A High School Graduates Guide To Financial Independence
Part 2
First off, I’m not making any of this up. There are tens of thousands of people who have done this. Even the ones with blue collar jobs and kids. Even the ones who start later in life. It’s doable. The methods are simple. The journey is NOT, but the result is more than worth it.
First we talked about cutting expenses, which free up capital to get out of debt and more importantly to start building capital for investments.
Next we talked about was getting out of debt - the kind like credit cards, car loans, and yes even home loans if you can swing it.
Once you have surplus capital it’s time to invest. The safest and best investments are Index Funds, where you just invest and leave it. Your eventual goal is to have enough invested to be able to draw 4% of that investment every year and it covers your living expenses.
But as a high school graduate who isn’t sure about the stock market I decided the best stock to own, was the stock in my own company that I control. In other words my own brewery. You are interested in this because if you have been reading my posts you want to own your own brewery too. This works really well for becoming financially independent.
I believe you should open a brewery without spending money you don’t need to. So in other words…
Starting off with an existing restaurant that already has the infrastructure you need for your brewery, even if you don’t sell food. This will cut your costs almost in half.
Frankenbrew your brewing system. Don’t start off with a turn key system. I love them for sure, but why spend 150k to 250k for a system that you could put together for 60k and make beer just as good??
Utilize a great business system that operates your business on a professional level rather than a Mom & Pop business. This, along with your great beer, will create the profits that are necessary for you to make your stock grow. Let me explain.
The goal is to make your brewery worth one million. To do that you need to net about 16k per month, or 200k per year. That 200k is made up of net profit, plus your salary, plus depreciation, amortization, interest expense and any other expenses that have to do with you rather than your brewery. Things like life insurance, cell phones, etc. If you have a well run brewery, this is very attainable.
You want to bring along your assistant manager, training them how to operate your business so they could eventually take over. You could easily hit these goals after five years, then you sell the brewery to your assistant manager and carry the note. Until you are paid off, in about 7 years, you still have access to the books, and making sure it is run properly. You will make your one million with interest, and they will have a chance to own their own business with a very simple entry point.
When we opened the first IL Vicino in Albuquerque in 1992, I could have easily done this at least 4 times. Every time a note was paid off the current owner could sell it off to the next manager in line. It’s a win-win all around. I know this because I looked at the profit and loss statement at the 30th anniversary of that one place. I also know this system works because I have done it. It’s not a Ponzi scheme. You are only selling your brewery for what it is worth and you have the profit and loss records to prove it. The new owner can pay you out of cash flow because you have a real valuation on your business and have proven that it is really throwing off at least 200k per year.
Now you don’t have to sell right away, you could continue to open more breweries and then spin them off, making much more than a million each. Or, you could quit work early by owning the real estate and renting back to the business. I’ve done this too, and that makes even a better income stream than the 4% you pull from Index funds.
The point is, the only obstacle to gain financial freedom are the limitations of your willingness to make the sacrifices necessary. Before I get flooded with angry messages that start with “What about…” I will include a reading list at the bottom of this. If you are serious about changing your future, I suggest you read them.
You are in a great position because you want to own a business you are passionate about. That is a key to success. This is just about the end game for when you decide you are ready for a change, or just want to go sailing.
Tomorrow is 2024, and an excellent time to walk with determination towards a future that you control. Happy New Year.
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Good question and it fits into what I have been thinking about with pint prices. The quick answer is costs per pint are so low it really doesn't matter as far as I've seen. Beer is one of the most profitable things you can sell and the price of grain isn't that big of a factor. I will write about this next week. Good question.
Hey Tom, can you comment price of ingredient trends over time and how this has made any shifts in your tried and true approach? Were you able to reach tolerable pint prices to counter cost rise in hops and mash bills?