Retirement Can Start at Any Time

As an entrepreneur, retirement can start at any time. Retirement does not mean that we should stop working, sit on the couch and do nothing. Retirement is when we prioritize our time beyond generating more personal income. We should be retiring from our business a bit at a time every day and with a clear vision for where we are headed.

Before we retire, we need to generate the personal income and wealth creation that we are seeking with a particular business. In my book The Abundant Entrepreneur, I describe how to calculate what is needed to build the lives we want. I call this the “enough” number. Simply put, this is how much we need to generate in income and have in lump sum assets to live our lives the way that we want. Retirement is then a process of converting some or all of that income from active (with our participation) to passive (without our involvement).

Focus

When we think about making that gradual transition away from prioritizing income production to prioritizing time, the focus needs to be on our vision for where we are spending our time. It may be that some income becomes slightly less active, meaning that there are team members and tools that take things off our plates. It may be that we can totally convert some business income to being fully passive and be truly just the investor. Or it may be that we start a new venture and actually spend more time working, but on things we are excited about. The focus of retirement is on what we want and away from generating more income.

So how do we know what we should focus on? Some of the key prompting questions when thinking about our time include:

• What activities feel like play to me but add value to the business?
• What energy draining activities am I still doing?
• In my perfect regular day (not a vacation), what am I doing from the time I wake up until the time I go to bed?
• What critical tasks inside my business have yet to be assigned to someone trustworthy?
• What would I need from that trustworthy person in order to delegate those critical tasks?
• What other businesses or interests would I like to spend more time on, and how much time is that?

Hypothetical situation

Let us create a hypothetical situation to illustrate the point. Our fictitious founder is named Victoria, and she is the chief executive officer of a general contracting company that builds franchise restaurant locations for a few fast casual brands. The company has embedded itself in the franchise holding company as one of their certified contractors with a reputation for delivering on time and on budget. Victoria did not intend to end up here. She just won a bid for the first location of a franchise that really took off and spent the hours to develop the business relationship with the holding company executives. They used to build a wider variety of commercial projects, but they got so efficient with their franchise location buildouts, that they only work on those now.

Victoria is able to vacation with her family when her kids are out of school in the spring, summer and fall, and she spends about 45 hours per week working on her business the rest of the year. She generates about $1M of annual owner benefit, and the business is worth between $500K and $600K. She has three great project leads who run the individual builds and a director of finance to keep all the wheels turning, but she still holds all of the business development and deal making roles. She is also the one who fights fires whenever a problem pops up, and the team is trained to go to her when something needs to be fixed.

Victoria knows they only need about $600K gross to make their family life run the way they want, and she has built up a portfolio of $3M in investments and real estate outside the business. She is not ready to sell the company and do something else, but she is also getting progressively more burned out with the day to day activities of her role. She knows that she really loves the relationships with the franchise holding company executives and getting new projects for the company, but she does not have any desire to be fixing things as they break anymore. She also got into this work because she loved developing new projects from the ground up, and she does not get to do that anymore with building the same franchise blueprints over and over.

Based on asking herself the questions above and reflecting on her role, she is going to do the following:

• She is going to search for a director of operations to run the playbook and fight fires when they come up. She knows she will be able to find an experienced operator through her trade association meetings and conferences. This person is going to be paid by reducing her owner's benefit from $1M to $800K, but because the business is now more operationally leveraged and transferrable, it will be worth $6M - $7M.
• She is going to cap her hours inside the current business at 20 per week, focusing exclusively on keeping the deal pipeline full for her team to build.
• She is going to start a second company focused on building small commercial developments from the ground up. She starts it with $1M in seed capital from her portfolio and plans to work here 15 - 20 hours per week. She does not think it will cash flow for the first one-to-two years, but as they get deals done, it should add another $300K of annual owner benefit over time.

While Victoria is fictitious, her story is not. None of us would say that she retired in any sense. What she did do was optimize her life based on what gives her energy and where she adds value to her company. We can do the same inside our businesses by taking a hard look at where we want to spend our time, who we want to spend it with and how much capital it will take to put all those pieces together.

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DISCLOSURE: Jarrod Musick is an officer of Destiny Capital and Entrepreneur Aligned, a DBA of Destiny Capital. This article is for informational purposes only and should not be relied upon as a basis for your investment, business, or personal financial decisions. We recommend consulting with your wealth advisor, CPA/tax advisor and/or attorney, as applicable to your situation, prior to implementing any new tax, legal, or investment strategy. Advisory services provided by Destiny Capital Corporation, a Registered Investment Adviser.

ABOUT JARROD

Jarrod was born into financial planning and solving financial problems. With his financial advisor father Steve telling stories about finance around the dinner table from an early age, the idea that everyone has a different financial situation was always there. After an early professional career spent in nonprofit and government, Jarrod came back to his roots helping people plan and invest in 2011. Since then, he has worked with individual clients, led internal teams and ultimately became partner and the CEO of Destiny Capital in 2017. With a passion for helping entrepreneurs change the world, Jarrod ultimately oversaw the creation of Entrepreneur Aligned in 2020. With both Destiny Capital and Entrepreneur Aligned, Jarrod leads teams that help people live lives of abundance where money is simply a tool to let everyone be a positive force for the world around them. When he isn’t working with the talented teams for EA and DC you can find him chasing his twins, wily trout or a podium spot at an OCR race.