Out of all of the cities in the world, I live in Seattle. You’re probably wondering why I decided to move up here from Orange County, right? Well as you probably already guessed I didn’t move up here for the weather. Instead, I moved because of the strong community of entrepreneurs and more importantly the knowledge that they were passing over to me.
Here are 7 things I learned from living in Seattle:
1. How to acquire companies
Acquiring companies may seem fun and sexy, but boy it isn’t. I led the acquisition of a business around a year ago and I quickly learned that it is a ton of work. Even if you hire a good law firm to do handle an acquisition, there is a ton of things that you have to do.
With my first acquisition I had a ton of help, but it took roughly 5 months. We had to do things like:
- Analyze bank account statements – if you want to find out how much money a business is really making you can’t just look at a tax filing. You have to look at each line item in a company’s bank account statements.
- Deal with lawyers – although lawyers are smart, they don’t know everything. You can’t just tell a lawyer that you want to acquire a business and call it a day. There are a lot of small details that go into acquisitions such as the terms of the buyout, checking if a company is in good standing, and protecting yourself from potential lawsuits.
- Deal with the other party’s lawyers – in most cases you would hope that the other party has bad lawyers, right? Well when you are acquiring a business, you want the other party to have smart lawyers as it makes things a lot easier. If they don’t, you’ll end up spending a lot of time dealing with the other party’s lawyers.
- Finding business partners– with my first acquisition I needed help, so not only did I have to ask people for advice, but I also had to convince them to put in some money as well.
2. Working with good law firms doesn’t have to be expensive
I used to never work with big named law firms because their hourly rates were so high. When I moved to Seattle successful entrepreneurs didn’t just introduce me to good lawyers, but they taught me how to work with them.
- Work with partners – partners at a law firm can control what they bill you for and what they don’t. If you have a good relationship with a few partners, not only will you get top notch service, but you won’t get nickel and dimed for every little thing.
- Equity goes a long way – if you give a law firm a very small amount of equity in your company you can get them to do creative things like not requiring you to pay your legal fees until your company hits a certain level of profitability, raises a round of financing or you sell your business.
- Rates can be capped – you can bargain with a lawyer and request a capped rate on everything they do for you. Such as you can negotiate a deal where they won’t charge you more than $5000 or $10,000 for a round of financing.
- You control billable hours – when you email a lawyer and ask them to do something for you, at the bottom of the email you can tell them to not spend more than 15 minutes on it. This way you won’t be billed hundreds of dollars for something that should be easy for your lawyer to do.
3. Non-qualified executive compensation plans
Who doesn’t hate paying taxes? But paying taxes doesn’t have to be that bad if you have really good tax attorneys and accountants.
You are probably already familiar with a 401k in which you can shelter money until you are ready to retire. But the problem with 401ks is that there is a $49,000 limit. The cool thing about non-qualified executive compensation plans (NQECP) is that they are like a 401k but better.
- No limits – you can put as much money into a NQECP unlike a 401k.
- Flexible investments – you can use the funds in a NQECP for almost any type of investment. You can invest in real estate, hedge funds, stocks, and even startups.
- Short time periods – you don’t have to wait till you are 60 to start pulling out money from a NQECP. You can setup rules in which you can pull out your money within a short period of time, such as 5 years.
In the end, you will pay taxes on the money in your NQECP, just like you would with your 401k plan. But you can make money on the government’s money through a NQECP because it’s deferred income.
4. It’s hard to make a high return on large sums of money
If you have large sums of money sitting in your bank account, you’ll learn that it’s hard to continually find good investment opportunities. And the last thing you want to do is keep money sitting in your bank account because it isn’t working for you.
Through other entrepreneurs in the Seattle area I have been introduced to the world of finance. You can put your money into stocks and hedge funds, but if you don’t know what you’re doing like me, you can easily lose it. But because I have been lucky enough to build relationships with successful entrepreneurs, they have been able to introduce me to finance guys that on average have been providing 10 to 30 percent yearly returns. And although that may not sound like it’s a lot, if you have a decent amount of cash invested, you can live comfortably just on your yearly returns.
5. There’s more to investing than making money
When you think about investing, what’s the first thing that comes to your mind? The chances are, it’s money. Well making money isn’t the only reason you should invest in business opportunities or people.
- Learning experience – you go to college, conferences, and even networking events to learn. Whether the companies you invest in succeed or fail, you’ll learn a lot. And hopefully that knowledge will come in handy in the future.
- Come along for the ride – when I was trying to acquire a company last year I reached out to a few friends for some money. A lot of them asked me what the money was for and if they liked the opportunity they wrote me a check. But there was one person who just wrote me a check and after he gave it to me he asked me what the money was for. At first I was confused, but later he explained that he was just along for the ride because he trusted me and saw that a lot of his friends were in on the deal.
- It’s fun – investments don’t have to be boring. Not only can you make money, but you can also have fun at the same time. For example if you invest in a club you don’t have to deal with the hard stuff such as the day-to-day operations, yet you get to participate in partying.
6. Most networking events are a waste of time
There’s a new trend that has been going around for the past few years. Networking events are starting to be dominated with “social media experts”. And I could be wrong, but after meeting a handful of these so-called experts, I noticed that many of them didn’t have much money.
So naturally I came to the conclusion that saying you’re a social media expert is just another way of saying you’re broke.
Seattle has a ton of events dominated by these social media experts and many of them are so bad that I just stopped going. Now granted, if I went to them and participated it may have a positive effect on my personal brand… but it won’t help me grow my business.
Fame is overrated and although you may want it, it doesn’t always make your pockets fatter. So if you are going to go to networking events, make sure there is a talented group of people there that are trying to do something productive with their lives. Or at least go to events that have discussions on topics that you want to learn about.
7. Location is everything
If you want to grow as an individual or grow your business, you have to be in the center of where everything is going on. Being an hour or even 30 minutes away isn’t good enough; you have to be in the center.
By being in the center of everything you get included in a lot more things. For example if I never lived in Seattle I wouldn’t be in as many angel investments. Or if I didn’t live right below my mentor (literally), I wouldn’t learn as much as I could from him.
By being in the center your cost of living and running your business will increase, but the revenue growth it can provide will make it worth your while. There are certain times where it is good to be frugal, but this isn’t one of them.
By no means was this post written to convince you to move to Seattle. No matter where you live, you can still grow and advance in life, but it doesn’t hurt if you are around a good group of people.
You have to find the right town for you and your business. For me it wasn’t San Francisco or New York, but it was Seattle. There’s a city out there that is a perfect fit for you… you just have to find it.