yesterday was a super interesting day.
Interesting Piece #1
Leading into the day, the big thing on my calendar was a conversation with a client that I didn’t expect to go well. That conversation was because what he wanted me to build a model for him in a way that just didn’t make any sense at all. I talked about it yesterday and how this silly project killed my motivation. It didn’t make me want to do much.
Well, I’m happy to report the conversation with the client actually went pretty well! I had emailed him the night before and suggested in the email that a custom-built model would work better than the template. Here’s the trick: I positioned it in a way to stroke his ego a bit. I used language like “your business is too complicated for a template” and “you guys are going to outgrow the template.”
The trick: always appeal to ego. It works really well. It’s the same reason you should ask people for “advice.” It appeals to their ego and makes them like you more.
With that in mind, I now have some time to have that model built. I’ll figure out the easiest strategy there today.
Interesting Piece #2
My day job at a startup went through a round of funding. That funding was interesting because it showed what the market value of the equity is.
That’s exciting, to an extent. I woke up very excited to see the numbers. It was going to be an interesting day, to say the least.
I’m pretty bummed.
Based on the dilution, math, and more, the equity just isn’t worth much.
As regular readers know, I do a lot of consulting for private equity firms. I know how to value a business by using a variety of different strategies and multiples.
Even if I was exceptionally aggressive in valuation of the business, to the point that no one else would value the business at that price, my equity isn’t worth a ton without staying for a long time at the company.
The reason why is the equity “cliff.” When you join a startup, you don’t receive any equity until one year in. This is called a “cliff.” It’s designed to prevent people who get fired quickly for poor performance from owning any equity. After “going over the cliff”, you end up earning an additional ~3% of your equity every month. That way, at the end of year two, you have 50% of your total equity, year three you have 75%, year four you have 100%.
With that in mind, I need to stay for four years for my equity to be subtantially worth something.
So, what is my equity worth, even if I value the business aggressively?
If I leave in a year, it should be worth ~$20K. Two years from now, ~$35K, Three years, $50K.
Of course, the business could appreciate in value over the next two years. If the value of the business increases 10X over the next two years, then my equity is worth $350K.
So should I stay or leave?
In consulting, we use an analysis type called “what do you have to believe to be true” analysis
For example, for me to stay two years is two more years that I’m not 100% dedicated to building my own business to try and grow to $10K a day at 30. I don’t know if I can waste that much time.
I would have to believe that two more years at my day job would be financially better than leaving.
For that to be the case, I would need to believe that:
- The amount of money I’d pocket would be $500K two years from now
- Which means I’d need to believe the paper value of my equity would be worth $1M two years from now (due to taxes)
- Which means I’d need to believe the company value would increase by roughly 28.5X (1,000,000/35,000)
- Which means I’d need to believe my company would be worth >$1B
- Which means I’d need to believe my company would be a unicorn and one of the top 0.0006% of startups in the world
I do not believe any of that.
This means the interesting thing I learned is that I’m probably in my last 6 months or so at the company unless my reasoning to believe in the company changes.
The opportunity cost is just too damn high otherwise.
What I did yesterday to make $10K a day at 30
The current phase of the plan
I’m in Phase #1: The Job & Side Hustle Phase. You can read more about the phases and my plan to get to $10K/a day at 30 here.
Wake up & sleep:
I slept okay, 7 hours and 43 minutes, waking up at 7:28 after going to bed at 11:18. I’ll take it
My recovery score is great at 95%, which has been relatively consistent over the past few days or so. I think this is largely driven by not waking up with an alarm
No exercise just took a walk. My day strain was relatively high though at 13.5.
This is super interesting on the day strain because I did a killer workout the other day and my strain was actually lower that day than it was yesterday.
My fiancee has mentioned I seem stressed and fractured right now. I’m wondering if the stress levels are so high that they’re putting my body through strain akin to a serious workout.
We’ll see, but I don’t think I like that implication.
Diet was coffee, eggs, and some ordered BBQ for dinner. Overall, probably 5/5 with 1 being the best.
The BBQ was so damn good though.
My Day Job
It was Thursday. I had a few meetings but nothing crazy.
Investment real estate
Nothing here. Still waiting to hear from property managers.
I have a few projects going on now.
I did some work to outline objectives for the business plan and the direction I’m planning to take this. My client had a few comments so I’ll make edits on those today.
Still in a holding pattern here. I’ll follow up next week
As discussed above.
I did some vendor paperwork with them, but nothing crazy.
Sourcing new work
Nothing outside of what I mentioned above.
Just publishing the daily post.
My fiancee and I spend some time together in the morning and evening.
No updates right now on trying to move
Rescue Time Daily Screenshot
Not a ton of hours here.
I’m realizing that I’m working a full time job and consulting on the side, but still less than 7 hours of computer time a day.
I can work harder.
What I made today
Rental Income: $33
My business: $0
Affiliate: Not doing yet
WordPress Maintenance Site: Not doing yet
Dividend Income: Not doing yet
Micro-SAAS’s: Not doing yet,
Hotels: Not doing yet
Today’s pro-rated amount of monthly & yearly expenses
Once I pay off my debt, I’ll break out expenses into a line by line as well.
Today’s Income (pre-tax)
My plan for tomorrow
Tomorrow will need to be more work on the $10K site and some day-job work.
About the Author & The $0-$10K/Day Case Study
Dean’s goal is to create $10,000/day in passive income through entrepreneurship. Too many people write “success porn” that skates over the struggles many face in entrepreneurship. His goal is to create something real that highlights the lack of sleep, disappointment from family, and setbacks you really face in entrepreneurship.
To read more about how this case study is set up, check out the ground rules here.
The hope is that this series of posts will inspire someone else out there to make their entrepreneurship dreams happen.
Dean Woods is currently an executive by day and a bootstrapped micro-startup CEO by night. Prior to working in startups, Dean was a management consultant. Dean graduated with honors from The Wharton School.