Letter to the Editor: 'Buying a job' can be road to success

|tab|

I've listened to Bruce Williams on the radio for years, and read several of his books, having tremendous respect for him, and believing his advice to be helpful and insightful. With this in mind, I was surprised by the incorrect advice he gave a reader in the July 12 issue and strongly but respectfully disagree. |ret||ret||tab|

Bruce said, "There is no point in buying a job." Wrong. Sam Walton started the Wal-Mart empire by "buying a job" at a Ben Franklin store. Business ownership is still a key part of the American dream, and according to Thomas Stanley, author of the best-selling book "The Millionaire Next Door," "Self-employed people make up less than 20 percent of the workers in America, but account for more than two-thirds of the millionaires." |ret||ret||tab|

While not every business owner is a millionaire, as a group, entrepreneurs are among the highest-paid individuals in this country. Statistically, buying an existing business is the least risky way to achieve that dream. |ret||ret||tab|

My first thought, of course, is that the writer cannot sell his job, but can certainly sell his business. Additionally, your boss can take a job away from you, but when you own your own business, you own your job, and you are not likely to fire yourself. Job security is owning your own business. |ret||ret||tab|

Regarding the writer's specific questions, with a professional business broker involved, the business owner mentioned in Bruce's column should have been able to sell his business for a stronger cash flow multiple than the 1.8 Bruce suggested to his reader. |ret||ret||tab|

The writer's CPA suggested the business should sell for at least $250,000, and he was right. Buyers in today's market will invest that amount because of the opportunity it represents.|ret||ret||tab|

To understand the difference between Bruce's perspective and mine it helps to look seven years into the future. Where would the writer be if he took Bruce's advice? |ret||ret||tab|

If he stayed with his $50,000 a year job and invested the approximately $50,000 required for a down payment, at the end of seven years he would have accumulated around $64,000 at 4 percent interest. If he used that same $50,000 as a down payment, his future would look different and probably much brighter. |ret||ret||tab|

If he paid $250,000 for this business with a 20 percent down payment, his business payments would be $36,000 a year (assuming a seven year, 7 percent SBA loan). The company's $110,000 cash flow would leave him with a substantial raise and enough excess profits to invest in future growth. If he chose to buy this business, his economic future would be much better. |ret||ret||tab|

At the end of seven years, his $50,000 investment would have grown to the current market value of the business. The business had $750,000 a year in sales the day he bought it (assuming a 15 percent cash flow-to-sale ratio). At the end of seven years, the firm's sales could have grown to $1.3 million and his cash flow to $199,000 (assuming 10 percent per year growth). |ret||ret||tab|

Bruce is correct in saying that larger businesses command higher cash flow-to-sales ratios. At the end of seven years, the business could bring a 2.75 multiple of cash flow. That means he has a business that could be worth $547,250 and would be free of debt.|ret||ret||tab|

Which case would put the writer in a better situation? A half a million dollars net worth and a strong six-figure income or his $50,000 a year job (even after raises) and his $64,000 savings account?|ret||ret||tab|

These are real figures. I have several clients who have achieved this kind of success and more. Bruce Williams is a very solid source of advice on owning and operating a small business. You can tell by reading his articles that his advice comes from years of experience. However, on this issue, his perspective was not correct.|ret||ret||tab|

|ret||ret||tab|

Scott Axon, CBI|ret||ret||tab|

Sunbelt Business Advisors|ret||ret||tab|

Springfield|ret||ret||tab|

[[In-content Ad]]