Dave Ramsey advice

[GoodSteward]

Most people in that situation are better off paying the taxes.

I agree, that's why I changed my 401k to a Roth 401k. As soon as I found out the company offered it, I jumped on it. Not all 401ks are required to be pretax (traditional).

I understand some of the appeal of being your own boss, but I don't understand when people come along and suggest that folks who work for someone are somehow doing something wrong.

I have an answer for these kinds of comments:

"If everybody did it, then nobody could do it."

This is the same reason I disagree with "everybody should buy a used car." Someone has to buy new before we can buy used. It just is what it is. Business owners can only be business owners if someone isn't. If everybody was a business owner, nobody could be a business owner.

Can you imagine billions of handmade product stands around the world with people just looking at each other waiting for a customer, but there are none because they all own a business and have no employees to run it, so they can't go out and buy something? lol!

[TexasHusker]

Of course not. We usually only hear the upsides.

It is kind of like the way that gamblers only tell you about their wins.

I have a volume of downsides and "misses" for anyone interested.

Small business owners bear a lot of risk. The businesses are actually quite fragile. For example, at one of our salons, a major feeder street - 2 lanes running each way - was reduced to one lane each way for a period of 15 months while they tore out the street and re-laid it. Well, lo and behold our volume slowly began falling, and honestly we didn't know where it would end. It ended up dropping about 13 percent. "Oh, so you took a 13 percent drop in your profit." No, it doesn't quite work that way. Service businesses are driven on volume. You have to still pay all of the rent, utilities, and employees - you cannot just cut all of those commensurate with your drop in volume and make yourself whole.

So the profit in that store, for that period of time, actually dropped about 60 percent. I'm not going to reveal the actual number, but it was substantial. We were breaking even plus a little over that time, which seemed like an eternity.

Here's one even better:

A fellow franchisee in another town recently opened a salon in November. He said it cost him over $150,000 just to build it out and get it "open ready" which sounds about right. Things were beginning to turn up for him, when three weeks ago the local highway department came and told him they were constructing a new highway in the shopping center where he is and that he has 90 days to vacate. Yes, I'm sure the state compensated the shopping center owner for the property. The tenants? No way. He just lost his proverbial shirt, and there's not a darn thing anyone can do about it.

[disneysteve]

I have an answer for these kinds of comments:

"If everybody did it, then nobody could do it."

This is the same reason I disagree with "everybody should buy a used car." Someone has to buy new before we can buy used. It just is what it is. Business owners can only be business owners if someone isn't. If everybody was a business owner, nobody could be a business owner.

Yep. I certainly hope that plenty of people keep buying/leasing new cars so that people like me always have a good supply of quality used cars available when we go shopping.

And as I said, business owners need employees, sometimes hundreds or even thousands of them. How would they run their businesses if they couldn't get employees?

[disneysteve]

A fellow franchisee in another town recently opened a salon in November. He said it cost him over $150,000 just to build it out and get it "open ready" which sounds about right. Things were beginning to turn up for him, when three weeks ago the local highway department came and told him they were constructing a new highway in the shopping center where he is and that he has 90 days to vacate.

Eminent domain drives me nuts. What an outrageous abuse of government power.

There is a very popular, long-standing shopping center directly across the street from Walt Disney World property. Disney actually built the center though they sold it years ago. It is fully occupied with a supermarket, a bank, numerous restaurants including both big chains (McDonald's, Uno) and small local companies, and other stores. Well the government decided they need to put a new ramp from I-4 there so the center is being closed and demolished next year. All of those places will be put out of business and hundreds of employees will lose their jobs and there's nothing any of them can do about it, as you described. One of our favorite restaurants is in that center. We eat there at least once every trip. Now we can go watch the traffic drive by instead.

[TexasHusker]

Eminent domain drives me nuts. What an outrageous abuse of government power.

There is a very popular, long-standing shopping center directly across the street from Walt Disney World property. Disney actually built the center though they sold it years ago. It is fully occupied with a supermarket, a bank, numerous restaurants including both big chains (McDonald's, Uno) and small local companies, and other stores. Well the government decided they need to put a new ramp from I-4 there so the center is being closed and demolished next year. All of those places will be put out of business and hundreds of employees will lose their jobs and there's nothing any of them can do about it, as you described. One of our favorite restaurants is in that center. We eat there at least once every trip. Now we can go watch the traffic drive by instead.

Yes. What really gets me is street/road work where there is seemingly zero accountability on when the project gets done.

In our situation where the road was reduced to two lanes for over a year, several of the businesses in that shopping center went under. We found out later that the contractor paid some measly daily "fine" for the days that the project went over, but those monies went to the city coffers, not to the businesses that were actually being affected. And the fines weren't sufficient to get the contractor's attention anyway.

What happens is that the city/state goes with low bid, never taking into account the quality of that bid and how it might affect the surrounding businesses. In my city alone, there have been untold numbers of businesses close shop due to the shenanigans at the highway department and city hall.

[disneysteve]

What happens is that the city/state goes with low bid

This policy has always boggled my mind.

Why do you want a job done by the person willing to do it the cheapest? I assume they are cutting corners somehow to get the price that low. Maybe they're using inferior supplies. Maybe they're underpaying their employees. Maybe they aren't paying their taxes properly. Maybe they aren't carrying all of the proper insurance and licensure.

[Captain Save]

Really? Every study I've ever read shows just the opposite, that 401k plans are very under utilized. Only about half the workforce has access to one and about 1/3 of those people don't participate. Of those who do participate, many contribute far too little to really get anywhere. Many don't even get the full company match. Auto-enrollment has aggravated this problem by setting the contribution rate too low, like at 2 or 3%. Inertia results in most people never changing it. If you are only saving 2 or 3% for retirement, forget about ever actually being able to retire.


I agree with this 100%, as do most financial gurus. The standard advice has always been to contribute to the 401k to get the full match and then fund a Roth. If you can max the Roth as well, then you can go back to the 401K, but since the median income is about 55K, if someone puts 6% into their 401K and $5,500 into their Roth, they've put away 16% of their income which is a great number for that median income earner.


In what field do you think there is less competition? I think it's harder than ever to succeed in small business because of greatly increased competition all around.


Businesses need employees. If you're self-employed, you might possibly start out as a one man show but if you're successful, you're going to need to hire staff. Everyone can't be self-employed. My small medical practice had 5 full-time employees (I was one of them as I didn't own the practice). There's no way the owner could have run the business alone. My previous practice had 8-10 employees.

TexasHusker owns 3 hair salons. He is self-employed but all of the people who work for him aren't.

My current job is with a hospital system that has over 9,000 employees, and we're constantly searching for more. What would happen if even 5% of those people decided to leave to start their own businesses? We'd have to shut down offices.

I understand some of the appeal of being your own boss, but I don't understand when people come along and suggest that folks who work for someone are somehow doing something wrong.

"more" people should be self employed does not mean "everybody" should be self employed ..

There is nothing wrong with being employed but there is something wrong when that's your only out. Imagine if everybody had an "out" when they lose a job. Not to mention, you have more leverage with your employer if you have an out. So you can use your ability to earn on your own as a way to get a better paying job or a job with a better work life balance.

I wish I had this mentality 10 years ago.


As far as the types of business. the most obvious are service businesses.

Cleaning services, landscapers, pest control, garage door service,

licensed trades: plumbers, electricians, roofers, etc..

what's nice about the trades is that you get paid while working for someone else and going to school, and once you are licensed. You have leverage, because you can always start your own.

[Captain Save]

I agree, that's why I changed my 401k to a Roth 401k. As soon as I found out the company offered it, I jumped on it. Not all 401ks are required to be pretax (traditional).



I have an answer for these kinds of comments:

"If everybody did it, then nobody could do it."

!

The problem is everybody is not doing it.. when everybody is doing something .. there is usually a lot of opportunities in the opposite. I'm sure when everyone was in the trades, it was tough for a plumber, but when all the tradespeople are 50 and over, there is a lot of opportunity for the younger guys. They have no competition.

[GoodSteward]

The problem is everybody is not doing it.. when everybody is doing something .. there is usually a lot of opportunities in the opposite. I'm sure when everyone was in the trades, it was tough for a plumber, but when all the tradespeople are 50 and over, there is a lot of opportunity for the younger guys. They have no competition.

This is true, and sadly, everybody is being fed the "get a degree" kool-aid. We have a major shortage of certified mechanics, plumbers, etc. I know of a local tire shop that had a certified mechanic for years, but he retired. They have been trying for a long time to get another one, offering the opportunity for a near or over six-figure income in a very LOCL area, and a very flexible schedule. But, nobody wants to work. He said he even knows a great certified mechanic, but he won't get off his butt.

Everybody wants the money, but few want to work for it. They want to get a degree that somehow makes them think they are owed that money now. Even in degree fields, you have to work hard and keep improving to stay relevant. The degree market isn't that great (look at all the people who get a degree and then can't find a job), but the trade market is exploding, especially in medical.

[disneysteve]

The problem is everybody is not doing it.. when everybody is doing something .. there is usually a lot of opportunities in the opposite. I'm sure when everyone was in the trades, it was tough for a plumber, but when all the tradespeople are 50 and over, there is a lot of opportunity for the younger guys. They have no competition.

One problem in our area is that a lot of that business has been absorbed by 2 or 3 large firms. They bought up many of the smaller independent shops. They advertise constantly. They offer all sorts of coupons and specials. You can't turn around without seeing or hearing their marketing. So when it comes time to hire someone, that's the first place most people turn because of the name recognition. It's very difficult for an independent person to get their name out there and pull business from the 800lb gorilla firms.

[Captain Save]

One problem in our area is that a lot of that business has been absorbed by 2 or 3 large firms. They bought up many of the smaller independent shops. They advertise constantly. They offer all sorts of coupons and specials. You can't turn around without seeing or hearing their marketing. So when it comes time to hire someone, that's the first place most people turn because of the name recognition. It's very difficult for an independent person to get their name out there and pull business from the 800lb gorilla firms.

Are you referring to service companies?

That's interesting. Around here, the smaller businesses are booming. We still hear of the big guys like "merry maids" for cleaning.. but they don't own the market.

If I were one of the employees and good at what I do, I would take the chance. One easy way to get business is get inside the Google Maps 3 pack. you'd receive a lot of phone calls.. find an untapped town and market to that town on google. when someone searches for a "house cleaner in *town*" be 1 of the 3 in the pack. Google will lean toward the person based in that town so if the big guy is not based out of that town you're marketing to, eventually you'll rank over them.

[Captain Save]

They want to get a degree that somehow makes them think they are owed that money now. .

Exactly. .. and if they can't get the job .. they feel stuck. That's what I was alluding to earlier.