Yes, there are a number of personal things I’d do besides pay off bills. Oddly (by some lights) I’d not go that nuts on toys.
What I’d do, ideally, is start a business. See, I have two dream businesses. One is purely for myself, filling an avocation. I’m actually doing it now out of desperation; it’s my information specialist service. I’d not be unhappy to put a bit more money into it, but it doesn’t need tons of money. No, the lottery would let me do the other business I’d like to run; one that’s rather service-oriented.
I’d like to start a business loan company of a different sort. Something of a micro-venture capital firm with a different model of payoff. Basically, I’d collect a share of net profits and do so until the other party bought out my share.
I’d be looking at small loans; loans of not more than $50,000, though up to $100,000 is a possibility in my mind. (Yeah, I know, that isn’t micro. It’s pushing not being small. And yet…) It wouldn’t be categorized as a loan for accounting but rather as shares at a rate of $1 per share. Contractually, as long as I had shares in the company it would be obligated to pay 10% of net income after taxes as dividends to shareholders. And finally, the other party (and only the contractual other party) could buy out the shares in part or in whole at the original price (though after I get my profit share for that year. Yeah, there’s some details for accounting purposes, etc.)
Let me list, simply, the two major points here. First and foremost, I’m offering loans that allow small (and desperate) entrepreneurs to run on a shoestring. I would INSIST on a solid business plan and some indication that the person can make the business work. But that’s it – I’m willing to provide up to 100% if I think the company will work. I’ve met some bankers who have met people who can do pretty much everything except a) put up part of the front money and b) pay it off. Most folk starting on a shoestring are looking at barely making it for the first year. I am willing to wait a year or two for a business I believe will work.
Heck, if it barely makes a profit but allows another family to put food on the table, it’s worth it: I win.
The second point is that it will be profitable long-term. My back of the envelope figures are that over half the businesses will have earned enough for the other owner to buy out my shares within five years, and that of the rest 60% (30% of the whole) will be making a small profit – call it breakeven. That gives me 20% down the tubes. (Actually if I vet properly – and one of the employees I HAVE to hire is an experienced business loan person – I should have that below 10%. But I’m running the paranoid level here.)
Of the 20% failures I’ll get some of my money back from sale of assets after paying creditors. Not tons, but a bit. Still using back of the envelope swagging, I lose 90% of what I invested.
As I said, there’s another 30% who will be providing a trickle of money – call it 1% return on investment per year.
Then there are the payoffs. Grossly simplifying, I figure I get an average of 4 years during which I get an average of 70% of the dividends per year. For every dollar they’ve earned to buy a share that share will also have earned me $2.33, minimum. (That’s if it happens in one year. Over time it earns more.)
Assume for simplicity one year, 1 million dollars. 200,000 returns 20,000. Another 300,000 returns 3,000. Finally, 500,000 returns the 500,000 plus a bit over 1.6 million. That’s notionally $2.2m, or 220% return. (Not profit. I’d pay my employees, I’d have taxes, and so on and so forth. That’s still a lot.)
In reality it wouldn’t return that much that fast (though over time it’d do more). That’s because in year one I would expect very few of the eventual buyout companies to make much over break-even. On the other hand most of the failures will happen the first year. No, the profit begins the second year – not wild, but definite. The third and fourth year I think it would be wildly self-sustaining, and in year five I’d be looking at establishing a second office in another area to expand the process.
I think I’d see in the vicinity of 20 businesses started per million dollars I had available. I’d need to reserve enough for employees for the first two years.
Yes, I could donate the million to charity, and it’d feed and clothe a lot of people for a year. But then they’d need it again the next year. This won’t feed and clothe as many, but they’d be doing it for a long time — and I’d get the money back to do it over and over.
If I won the lottery, this would be my business.
I have considered writing to millionaires and seeing if they’d invest in a company to do this. I hesitate out of the simplest of realities – if I were in their shoes, why would I give the money to me when I could set up a firm to do it myself? Or rather, get someone with a VC or investment or business loan/management background to take my idea and run with it? I mean, who is Kirk Spencer anyway? He’s an information professional with most experience in the public arena and no outstanding demonstrations of having what it takes.
Looking at that, perhaps I should. After all, I’m still the one willing to do the work. I would be willing to do it for a salary – significantly cheaper than the ‘typical’ specialist – and the bonuses I already plan to pay.
Bonuses? Sure, let’s hit the rest of the plan. I intend to pay all employees a bonus. 5% of net profits after taxes divided among all employees by hours (salary will count as 45 hours per week). As initially all employees will be salary, that would mean equal shares for all. If it grew – if I found it necessary to hire half- and part-time employees and hourly employees (full time janitorial instead of contract cleaning, for example) then the different rate would come into play. I’d also plan to pay all shareholders – all the people who’ve provided money for the company – dividends of 10% of net profit after taxes. Once more the initial return would be slow. The payoff comes over time.
It’s sorta old-fashioned. It’s a return to the original reason for buying shares in a company. You bought them not so you could sell them for more later, but because it provided you a share of the profits a successful company produces.
If I won the lottery…