When McDonald's Is too Expensive
Congratulations son, you've graduated from college. What are you going to do now?
Well, I think I'm going to start my own company.
Oh, that's great! I'm sure you'll do wonderfully (snicker). Good luck to you!
I've heard that a lot recently, and I'll first note that the 'snicker' was added by me (creative license). I heard it mentally every time I heard people say that to me at graduation a month ago. It wasn't because I thought they were false - quite the contrary, they truly felt happy for me and wanted the best. However, I had a bit of an idea of the road ahead and I knew it was going to be a tough one.
Little did I know just how tough, nor do I think I've hit the toughest parts now. That is to say that I've just entered what most people call "The Real World". Life after college. Good bye help from Dad, hello bills.
I've always had a good head for numbers, self-discipline, and decent financial sense, which is why for the last two weeks I've been stressed to the max. I've done everything to cut my expenses to the bone - I'm even still living in my fraternity through August! In fact, I've been so thorough that I'll spend less than $17,000 in the next year - equivalent to the salary of someone making $8.50 an hour. That's barely above minimum wage here in Massachusetts!
Even still, I'm stressed to my bones. I'm working 80 hour weeks and it doesn't feel like enough. I'm bumming rides and walking almost two miles to work - whatever it takes to save money. Why? Because I'm not making a cent right now. That's not to say that I won't soon, or that I'm actually in financial trouble - I'm not - but I'm illustrating what every entrepreneur experiences at the beginning: lean times.
If you think about it, by not taking a salary now I'm just vesting my work for the future. It's painful, but it's going to pay off. Walk with me. I'm a rocket scientist from the top engineering school in the country, MIT. In my fields, IT and finance, my peers are getting paid $65k-$900k per year out of school. If we take a roughly median compensation (sans health insurance, etc.) of $80k per year, that breaks down to about $40 per hour if you were only working 40 hours per week. Of course you're not, so let's estimate it at $32 per hour (50 hours/week).
Now at $32 per hour, and working over 80 hours per week, my year is worth $128,000 in outright compensation. I know, I know - that's ludicrous. And yes it is... even working 80 hours a week someone my age would most likely not get paid $128,000 in one year. THAT'S WHY I'M NOT WORKING FOR A CORPORATION!!!
If I worked for a corporation, they'd reap the benefit of my extra work and I'd be stuck crossing my fingers that the higher-ups notice my work and promote me faster. They trade-off - security. It's slow going, but at least you'll always have a salary. However, let's say my hard work net's me the $128,000 this year. I certainly can't take nearly that much out of the business in compensation, nor do I want to -- Uncle Sam's taxes on that pay would be killer. So what gets done with the money? Simple, it's vested in the company. Actually cash assets are held by the company and reinvested into more product, more employees, more sales. And the net difference, the intangibles that I built up all year, those go into more sales too. Those are all the deals I haven't quite closed yet, all the relationships that haven't come to fruition, all the partnerships that are just getting started. Those are the real road to financial independence and developing a successful business all my own. Owning what I make with my mind, ingenuity, blood, and sweat.
So while I can't even afford to eat McDonald's most days. I can take heart in the fact that not only am I saving myself from needless calories, but more importantly I'm the complete owner of my work and that's it's vesting for the future. Talk about a hearty nest egg. There's nothing like a business to support a family, maintain a satisfactory lifestyle, and enable a comfortable retirement when the time is right.
That's what I think about when I look at my disappointing wallet and tell my friends going out on the town to have fun without me. It keeps me disciplined and focused on creating the value that I want to create and reaching the goals that I have set for myself. So take heart, strike out after your dream, and keep in mind the words of Jeff Fox in How to Make Big Money in your Own Small Business, "Scrimp the shrimp... and scrimp to succeed. Invest in your future."
References
Fox, Jeffrey. How to Make Big Money in your Own Small Business. New York: Hyperion, 2004.