Open 1 clinic, 2 clinics, or 3+ clinics? What would YOU do? These are non-trivial questions: make the wrong move and you can defeat any chance that you had to reach your Number.  So, how NOT to leave this critical decision to chance? Well, Scott ‘benefited’ from his turn ‘under the spotlight‘ so, we already have some insight as to where he is heading with all of this.

Now, you can read Scott’s latest thinking … what do you think? And, can you help Scott ‘only’ get 12% compounded on his money?

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Ok, now that i’ve laid it all on the table about my plans and strategy to get to my number of 4 million in 9 years, I’ll just summarize a few things.

First, I’ve realized that opening clinic after clinic after clinic in multiple succession is not necessarily an optimum plan to get me to my number faster. Running the numbers on opening 3 clinics as fast as reasonably possible does not produce a higher number within 9 years than opening 2. The reason being, is that takes capital, to the tune of around 100 grand to get an office up and running and cashflowing positive, not to mention it takes valuable time and a big drop in salary while it’s developing.

If i’m moving things along at warp speed, I can cashflow positive an office in 6-8 months, but looking at the numbers, this sudden drop of 100k to open an office, coupled with the fact that I have to hire a new associate PRIOR to starting up the next office, spend at least 6 months minimum training them to run an office by themselves before I can turn them loose on their own at my old office and they can be reasonably capable, pay them a fair salary during this training period (while they aren’t producing a dime of income and actually dropping the clinic performance, due to patient lack of trust in a new doc a well as my focus being so much on the new doc and less on running the practice), continuing to pay them and increasing salary while i’m at the “new” office building(this drops my salary from the previous office dramatically and remember, i’m not making anything on the new one until it cashflows positive) etc…etc…

NOW, if my goal was to work for 12,15, or even 20 yrs, you would see that NUMBER double and even triple on the backend. Once you own 3 clinics and they all have well trained docs, all cashflowing very well and everyone is happy, it’s easy to have cashflow to the tune of 50k per month to invest. This builds quite a Number very fast, but this process takes a few years before the plane even gets off the runway. It’s a helluva 15-20 years plan for major wealth, just not a good 7-10 year plan.

Now double checking, triple checking and quadruple checking my math says that if I can achieve a 12% gain on my cashflow, while keeping my lifestyle the same, I can accumulate 3.2 million in roughly 9 years by continuing out my contract over these next 29 or so months, then getting an associate asap and moving on with the next clinic startup and just sticking with 2 clinics. At that time, I can sell both clinics for roughly 300k each and when adding those funds to my other assets (home equity at that time, rental property equity, etc…) that will put me right around 4 million in 9 years.

Now, I have to make sure I can produce 12% per compounding with this cashflow…..the next question is, how do I get this rate of growth on my money? Stock market coming out of a recession? Continuing to add rental properties and hopefully great foreclosure buys to my portfolio? Steadily purchasing tax lien certificates in states with a high return rate? Buying the commercial properties that these 2 offices reside in? A combination of all the above?

Also, just for kicks, I ran the numbers on just owning the one clinic the entire 9 years and not even opening a second office, keeping our lifestyle the same and investing all the cashflow. Interestingly, it produces very close to 3 million in those 9 years if I can get that same 12% return. Now think about that one for a minute. 2 clinics “only” produces 200-300k more over that 9 years (plus the 300k value of the second clinic itself if it were to be sold, so I guess i’m looking at more like a 500-600k difference in the end at 9 years) so you can see from the above example, the multiple clinic ownership REALLY needs time to take off and produce meaningful results. Definitely not a get rich, really quick plan, but more of a “get REALLY rich in 20 yrs” plan.

Any suggestions?

Best ways to almost guarantee at least a 12% return on your money?

Can You Find Your Number on Craigslist?

As I prepare for my entry in to MM201, I’m finding that my game plan is changing.  My original play book was aimed at achieving an annual compound growth rate of 38%.  However, in my previous post, I noted that recent increases in my net worth have reduced that requirement to just under 30% (29.28% to be exact).

That’s great for a couple of reasons

1. My number (10 Million by 1/1/19) just became more achievable.
2. I can take a step down on the risk ladder and still have a reasonable shot at achieving my goal.

As Adrian pointed out in a post over at 7million7years.com about Masterson’s Table

1. Real Estate and Stocks can produce an annual compound growth rate of 30%
2. Real Estate, Stocks and a small business can get you to 45% annually.

When I needed 38%, I was planning to take aim at the 45% growth engine to ensure I hit my goal  Higher returns tend to require greater risk and I was going to assume some to get where I wanted to go.  That extra risk is not necessary right now, so I’m going to put my business plans on hold and focus on REI and individual stocks.

In an attempt to jump start my progress (and to have a little fun) I placed two ads on Craigslist.  Who knows, maybe I’ll find my Number on Craigslist.

Wanted: Value Stocks for Long Term Investment

Seeking Value Stocks for investment opportunities in companies that possess consumer monopolies and a demonstrated history of strong financials.  Each company’s leadership must be passionate about the enterprise, care about its employees, provide value to it’s customers and keep the best interest of shareholders in mind.  Serious recommendations only, new risky start ups need not apply.

Wanted: Good Real Estate Cheap!

Seeking Good Real Estate Cheap.  Must be move in ready in good school districts.  Must be worthy of high quality tenants who want to fork over loads of cash in exchange for a roof over their head.  Commercial real estate offerings will be considered on a case by case basis, but must come with tenants already in place.

I’m relieved that my growth rate doesn’t force me to own a business right now to continue making scheduled progress toward my number.   As much as I want to start my own business, I suffer from two hold backs.  The first is I am not in a position to devote the time necessary to pursue any business plans because of my military commitment.  The second is that like Ryan, I’m struggling with settling on “The Big Idea.”

It’s not that I don’t want to lead my own company…quite the contrary.  I really do.  My life’s purpose is to “Lead and Develop Leaders.”  Owning, running, and leading my own business would pack a double punch.  Progress toward the number and an early fulfillment of my life’s purpose.

I’m fortunate that  in the military, I have a job that requires me to Lead and Develop Leaders…and I’m getting paid to do it at the same time.

To this point in our experiment we’ve been saying that we need to achieve our number so that we can retire and start living our life’s purpose.

I’m finding myself in a unique situation where I’m nowhere near my number, yet I’m fulfilling and living my life’s purpose already.

Does anyone see a problem with this?  I do.

The Exciting Adventure Ahead

Now is the time to get the engines going and steer in the right direction toward our Number by our Date.  Taking a look back at my notes and goals reveals that we’ll need a bit over 4 million by 2018 to live our life’s purpose and according to our required annual compound growth rate, we’ll need to average right at around 38% moving forward. I firmly believe in all of my heart that this is doable for us over the next 9 years. Here we are almost 1 year into this grand experiment and we’ve already far exceeded that compound growth rate for the first year(I believe last year when we first estimated this, it was closer to 40% required, so we are moving along nicely).  We had a 67% growth rate for the previous year. I would really LOVE to reach this number well before 2018. If we can shave a few years off, by all means, i’ll do what’s necessary!

According to the table by Micheal Masterson, http://7m7y.com/2008/11/13/draft-how-high-is-your-mountain/, we’ll need a combination of real estate and stocks together with small businesses as our vehicle to get that compound growth rate.

After thorough discussion on this forum and throughout this experiment, it appears that the best order of those modalities would be for me to start up additional businesses(in my case, clinics) and use the cash flow from these small businesses to purchase real estate(possibly starting with the commercial properties that these practices reside in) and stocks.

I believe that now is a better time than ever to make this all happen since not only do I have terrific experience in running a successful practice, but also in training associate doctors to actually run a new practice startup to possibly duplicate my own results.  Health care always does well in the midst of a recession(lots of stress as well as odd jobs being performed for people to keep paying the bills, this adds up to health problems and injuries). So getting a new practice up and going to successful numbers is in good favor, purchasing real estate is terrific right now due to the bursting bubble, low prices and dirt cheap financing(Phil Town also suggests that commercial real estate will continue to drop in prices as business failures flatten out) so that’s a check, then hopefully the cash flow will be occuring in perfect timing as we crawl out of a recession and all those wonderful, undervalued companies(and their dirt cheap stocks) begin to move back up in stock prices.

Anyway, this is my prediction or delusion! lol. Now my only delima in this whole situation is this; I’m currently under contract for the next 30 months to run this clinic I currently practice in. The deal is, 50% ownership of this practice was given to me by my previous employer(who has owned and operated multiple clinics for many years) and this 50% ownership was to span 3 1/2 years, at which time the other 50% would be given to me(for all my previous service). In essence, I worked for him as an associate for 4 years, made a good base salary, plus good bonuses(which my wife and I used along our Money Making 101 journey) then I made the move to the new clinic that was just getting going on it’s numbers and the deal began. The 3 1/2 year working span at 50% ownership at this new office was pretty much my payment for the other 50%. Well, it’s been a year that i’ve been there, so 30 months are left and I don’t want to do anything to jeopardize this deal, I want complete ownership of this clinic in 30 months, but at the same time, I feel that my hands are tied during this time period and it’s nearly impossible for me to open another clinic until i’m free of this deal.

If I owned this clinic completely at the moment, this would all be simple; I hire an associate dr fresh out of school, take them in as my padawan for around 6 months and train them pretty intensly on how to run this practice as I have and how to duplicate my results(as well as have a nice period where we are both working in this clinic, so that existing patients get comfortable with this doctor), then step away from this clinic, let this doc run the show for a fair salary and attractive performance-based bonus system, plus full benefits and I go and start up practice #2 and repeat! (Actually, the moment I have practice number 2 up and cash flowing positive and ready to hand over to trained associate #2, I could techically step away and begin to live my life’s purpose because we will have superceeded our “monthly number” in passive income, ala what such authors as Robert Kiyosaki, T. Harv Eker and Timothy Ferris teach =  Get to your monthly number in passive income and then you are ‘out of the rat race’ or you have ‘won the money game’ or you are on a ’4-hour work week’.)

The interesting thing about this idea would be that I could still keep a “foot in the door” sort of speak to still practice a bit(I do love helping patients, I just don’t like the daily grind and the ‘have to go to work’ situation or the daily dealings with insurance, so being available for occasional associate dr requested days off or 1-2 time per year vacation weeks for them or a bit of part time coaching would actually be kind of nice and fun to get to do). This idea would actually set us free MUCH faster and my passive income from these 2 offices would FAR exceed the income that getting to our NUMBER would provide. (If these 2 doctors generated only 75% of what I currently generate on average in practice and if I paid them a generous 6 figure income that was even more than I made as an associate plus full benefits for them and their families, my personal passive income total from these 2 offices added up would still be in the 20-25k per month range while my NUMBER would provide a little over 16k per month in income). Needless to say, my wife and I would still live on the 16k per month via our life’s purpose and would invest the extra money to grow our portfolio at the same time.

I guess i’ve sort of parlayed an interesting set of questions and possibilities for me in this post and where I am right now. Any suggestions?

Anyhow, my businesses might look like this in an ad:

Wanted: A very successfully run healthcare practice, specializing in spinal rehabilitation, exercise, massage therapy as well as other holistic services such as nutritional advice and expertise. Professionally run to the highest of clinical standards with a well-trained, goal-oriented staff, necessary equipment and supplies. Low monthly overhead, time-proven practice and business design system already in place, extremely high cash-flow and yearly profit margins, ongoing community marketing programs in place, all in a state and local community that harbors terrific heath insurance coverage for these services.  Totally turn-key, fully developed business design, everything from new employee training techniques, to patient marketing, to patient scheduling, to treatment programs and proven care systems are all in place and can be duplicated, expanded upon and repeated in additional clinic ventures and startups time and again. The commercial property that the clinic resides in may be purchased at reasonably assessed property value and additional rents may be collected by adjoining business that resides in the same building, once building is purchased.

Financial Tune Up

After Jeff’s ‘quick and dirty‘ post became an intriguing set of discussions around his business / investing aspirations, I hope that you are finding these exercises worthwhile following along with?

Even better, if you find an issue raised – or financial situation disclosed – that has some parallel with your life, you should feel free to weigh in with a comment, opinion and/or question … the more the merrier!

Josh is also master of brevity, but it appears that he has made a major – and, uncomfortable – change to his ‘retirement savings’ strategy: basically eliminating it entirely, in favor of a more direct / hands-on investing/saving strategy. Is he wise to forgo the tax advantages and potential employer match?

______________________

The latest improvements made to increase my net worth faster (while maintaining the ability to access the capital before I’m 59) is to drop the 401(k) bi-weekly contribution to 0% while adding the after tax cash to my bi-weekly saving and investing/trading. It has been difficult to accept this route because I know I will be forfeiting the free employer contribution, but it’s clearly best since I plan to withdraw the funds within 7 years.  I will continue to actively trade the SDRA account, from the research I’ve done, it seems once I leave my current job, I can withdraw the vested funds with 40% going to taxes and  penalties…at least I get the bigger piece of the pie.

The current exercise of recording all monetary expenditures for the month of April has been enlightening. I clearly need to spend less money and will continue to work toward minimizing unnecessary purchases.

It is also clear I need to increase my income as soon as possible. Over the next 3 years (approximately) I’ll be studying and taking tests’ to earn membership within the CFA Institute. I hope within the next year to land a position in finance, leading to an analytical position and finally portfolio management. Or maybe I’ll just open my own private equity group, we’ll see what happens.

The Right Vehicle

The vehicle selected for my journey to 9 million in seven years is to start and manage a business, this selection is appropriate for the compounded annual growth rate necessary to achieve 9 million in seven years. The business I plan to start is essantialy a money managing business also know as a hedge fund (In the past several decades the title “hedge fund”  has become more of a blanket title then an acurate description of how money is managed in most “hedge funds”, because usually very little “hedging” is actually happening).

The fund I plan to manage will initially use purely long/short equites for investing purposes, using an aggressive yet risk adverse strategy to atract institutional investor’s as well as high net worth individuals. Most of the revenue from the fund is generated from from  fee’s taken from the investors capital appreciation, this is generally 20%-25% and usually 1%-2% of the principal for administrative costs.  The fee structure of hedge funds is the main attraction for me to this business model because when comparing to mutual fund’s, the fees guarantee that profits to the firm will only be paid when capital appreciation takes place, thus aligning the managers and investors incentives perfectly.

Judging from the fee structure, anyone can see that the more money under management, the greater the profit potential is, although it is arguably harder to make 50% per year with 1 billion dollars then 1 million dollars, so the competition to earn the greatest return for investors becomes more difficult as more and more money pores into the fund.

The path to the initial starting capital for the fund will come almost entirely from the what I saved up and continue to earn and make from investments. As certain milestone amounts have been reached it will become feasable to start the fund. There is no dought in my mind that managing a hedge fund has the potential to increase my net worth past my number of 9 million.

mmm

6 Years, 11 Months To Go

Josh: I’ve always wanted to know a hedge fund manager! Hang on, I already do   Given the current market, it’s probably a good idea that Josh is preparing to ‘soak’ a few years up in preparing to start his own hedge fund: getting an MBA and the like … of course the acceleration curve will then need to be HUGE unless the internet businesses have kicked in some serious bucks, as well …

__________________________

My current financial situation is not too bad. I’m not in any debt, I make a comfortable wage, one that should be increasing soon due to a promotion, and my expenses are relatively low. I recognize the unique situation I’m in and plan to take advantage through the following ways.

I’m currently pouring all excess money into my online business. It’s costing more then it should right now because I’m basically learning what avenues are effective by trial and error. I believe these costs will eventually be recouped as more and more orders come in, which is what happened after I tweaked the advertising campaign. I’m committed to seeing this business through till it becomes profitable; I think a realistic time frame for profitability is six months.

The only possible way I can accomplish the goals for my business at the rate I’m currently working at, is because I still live with my family. This luxury allows me to save on lodging every month, which is money I put towards my business and other investments. After disclosing this information in a previous post, there was some concern about how much I was inconveniencing them. I can assure everyone, the only reason it works is because it’s convenient for all parties. It’s actually so convenient that I’m considering…

Graduate school is also an option at this point. NYU offers an MBA program which I could complete in about three years time and attend as I work at my current job. I would pay for the program through my salary, in the hopes that the on-line business would supplement the huge gaping hole in my income that $1,400 a credit would create. Although this seems to be working backwards, it would set me up, in an idealistic way, to eventually open my own hedge fund.

Check out my NetworthIQ profile.

Photo credit: Duckscrossing

You can’t get there from here …

No, Lee, Ryan didn’t go AWOL … just slipped into the ‘think tank’ for a little longer than expected

Ryan explains what this means in his opening, but with this photo, I was as keen as you to find out! He knows that he has a big task ahead of him, and I will say that developing/selling some intellectual property (be it via a unique business model, invention, process, or whatever) WILL be his path to success, because it’s the only one likely to give him the ‘home run’ he needs, given that Ryan’s annual compound growth rate is well into ‘boom or bust’ territory …

_______________________________

“You can’t get there from here.” This New England saying never made sense to me until I came up with my number! Can one get from 100K net worth to 16 million in under 9 years?!?! There is certainly no road map to go from, but there is no doubt it can be done.

Short of winning the lottery or getting a huge inheritance from some long lost uncle, it’s going to take a lot of planning, hard work, and a little luck. Fortunately for me (and the others following the 7m7y experiment), luck favors the prepared mind. Without getting too philosophical, basically what I’m saying is that if you want a million bucks (or a billion for that matter), it’s not likely it will fall on your lap without any effort from you. However, if you’ve set goals, come up with your number, researched, planned, put the hours in, and made it a priority, is it still luck when your an “overnight success”?

That is why the 7 MITs are putting up these posts showing how we think our journey might look to get to the destinations that we’ve dedicated the last few months defining. We all now know where we are right now. Those who have completed THE TASKS on 7m7y.com now know where they need to get to. And now we just have the MINOR chore of filling in the in between stuff.

My “in between stuff” will HAVE TO include starting my own business because my compound growth rate is 85% (see Scott’s post for a great explanation of this). Starting a saleable business is something I’ve always wanted to do anyway. Actually, I already own my own company, but as a medical device distributor it is unlikely that I would be able to sell it for the type of return I need to reach my goal of 16 million, so I don’t really consider it saleable.

I also want to develop some Intellectual Property. I’m in the operating room every day, so I constantly try to be aware of inefficiencies, improvements and things that are lacking. My business may start from some IP that I develop or I may just sell it after it’s patented.

Lastly, I believe my road map will also include, to a smaller degree, stocks and real estate.

So, I’ve chosen my vehicles, packed my bags, and I’m ready for this trip to start. Did anybody bring the GPS navigation?

Scott’s “Lee’s List”

In my haste to publish, I did Scott a disservice by not writing this intro! Scott seems to have a very altruistic ‘purpose’ (mine is far more self-indulgent, at least on the surface, although I hope that all of my ‘traveling’ produces some benefit to others along the way), one that I did not fully understand until he wrote his “Lee’s List” …

My Life’s Purpose: To have the financial, spiritual, emotional and physical freedom to use my knowledge, skills, talents and wisdom to help others.

In order to make this happen, I believe I will need the following:

1. Replace AT A MINIMUM, the monthly net income required to support my family’s current lifestyle to free both of us from the rat race of ‘work’ and allow us to live our life’s purpose  (replacing active income with passive) – $4k per month net or $48k/year.

2. To Run a clinic to help people with little or no ability to pay and/or poor insurance coverage – A bare minimum monthly overhead to run a clinic where only the required staff(2-3 assistants) are earning pay, but I am not due to lack of collections would be approximately $15k/month, which totals $180k/year.

3. Traveling abroad to help patients – AT A MINIMUM, 2 trips per year with my wife for ‘mission’ type patient care in countries where health care is virtually non-existent or very poor. This would be at a minimum, 1-2 week long international trips, business class, but not always at the finest hotels due to possible destinations @  $8k per trip = $16k/year.

3. Having the time and money to travel with family on 2 personal vacations per year – Business class, 3-4 star hotels, minimum 1 week vacations = $10k per trip = $20k/year.

4. The payoff of my student loan is currently $140k and the payoff on my primary home mortgage is currently $323k, which together totals $463k. These payoffs would be added to our ‘NUMBER’ to make us debt free. This does not include the payoff of our rental property, but we are allowing the payoff of the primary mortgage and student loan to be our only ‘increase in lifestyle’ for now. We will let renters continue to pay down the mortgage on our rental and continue to refinance this every few years, while raising rents according to market conditions which will also effectively add passive income to allow us to increase lifestyle slowly overtime.

Scott’s Life Purpose

Scott has been with us since before Day 1 (I think that I mentioned that we ‘met’ via a question that he sent me on NetWorth IQ?); I think you will enjoy reading this post as much as I did. However, Scott, same question as for Ryan: what do you think it will take to live this kind of life (in time, and money terms) … in a general sort of way – we’ll get to the specifics soon enough?

Honestly, I’ve been working on discovering my life’s purpose for quite some time now. Being a student of many successful speakers, authors and success coaches for a few years now, the importance of finding one’s life purpose has been stressed to me in past teachings. But as Adrian has pointed out, this is no quick or easy task! Narrowing down your purpose for existence is very difficult to do in a sentence or a few written words. However, I have been able to ask myself a few very important questions that have revealed a thing or two about me. The first question has to be: What are the things that I value most in my life now? And to that I would have to say that my family, my health and any personal freedom I do have away from the “busi-ness” of work to focus on family and health. The second question that has helped lead me to my purpose is: If I no longer had to work, what would I be doing with my time? And to that, of course having more time with my family, having more time to exercise, get the proper amount of rest and other necessary healthful activities, make the best food choices for myself and my family and after these things, I would have to say that I would look for ways to spend my time helping others using any knowledge I’ve acquired along the way in any way I can.

Also helping me discover my life’s purpose was a serious of “Don’t Wants.”  One of which has been overwhelmingly to not be at the mercy of an employer or his/her employees. Setting my own stage, running my own businesses and having the freedom to make choices regarding my work are extremely high on my values list. Also, I feel that working IN my business should be a choice, not an absolute necessity. And at least a third “Don’t Want” for me would be to not want to have the feeling of coming home stressed out, beat down and exhausted from my work. My career is not only mentally demanding and stressful at times(like most careers are), but it is also physically demanding and exhausting when I’m working at the level I need to in order to earn the level of income that I desire. I really want to be able to enjoy my work and not allow it to take its toll on the energy levels that I have for my family as well as not taking a toll on my health.

When dreaming about the future, with the help of 7million7years.com and 7m7y.com and visualizing accomplishing my life goals, I can imagine sitting on the back porch at the ripe old age of 90, still very sharp-witted, very active and healthy, able to play with grand kids and great grand kids and being able to explain my life’s vision and purpose to them with total clarity. I can imagine telling them “You know kids, the most important thing in life that you can do is to first discover yourself and what your life’s purpose is! You gotta spend more time than anything figuring out everything you really want in life and how you would prefer to spend your time kids! I discovered for myself along the way that FREEDOM was extremely important to me. And I’m not talking about just personal freedom or physical freedom; I’m talking emotional freedom, spiritual freedom and financial freedom. Once we built up enough wealth to cover my and grandma’s dream lifestyle, we no longer had to be confined to work hours, working for someone else, making them rich! We were able to have the freedom to travel the world, to sleep in as many days in a row as we wanted, to experience life to the fullest and to exercise any time we wanted and take care of our bodies, so we could be with you here today as we are, alive and healthy. But most importantly kids, when you have that kind of freedom, you have more time, energy, strength and resources to HELP OTHERS! Yes children, that’s what life’s all about, to enjoy it to the fullest and help others along the way learn how to master THEIR life and experience and enjoy it to the fullest!”

So I guess by now, you have probably picked out one key word that certainly makes up my life’s purpose…and the word is FREEDOM. And to complete my life’s purpose in one full sentence, it reads:

“To have the financial, spiritual, emotional and physical freedom to use my knowledge, skills, talents and wisdom to help others.”

So ask yourself, what would your back porch speech to your grandkids be like someday?

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