Part of my ‘job’ which requires Internet access (and part of the reason we’ve stayed so long in San Juan, as I wrote yesterday), is managing the finances of the very small sailing career we’ve created under the guise of 59º North, Ltd. Since our night-ops mission to depart San Juan got turned back, I spent some time today back at the Hilton hotel lobby going over our accounting.
Most people flat refuse to speak about money, even (nay, especially) among friends. I am not one of them. I only wish that this sort of information had been available to me as we set up the new business. Alas.
Straight cash homey. –Randy Moss
It’s been a while since I touched on this in a few podcast essay episodes, so it’s time to delve back into the business side of the lifestyle Mia and I are trying to create. For the past eight years we’ve earned our living in all sorts of ways – delivering other people’s boats (lots of money, relatively, in a short amount of time, but inconsistent over the course of the year); working for World Cruising Club on event or as their USA reps & event managers (the ‘base’ income and the most steady of it all); writing articles for various sailing magazines (very minor); working at daycare in Sweden (Mia); and a meager amount in podcast sponsorship, which basically allows that side of the ‘business’ to break even.
And of course podcast ‘donations’, for lack of a better word. I’ve considered creating a ‘membership’ system for the podcast to try and raise some revenue – some kind of bonus scheme for ‘members’ while the podcast episodes remained free to all. I decided against it, as I don’t think the small extra income will make up for the large amount of extra work.
Since I first put the ‘donate’ button on the podcast page in September last year, we’ve raised a fair amount - $1,587.00 from 96 payments to be exact. That’s over the course of 15 months, so we’re not breaking any records, but it helps. Of that – and this is an ongoing issue with all the ‘online’ stuff I’ve been trying to setup – we’ve had to pay ‘Moonclerk.com’, our donation payment service, $9 per month, totaling $135, so it’s not 100% going to us.
While we’re at it, I’ll take the opportunity to humbly ask any of you who have thought of donating or subscribing to pony up – you can offer a one-time donation with the ‘Donate’ button, or even better, a recurring subscription with the ‘Subscribe’ button. It all goes directly towards making these episodes better and better. After 130-something episodes and counting, I have no plans on stopping.
All of these various revenue streams combined to create what I’ve dubbed as sort of a ‘half’ career. Mia and I could be classic DINKS – ‘Double-Income, No Kids’ – we’re well educated and experienced and could easily make higher incomes working ‘normal’ jobs. In fact, Mia had initially gone to university in Sweden to study chemistry and pharmacy. She’s far smarter than I am, and would undoubtedly have been the big earner in the family had we gone that route. But we choose not to, for obvious reasons.
Before we get into it, I need to be clear on one thing – we could never have accomplished any of this without the help of friends and family and supportive folks in the sailing industry, most of all my dad. While not given any direct financial assistance, we’ve been helped along by borrowing cars, volunteer labor, co-signers on loans, in-kind sponsorship deals for sailing equipment, business-plan advice from some of our direct competitors (thanks John & Amanda Neal & John Kretschmer!), marina dockage, places to sleep during the dusty refit, etc. etc. If you’re reading or listening to this and you helped us in any way, THANKS! You all know who you are…
So why even talk about this? I think it’s interesting reading about other startup businesses. Maybe it’s egotistical, but my hope is that other people will find this interesting too. Plus, I want to both inform others about how we went about this, and importantly, inspire people to follow their dreams and provide a practical blueprint for doing so.
The single most important thing about the early success of our business/lifestyle model has nothing to do with finances but is more about opportunity. We could never have accomplished all we have in such a short time with only the money I discuss below – we would have fallen far short of being able to afford all of this on money alone. It’s the paragraph above – the people that helped out along the way, whether through in-kind sponsorship, volunteer labor, etc etc – that truly made this happen.
But it’s not just luck – a lot of the opportunities we put together happened by a series of serendipitous circumstances that we were conscious enough to notice and brave enough to act on. And that’s the key.
I believe, like it talks about in the book The Alchemist, that once you set your mind on achieving a goal, whatever that may be, that the universe conspires to help you towards that goal. But it doesn’t happen automatically – it’s the recognition of opportunities and the ability to be flexible enough to pounce on them that truly makes the difference. Set a dream, make a plan, and take advantage of every good thing that happens along the way to make that dream possible.
A further note before we get into details. I was proud when I got an email from longtime listener Bela. Bela said how impressive it was that we’ve managed to create all of this stuff out of thin air. Quote, “You are a real entrepreneur. Not the kind that goes out and raises $500K from investors and then spends it, but the kind that makes something from nothing. Your progression from sailing around the bay with your folks, to rigger, running rallies, starting an ocean sailing program, and keeping your podcasts going, is a set of solid accomplishments that YOU made happen. I am sure your dad and mom, who's smiling as she watches you from above, are very proud.”
I’d never thought of it that way before, but I guess Bela is right. We did create something out of nothing, are in the process of creating it. It never occurred to me to ask other people for capital (aside from your helpful donations!). I’m really proud of that.
Anyway, to recap the past couple years financially, here’s how we did it, and some of the details of how it all works:
· September 2013: I started the 59º North podcast from Mia’s parent’s house in Sweden. After producing 30 episodes of ‘Two Inspired Guys’ with my best friend Ryan, I knew just enough about podcasting to start a show on my own, in my area of expertise. Episode #1 was Allan Palmer, the captain of a tall ship I’d met while we cruised Arcturus in Aland, and I learned quickly how thrilling it is to speak to people ‘in their own habitat’ so to speak, talking to Allan from the captain’s cabin of the Tre Kronor brig docked in Stockholm. I never imagined it would get this popular. It was, and still is, just a hobby. But by creating this wider audience, it’s allowed a lot of what follows thanks to the support of my listeners. We’ve grown to almost 3,000 listeners per episode on average. All-time, as of December 14, 2015, 59º North has been downloaded 378,960 times through 133 episodes and counting. The most popular episode? ‘Offshore Yacht Rigging with Mike Meer,’ at 6,740 downloads.
· December, 2013: Mia and I bought our first house in Lancaster, PA. Because we’d been self-employed and led a very non-traditional lifestyle, we had trouble securing a loan. Our credit is excellent – over 800 – but we don’t show much income, and what we do, comes at very irregular intervals (this would hinder us purchasing Isbjorn later on). Anyway, with my dad’s help in the form of his credit (he was co-signer, but put up no cash), we got the loan. It was an FHA loan, so we only needed 2.5% down. The purchase price was ~$95,000.00. We had little other savings.
· Over the course of the next year, through getting more work – and importantly, living very simply – we managed to save a lot. To the tune of over $30,000.00, which I invested in a Vanguard index fund through Betterment.com. This sounds like a lot of money, and it is – but the only reason we were able to do this was by living a simple lifestyle. Mia was brought up this way back in Sweden and had a big influence on me. I was also introduced to a fantastic blog called ‘Mr. Money Mustache’ by my friend Rory Finneren, which has only further inspired us to live simply. And living in Lancaster was a specific decision to that end – real estate was inexpensive, as was the cost of living. We could survive day-to-day without a car, fresh food was available from the Amish markets and by living in the compact downtown area, we walked everywhere.
· I like to say that from 2013 to the present is when our sailing career truly ‘blossomed’ – for the first time we’re having to turn down work, and it finally feels like the hard-work we’ve put in over the last 8 years is paying off, literally.
· December, 2014: At Christmas-time, I had some downtime and did a Yachtworld.com search for ‘Swan’ between 45-50’, for under $150k. The inklings of a business plan were hatched, and over the coming weeks, I refined that plan in a Google Sheets spreadsheet.
· February, 2015: Independent of the boat search and the business idea, we decided we’d put the Lancaster house up for sale in the spring. The goal of moving to Sweden was going to happen sooner than planned, so time to move!
· February, 2015: Merrill, the owner of a Shannon 43 ketch called Serenity, who had sailed twice in the Caribbean 1500 since I started running it, offers us use of his boat, for free, to test the concept of the business. Merrill is an entrepreneur himself and an eccentric hobbyist – he makes his own furniture, brews his own beer and produces his own wine. “I like to help people,” Merrill said. “This is the least that I can do. And it saves me on dockage!” The test passed – all 8 of the berths sold on two trips from the BVI-Grenada and back, and the profits went directly into the Isbjorn fund. In fact, before that Serenity trip ever left the dock, we had a contract to buy Isbjorn.
· February, 2015: I returned home from the BVI after the successful Serenity trip and we closed on Isbjorn! All $32,000.00 of the money we had saved went into the down payment ($26k) and taxes ($6k) on the $130,000.00 purchase price of the boat, and we still had to use my grandfather’s credit to secure the loan (for the same reasons as when we bought the house). I have to stress again how proud we are to have saved this much money in such a short time – over 50% of our income, again, due to simple living.
· Terms of the loan were $104k financed for 20 years at 4.5%, making for a monthly payment of about $650. We could afford this, we thought, even if the business fell through and we had to get ‘jobs.’ This, of course, was a huge risk – that $32k was supposed to go towards the house we’d buy in Sweden when the time came. But I also had the realization that I’d need to work when we moved to Sweden. So what better idea than creating my own business plan that can work from anywhere, and at the same time, allow me to keep a connection to friends and family in the US by keeping the boat registered in Annapolis? We were all-in, literally.
· April, 2015: The Lancaster house went on the market. Thanks to Airbnb, we’d been able to more then recoup our mortgage payment and expenses from weekend renters while we were out of town. This worked from November 2014 right through to July, 2015, so about 6 months of house expenses in recouped money, for a net-zero of owning the house over that time period.
· July, 2015: Our first trip on Isbjorn with the new business. Three spots sold on the way north, two on the way south. A good start, at $2,500 per head. And the 2016 calendar was already starting to sell. A very good sign.
· Side-note: Did you ever read the parable of the fisherman? I worked the Isbjorn business plan in reverse - I set a target annual profit of $70k, based on the statistics that life doesn’t get any happier above that mark, and worked the plan backwards. Given the fixed and running costs of the boat, how many trips would I have to sell in a year to hit that goal? Turns out, it’s about 30-40 bunks per year (or about a 1.3% conversion rate from of my podcast audience…). That means during the downtime I don’t have to work. That was key to the business plan. Of course the downtime includes a ton of work in the form of admin, communicating with crew, passage planning, boat maintenance, accounting, podcasting, etc. But the point is that it doesn’t feel like work, and I can do it on my own time. And when we have kids, that time will be entirely at home. No 9-5 office dad, but home.
· September, 2015: Within the span of 6 weeks, we sold the house and Arcturus! The Lancaster house, due to the crazy real estate market there, netted us just over $10,000 when the deal closed, which went immediately into Isbjorn’s refit (or, more precisely, to pay off the credit card bills that had been piling up during the refit!).
· One side note – we use credit cards for everything! We have three of them – two for the business and one for personal use. Each month I pay them off in full to avoid paying the stupidly high 19.9% interest rate. All the while, we reap the literal rewards from the credit card companies. Just a few days ago, Mia and I each booked flights down to San Juan for our planned April 1 trip back to Key West. We had enough credit card miles to do this, and still have enough left over for another flight. We spend enough on credit cards that we end up getting the equivalent of about $1000 kicked back every six months. For those interested, all of our cards are with Capital One. For personal use, a ‘Venture’ card, that importantly doesn’t charge international fees when we’re abroad. And for the business, two ‘Spark Miles’ cards, that also don’t charge traveling fees. All of this is managed via one login on capitalone.com, where I have both business and personal bank accounts linked as payment accounts, and set it up to automatically pay the balances down each month so I don't have to think about it. I just have to make sure there is money in the bank!
· Okay, back to September 2015: Arcturus sold for $36,000.00 – we bought her for $40k (and put in another $35-40k in refit costs over the years), so it was a net loss – but after paying back the $15,000.00 we still owed on that loan, we netted about $20,000.00, which went straight into our Betterment index fund. After buying Isbjorn, that was back down to zero.
· Fall 2015: Isbjorn’s refit. I’ve talked about this before, but we spent all-but $40,000 refitting Isbjorn this fall. The list was extensive, and a lot of stuff was spent on deferred maintenance, stuff you can’t event see, and stuff I hadn’t necessarily budgeted for when we first bought the boat (suffice it to say, it was exactly in the condition we’d thought it was). And it didn’t even include new sails, which are now on-order for a spring 2016 delivery before our first Trans-Atlantic to the tune of $19,000.00. Bigger boat, more expensive stuff!
· November, 2015: Isbjorn’s second ‘working’ passage is the Caribbean 1500 with a full crew. I paid Paul Exner to skipper the boat in my absence (since I ran the event), and my dad sailed as mate. Under Paul & my dad’s guidance, they completed the passage in just over 8 days and won!
That pretty much brings us up to speed and to the present tense, where we’re still in San Juan! We’ve taken deposits on over 60% of our scheduled trips for 2016, and have sold 4 crew spaces for 2017 only a week after opening that calendar. We take a 50% deposit up front, with the balance coming due 60 days prior to the trip’s scheduled departure. The first of these payments are now coming due for the next passage starting in the end of January.
Further to this is how we take those payments. I use Squarespace.com to host my website – and absolutely love it – to the tune of about $30 per month in the subscription fee. It costs $20 a month to host the podcast on libsyn.com. I use Xero.com for my accounting, which links seamlessly and directly with Squarespace when something gets ‘sold’ through the website. The credit card payments are processed by Stripe.com, which also links seamlessly with both Squarespace and Xero, but it costs. 2.9% plus $.30 on each transaction. It’s actually not that bad in the world of credit card fees – my dad pays more to have a payment processor for his restaurants, for example – but it’s a big chunk. If we sell out in any given year, it’s upwards of $5,000 we’re spending in fees.
If you sign up to come sailing with us, you’ll get two invoices through my Xero accounting system – one for the deposit, another for the balance. There is an option to pay by check, and address listed to mail it. But I’ll ask you to pay by card. Despite the fees, this is still my preference. The automatizing of it all saves lots of time and hassle and ensure the money goes straight into the bank. I’ve accounted for these fees in the overall business plan as a ‘cost of doing business’. I still accept checks of course, but I like to keep it all online. It’s the main reason we’re able to manage all of this while sitting in a Caribbean anchorage on the boat and ‘hot-spotting’ our phones for Internet!
Speaking of phones – Mia and I last year discovered Ting.com, a sort of next-gen cell phone service that works on the Sprint network. It’s a prepaid plan and we pay $12 per month for us to have two iPhone’s on the network ($6 each), and then pay for only what we use. It’s divided into ‘voice minutes,’ ‘text messages,’ and ‘data.’ When we travel so much, the phone lines remain active for the $12 per month, but we don’t get charged for anything else. In foreign countries we buy local SIM cards to work in our unlocked iPhones and allow us to make cheap local calls and also forward our Sonetel.com US business number to anywhere in the world. When we’re in the USA (which is less and less), we use the phones as normal, and suck up a ton of data by using the phones for wifi. All told, our average phone bill through Ting is $88 per month, and that’s for both of us. We don’t pay for cable TV, home Internet or any of that other bullshit. Our phone bills, the boat’s loan payment and the boat’s insurance are the only monthly bills we get.
Anyway, all of these advance payments and deposits has created an interesting financial conundrum – thanks to the deposits coming in, we’ve got money in the bank – but it’s not really ours. We need that money to maintain the boat and deliver these trips to a high standard, sometimes months and, in the case of 2017, years into the future. Isbjorn’s fixed costs for 2016, including the new tri-radial, Hydranet sails (a Dacron and Spectra weave from Dimension sailcloth for those interested) we just bought through Chesapeake Sailmakers are estimated at $54,000.00 (though a ‘normal’ year will, hopefully, be closer to $35,000). And that doesn’t even include all the travel, provisioning and logistical costs of running the actual expeditions. So while it feels like we’re flush with cash – by the way, we have no other debt to speak of, and are living on the boat, so expenses are low – we’re still just barely hanging on.
But – and this is key – the plan is working. We’ve completed the major refit, have money in savings for our future apartment in Sweden, the Swedish kronor is at an almost all-time low against the dollar (which is good for us), bookings are coming in and we’ve got a reasonable cushion in the bank for the next few months. We’re free of everything else that could potentially hold us back – no house, no car, no debt, no Arcturus, just the new boat. Let’s just say I’m cautiously optimistic.
(Actually that’s a lie – I’m effing ecstatic!).