Reaching Escape Velocity

most people haven’t heard of the term “escape velocity” let alone know what it actually is

I didn’t know either until 2 years ago

escape velocity is the amount of money you need invested post tax to cover your lifestyle

so once you know how much money you need to live off of, you can calculate your escape velocity #

say you need $200,000 a year to live off of, at a conservative 6% annual return, you’d need roughly $3.5M invested post tax

now I know that’s a lot of money, then we need to think about the different routes to get there

1. W2 high income job (lawyer, doctor, high up finance) will still take a while, probably won’t be “rich” till late 30’s to 40’s

2. High cash flow business (think agency, ecom, etc)

3. Liquidation event AKA exiting a company for a large multiplier

every single option has pros and cons, I’m not telling you there is a right answer

W2 can offer great stability, predictability, and some people need that

Agencies are great for cash flow, but can be a pain to run at scale and be just like a job

I personally believe that selling companies is the fastest route to escape velocity, that is my opinion.

SaaS or software as a service companies get the highest exit multipliers, 5-10x multiplier on annual profit

meaning to get to that $3.5M I need to do about $1M/yr with my SaaS for a conservative $5M exit then taxes etc etc I’ll be close to my number

is that easy? not at all, not even close, but I believe it’s more likely for me to hit my # before I would with an agency or W2 job

I have a buddy that took his SaaS from 0 to 5M per year in just one year…

now again, extreme outlier but the amount of wealth he built in a year is astounding

so I encourage you to explore all options, familiarize yourself with it all

Play around with GTP4 and platforms like softr this week

look for problems and use these tools to solve them

you may just end up owning a business

as always, if you enjoy my newsletter please tell your friends about it and have the opportunity to win free consulting calls with me

God Bless,

alex