Captured by $250/hour

Folks,

Perennially people ask how much can one make working self-employed in small
business international trade. Those who have recently taken my seminars may
recall I've said one makes about $250/hour, and it should not cost more than
$100 per month and take more then 9 months to get to the point where you know
whether or not you have enough orders aggregate from customers to cover the
suppliers minimum production run in a workable amount of time, profitably
(say $250/hour). And I say if you are not within these bounds, something is
wrong and please check in for review.

Now, the $250/hour is supposed to be a kind of Zen koan, to throw you off the
wrong track and get on the right track. I picked it some what intuitively,
guesstimating what my bosses and I make.

(And people ask do I make more teaching or trading... well, I make $250/hour
trading and $100/hour teaching. So that is simple, but the real bucks are in
consulting, which is over $1000/hour. Except I cannot stand consulting
unless the project is extremely interesting and relates exactly to what I am
now working on... which means I turn down easily 99% of consulting offers and
do a little less than every two years.)

Also, please know I find all this talk of "how much can one make" repellant
since it is impertinent and unseemly, and seems to be bragging. But if I can
cover this topic from one more angle, I think I can wrap this up into an
essay and leave it as an item to which I can refer those who seem stuck on
money.

Here goes:

Once your company is up and running, and you are getting lines of credit from
banks (against which you open letters of credit to suppliers), you will
yearly visit your banker to review your banking relationship. Your credit
lines will be changed as warranted, and the banker will secure all of your
personal assets, etc, as outlined in my book.

As a side note, since money is fungible, and small business loans are at say
11%, and home loans are at about 6%, many businesspeople take out large loans
on their homes at 6% and use the money in the business, saving 5 whole
points. Since profits are on the margin, the difference in a business that
carries inventory having to pay only 6% interst instead of 11% shows up as
profits, going straight to the bottom line.

Of course, since almost no one gets a mortgage anymore, merely a deed of
trust, no home is safe from a bank anyway (again, making nonsense out of the
claim one incorporates to protect one's home and private property).

I mention this because it is common practice today, but in any event, as
banks establish lines of credits with businesses they take an "abundance of
caution" which as a practical matter means your personal assets cover the
banks risk.

Further, the bank lays down your salary, to assure they can watch how much
cash you take from the business. usually, this is a non-issue since very
many small buisness people, on advice of their CPAs, take a very small salary
to minimize loss through taxation.

Having said all of the above, I did a quick calculation of one business
owner, after 25 years in business... his salary was about $100,000 per year,
and I estimated he worked about 400 hours per year at the business, the rest
of the time he was busy about his other interests.

Guess what 400 hours into $100,000 equals? $250/hour. Now, of course, his
$5 million a year in sales business is turning net profit of $500,000, but
that belongs to the company (which he owns, but it is not what he is paid
for his work, it is an appreciation on his investment).

This net income on his business is no different then money he makes on his
stocks or his real estate. He may decide to work more hours, and no doubt
they would generate more $250/hour income, but he simply does not choose to
do so.

So, thank you for enduring this crude and distasteful topic, but I think
there is something to learn about the reality of the biz from this
exploration.

John

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