Right after I came back from my Holiday vacation, I received some “unconventional news” via email; one of my co-workers was quitting the bank to buy a business. I’m using the word unconventional as it’s pretty rare that someone would leave a good pay check, job security (it’s not like they are firing salespeople in the financial services industry!), most solid pension plan (unless you are willing to bore yourself working for the Government ) and unlimited advancement potential (I have earned 5 promotions in 10 years at the bank).
Still, this young fella just decided that the financial industry was not for him and that he would rather go back to his first passion; owning a restaurant.
I must admit that I know little about the food industry. I love cooking, I love going to restaurants but I never thought of how I would run my own as an efficient business model. Margins are low, plagued by staff turnover, fresh food is crucial so potential losses are very important. In other words; I don’t think it’s an easy industry to have success.
I decided to have a good talk with this “kid” to know what he has in mind. At first, it seemed to be a crazy dream where the guy and his girlfriend didn’t think much about what they wanted to do. They were looking for a way out, they remembered the great times they had serving while they were in school and thought it would be a party every day.
I spent about an hour and a half talking about his business plan, how he thought he could make money and about his financial situation. It now appears to me that his dream is not that crazy after all.
The idea of buying a restaurant didn’t come from last night’s dream or a nostalgic night about the good times at the café where he worked with his girlfriend. He had been planning this for a while. As you don’t make a good dish in a hurry, he prepared his recipes with numerous hours of work behind it.
He made a business plan, using the previous owner’s numbers and dropped them by 20%. He ran numerous scenarios, identified where he could make immediate tweaking to improve his margins and sell things he didn’t need in his restaurant. On day 1, he won’t only get the key to his business and open the restaurant, he is going to apply his plan and start taking action right away.
He also set himself up in a way where he could get burned by a plate without losing his hand.
I think the most important point of your plan when you are throwing yourself into an entrepreneurship journey is to establish the worst case scenario. I’ve often ran this scenario in the event I would get laid off. While it’s almost impossible, I think you should always have a solid plan B to make sure you know where you are heading when you are in the eye of the hurricane.
That’s exactly what he did. First, he’s young, so he has plenty of time to recover from a big loss. Second, he didn’t start by buying himself some nice things when he got his first job. He and his girlfriend saved most of their income and bought a Triplex. Today, the rental property almost pays for itself while they live on the first floor for free. He doesn’t drive a nice car, he doesn’t have expensive taste, he can live on little money.
This is exactly the right mentality to start a business with. What’s the worst that can happen in his situation? The restaurant is a flop, he’ll lose 50k to 100k and will return back to his financial career (which was off to a great start anyways). By the age of 30, he won’t even feel the pain of his loss and in the meantime, he will still keep his Triplex and family. That’s the worst case scenario. He’s not lucky, he planned for it.
The problem when you make money is the consumption cycle you enter. I hate to say that, but Sam from Financial Samurai is right: saving 50% of your income is the best way to achieve financial freedom. I’ve let the “savings train” leave the gate at some point in my life because I’ve taken a bite of the forbidden fruit. Since then, my eyes have opened to a whole new world of nice things to have, to do and to eat. It’s fun but costly and takes you away from saving money and realizing other projects.
I remember when I was a few years younger with no family and living in an apartment. I was putting a lot of money aside. Much like my co-worker, I hadn’t touched the forbidden fruit yet. This was my advice to him; don’t start spending the money you make and jump on the train while it’s still here.
I almost envy him. Being able to drop a conventional career, conventional life, and conventional rules to do something different is awesome. It’s awesome because you open yourself to live other experiences. He planned everything so he could do it. He did it before becoming another bourgeois sipping wine on his terrace (hey, that’s me!). There is a part of me that envies him and the other part is screaming: “look at what you have! You’re living a good life where you enjoy time with your family!”. Yeah… that’s the other part: being an entrepreneur requires a lot of hours at work. Right now, there is no way I would trade my 4 day/week schedule for owning a business. I value the time spent with my family too much right now.
For those who think that the train of entrepreneurship passes only once in your life, I suggest you read how I manage my windows of opportunity to understand that there is always one opening very soon. The key is to be prepared to seize it.
The best way I know to seize an opportunity is to live a simple life and pay down your debts. These two things are quite a challenge for me right now… but I have my own way of making things happen ;-).
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