224: Fireside Chat With Andrew Youderian On Business, Happiness And Wealth – Part 1

Podcast: Download (Duration: 30:21 — 42.0MB)

The reasons not to sell a profitable business are mostly non-financial, which is why a multiple that looks good on paper often is not enough. When Andrew Youderian pushed me on what number I would accept for my ecommerce store, I started hesitating around 6x, and every hesitation I raised was about what I would do afterward rather than about the money.

Andrew founded Ecommerce Fuel and has built and sold multiple stores. I recorded this with him around a campfire on day one of a three-night trip through Montana and Yellowstone, with no cell service and nothing to do but talk.

This conversation covers the relative wealth question that shapes where you live, why cost of living may matter more than income, what actually stops people selling businesses they could sell, and how differently the two of us approach raising kids.

Key takeaways

• Most people, when surveyed, would rather earn less in absolute terms and more than their neighbors than the reverse.
• Cutting your cost of living by 50% to 70% can buy back more time than earning more ever will.
• Research consistently finds relationships are the strongest driver of happiness, which is what long working hours erode.
• Non-financial reasons kept me from selling: the work keeps me occupied and the podcast is my main social outlet.
• The typical ecommerce store sells for roughly a 3x multiple.
• Selling only makes sense when you have somewhere better to put the money.
• Self-selecting into an unusually successful peer group makes you feel poor regardless of your actual position.
• Personality and persistence matter more than the business idea at the six or seven figure lifestyle business level.

Would you rather be wealthy or wealthier than your neighbors?

The question I put to Andrew was whether you would rather earn $100,000 where everyone else earns $50,000, or earn $500,000 where everyone else earns a million. Surveys consistently find most people pick the first option.

Andrew’s honest answer was the first, despite wanting to say otherwise. He and his family deliberately chose not to live in expensive markets, partly for cost and partly because comparison is corrosive.

My answer is the second, on the theory that I could leave at any time and live like a king anywhere else. Andrew’s counter is fair: that only works if you actually leave.

His day-to-day argument is the stronger one. Not feeling like every friend drives a Tesla while you drive a 2008 Subaru Outback is easier when most of your friends are not outrageously wealthy.

Why cost of living may matter more than income

Cutting your cost of living by 50% to 70% lets you work far less and spend that time on the relationships that actually produce happiness. Andrew’s framing is asking why three or four times in a row.

The chain usually runs the same way. You work hard to provide for your family, so your family does well, and part of doing well is spending time with them, which is the thing the working hard eliminates.

The research is unambiguous. Relationships, hands down, are what make people happiest.

What does the Bay Area lifestyle actually cost?

Where I live, getting a decent house in a good school district generally requires two incomes, which shapes everything downstream. Nannies raise a lot of children and three or four weeks of vacation counts as a good deal.

I have a friend whose day runs from work to dinner with the family to logging back in at night, plus one day most weekends. He earns a great deal and owns a nice house.

Another friend bought a house a step above what he could comfortably afford, partly to be near his wife’s family. He now works hard specifically to carry the mortgage and complains about it regularly.

Summer camp runs $500 a week per child where I live. That is the kind of number that makes the arithmetic on relative wealth concrete.

Is there an alternative to choosing one expensive city?

Split your year across two places rather than picking one. Andrew’s family planned to spend the school year in Tucson and return to Bozeman for the summer.

The logic is arbitraging the weather. They keep the Montana community they love and skip the winters, at a cost of living far below California’s.

Tucson was his pick as somewhere still undiscovered with real appeal. The general principle is that the choice is rarely binary between your current city and the expensive one.

Why does self-selecting into a wealthy peer group make you unhappy?

Choosing an unusually successful comparison group makes you feel like a failure regardless of your objective position. Andrew told a story about a couple who worked their entire lives to buy the cheapest apartment on Park Avenue and were miserable there.

They had done extremely well by any external measure. They had also placed themselves in a sample where they ranked last, and that ranking is what they felt daily.

The same effect applies to children. A student who is middle of the pack in Silicon Valley would likely land in the 90th percentile almost anywhere else in the country.

What multiple does an ecommerce business sell for?

Roughly 3x is the average ecommerce store multiple. That number is where the conversation started when Andrew asked what I would sell for.

I dismissed 3x immediately and started hesitating at 6x. What surfaced as we worked through it was that my objections were not really about price.

Even at 6x I was uncertain. When you ask what you would do with the proceeds and cannot answer, the multiple stops being the question.

Why won’t a profitable business owner sell?

The reasons that surfaced for me were entirely non-financial. I would probably get depressed with nothing to do, since I already feel underworked.

My schedule runs from about 8am to somewhere between noon and 1pm, then exercise and school pickup. Most of my friends work regular jobs, so I get limited social interaction during the day.

The podcast is the bigger reason. It is my primary social outlet outside my family, and selling the business that supports it would leave me isolated.

The network is the ancillary benefit people underrate. I can land in most US cities and reach out to people I know, which is a real asset that does not appear on any balance sheet.

What would you actually do with the money?

Both of us defaulted to index funds or waiting for a market crash that has not come. We have both been waiting a long time while everyone less risk-averse has done well.

Andrew’s plan was more considered than mine. Eighteen months traveling with his family while his kids are school-aged, teaching them along the way, then something business or nonprofit related where his skills apply.

My honest reaction is that watching a bank balance decline monthly would bother me significantly. Andrew’s response is that living off the interest on a substantial sum is straightforward, and difficult specifically in the Bay Area.

That brings the whole conversation back to cost of living. The same capital funds a completely different life depending on where you spend it.

How different education philosophies play out

Andrew teaches his children opportunistically, explaining what they encounter and never talking down to them. I am considerably more deliberate about it.

My own upbringing explains mine. I studied for the SAT starting in fourth grade so I could take it in sixth and qualify for an academic summer program, where I completed algebra one, algebra two, and geometry in three weeks as a seventh grader.

Where I live it functions as an arms race. If your child is not in the supplemental math program, they are behind because everyone else is.

My actual goal is confidence rather than admission anywhere specific. A child who walks into class already knowing the material feels capable, and my daughter would likely be discouraged about math without the extra work.

Andrew’s pushback is about the cost of that pressure. Pushing a child from age eight toward an elite school imposes strain that may outweigh the benefit, particularly since most of the value of those schools is the network and the resources.

What matters more, the business idea or the person?

For a six or seven figure lifestyle business, the person matters more than the idea. That is the same reason venture investors back founders rather than business plans.

Andrew’s qualifier is reasonable. Given a business model that is not actively terrible, work ethic, hustle, and commitment determine the outcome.

Nobody knows in advance whether something will work. A month of research might move your estimate from 20% to 70%, and you still have to push through six months minimum and usually years.

Confidence is what carries you through that period. Believing you are on the right track long enough to find out is most of what separates people who succeed from people who quit.

Frequently asked questions

What multiple do ecommerce businesses sell for?

Around 3x is typical for an ecommerce store. Higher multiples require something that makes the business unusually defensible or unusually attractive to a specific buyer.

Should you sell a business you enjoy running?

Only if you have somewhere better to put the money. If you cannot answer what you would do with the proceeds and you still enjoy the work, the multiple is beside the point.

Is it better to earn more or live somewhere cheaper?

Cutting cost of living by 50% to 70% frees up far more time than a comparable raise, and time with people is what research links to happiness.

Why do people in wealthy areas feel poor?

Because comparison is relative to your immediate peer group. Someone who buys the cheapest home in an expensive neighborhood feels worse than someone with less money among peers.

What are the non-financial reasons to keep a business?

Occupation, social connection, and network access. Those are the things that surfaced for me and none of them appear in a valuation.

Do you need to live in an expensive city for opportunity?

No. Andrew’s experience in Bozeman is a strong community of bootstrapped entrepreneurs who can take a weekday afternoon off, which is difficult to replicate in a high-cost market.

Does the business idea or the founder matter more?

At the lifestyle business scale, the founder. Given a workable model, persistence and work ethic determine the outcome far more than the specific idea.

How long do you need to commit before knowing if a business works?

At minimum six months and usually years. No amount of upfront research produces certainty, so the commitment has to come before the evidence.