Looking at our recent income statement, you can see that Mr. PoP and I make pretty good money. Yes, August was a little higher than usual so it’s a bit skewed – but our year end gross pay is in the range of $70-80K for each of us, so we’re not on minimum wage. But it wasn’t so long ago that Mr. PoP was working a minimum wage job… AND we viewed that job as having the most “upside potential” in our finances at the time.
A Little Backstory
In 2008, Mr. PoP very much wanted to buy a local small business that he had known and been a customer of for years. It has been a family run business in the same location for more than 20 years with a loyal customer base. But the owners were nearing traditional retirement age and were interested in slowing down a bit.
The couple that owned the business were interested in selling the business to Mr. PoP with owner financing – something that was definitely needed as this would have been a HUGE purchase for him. [On a side note - even though we weren't yet married or engaged, I was very involved with the negotiations of this purchase, too. So even though it wasn't official, we were getting into combined finances mode well before we signed that marriage license.]
After a lot of Excel spreadsheet work with cash flow models, thinking through business plans, and really getting into the nitty gritty of the business history with the owners of this business, Mr. PoP negotiated a price that he felt accurately valued the business and that we were quite sure he could pay back safely using the income that the business would generate.
Then Lehman Brothers went broke and the stock market crashed 9% in a day. And then fell some more the next day. And the next. At least that’s what it felt like.
The owners freaked out and called the deal off. They (quite correctly) viewed an owner financed sale of their business as a retirement annuity and they just weren’t confident that Mr. PoP had the wherewithal the weather the fiscal storm that they were afraid was coming. And if he couldn’t, the value of their annuity could shrink dramatically – not something they wanted to risk.
Fast forward about a year. Mr. PoP and I have eloped and Mr. PoP is again talking with the owners of this small business. They have weathered a year with a sales drop off, but too horrible, and are still interested in selling to Mr. PoP. But there’s a catch – they are still pretty nervous. Mr. PoP understands that they seem to need some sort of assurance as to his dedication as well as an understanding that he is fully capable of running the business. With those assurances, they would have greater confidence in an owner financed deal. So Mr. PoP makes a proposal…
“I’ll Work For Minimum Wage To Learn The Business”
The owners of this business knew that Mr. PoP was able to earn more than minimum wage working elsewhere. Otherwise he wouldn’t have been able to be a customer of theirs for so many years! So this offer definitely proved that he was serious in wanting to learn the business and still very interested in purchasing it. They were intrigued enough by his offer that they took him up on it. “Work for minimum wage for 6 months, and we’ll evaluate the state of the business and confidence levels and see if we can come to a deal at the end of that period.”
So Mr. PoP took a pay cut. But he loved going to work every day. When I say he skipped off to work, that is barely an exaggeration. While we were in the midst of doing manual labor on our house every night because we bought it through a foreclosure, we would talk about how much he was learning about the business and about his plans for after *we* bought it.
This minimum wage arrangement worked really well for about 4 or 5 months until it became clear to Mr. PoP (who was there on a daily basis) that even though the couple that owned this business swore left and right that they wanted to sell the business, one half of the couple really wasn’t interesting in leaving this part of their life behind. Mr. PoP had a hard time hiding his disappointment when he told this news, and I was disappointed, too.
Buying that business would have changed our finances dramatically with massive amounts of debt in the short term, but the opportunity for growth and equity in a successful small business like that is something that Mr. PoP and I still aim for someday.
At the end of the six months, Mr. PoP and the business owners mutually agreed to go their separate ways, and though he says there are no hard feelings, Mr. PoP isn’t even a customer of the business anymore. Plus – according to local small business brokers, the business is still technically “for sale” over 2 years later, though I wonder if the conflicting desires of the couple that owns it have disappointed any other buyers besides us.
So while a lot of minimum wage jobs might be “dead end” – for Mr. PoP and I at the time, we viewed his working for minimum wage as one of the biggest opportunities that we had in our lives to that point.
We don’t really have any regrets on this period in our history. Mr. PoP learned a lot, and after it went on to get the great job that he has now. There’s no doubt that our path would have been very different if that sale had gone through – probably no $50K duplex or the rest of our real estate “portfolio”, but we would be growing a business and building equity there – how can we really say which end result would have been better for us without having lived them both?
Have you ever taken a big pay or benefits cut to pursue an opportunity? What was the opportunity? Do you think it worked out for you?