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December 24, 2006



yes, many 'owners' miss the point that having a business survive isn't enough. it must pay you a living wage, plus benefits, commensurate with your skills and time invested. If you work 80 hours a week, you need to make probably 80*15*1.3 dollars each week, or else you should just go work for someone else who pays 15 dollars an hour plus benefits.

Then, of course, the business needs to survive, grow, stabilize, pay the taxes, rent, other employees, etc.

The equity of the restaurant can be considered a retirement package or pension plan. If it is stable and earning a certain amount each year, and can be considered to do so with a new owner of comparable skill, then it can be sold as a running business for a good amount; and this amount increases as the business grows. When you are ready to turn in for the long day, and need income to retire, you should have at least 75% of your annual salary from dividends/capital gains, etc. Not counting what you bequeath to children - like college, a starter home, wedding expenses.
You'll need this income for possibly 20-30 years, so spending down capital is unlikely to satisfy, unless you can get together $1.6 million or more. Medical expenses will drive up retirement costs severely. So, you need to consider that when you sell the restaurant, it will need to fill in any gaps in your savings (401k, etc) after taxes. Or else you will need to sell a partial stake and keep reaping dividends out of profits - a sort of 'undiversified investment strategy' that still costs taxes as you go, though not all at once.

Anyway, it is all very depressing and yet necessary to consider.

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