• 06:32:21 am on April 20, 2009 | 17
    Tags: , , , , , , ,

    Quick and Dirty…

    mud-bath1I couldn’t resist adding the photo …

    But, a short post can be a sweet post, if it tells you what you need to know.

    So, did it? What else can Jeff tell us and what can you tell (well, suggest to) him?

    _____________________

    I feel bad even calling this a “post.”  It’s so short that it hardly qualifies as a response.

    The only changes I think I need to make at this point relate to my approach to long term investing.  As a reminder, I’m primarily using index based mutual funds in a variety of tax advantaged accounts (401K, Roth and Traditional IRAs, 529s).

    The change I’m going to begin implementing is a move away from mutual funds and into a more concentrated portfolio of individual stocks based upon value investing principles.  To help me accomplish this move, I’m re-reading Rule #1 by Phil Town and am reading Buffetology by Mary Buffett and David Clark.

    This will be a measured process of moving money.  I plan to move a portion of my money…test the results and then move greater amounts over as I see results and become more confident in the stock selection methods.  Future investments will be prioritized to non-tax deferred accounts so that I can access the funds when I deem necessary (hopefully by age 50) rather then when Uncle Sam says I can can.

    By doing this I hope to do accomplish two things….

    1. Grow richer quicker  🙂

    2. Access my money whenever I desire

    As far as my debts are concerned, I do not intend to do anything about my mortgages other than continue to pay them monthly per the amortization schedule.  I intend to pay off my $17,500 bridge loan in May.

    My other activities are in the realm of MM201 where I continue to fiddle around with increasing my income via a variety of online methods and look for opportunities to buy a business and more residential or possibly commericial real estate.

     

Comments

  • Scott 6:55 am on April 20, 2009 | #

    Looks like you’ve got it all covered and ready to cross to the other side Jeff 🙂

  • Lee 1:19 pm on April 20, 2009 | #

    I like what I see but are your plans all about investments and moving money from here to there and nothing else? I thought you might have some kind of business opportunity waiting to bloom.

    Also regarding the length of your post, from a readers viewpoint I cringe when I see a lengthy post thinking “oh great another book”. When a post is long I usually just skim over it anyway. When it is short I’ll read all of it, thanks for getting to the point. I would much rather read a short post and ask questions than receive a long one that I’ll never finish.

    Most of our brains can only comprehend what our seats can endure.

  • Adrian 3:33 pm on April 20, 2009 | #

    @ Lee – Aaah the ‘seat facto’ … I’ll have to trim down some of my posts over at the ‘other blog’.

    Nice observation about Ryan’s plans being “all about investments and moving money from here to there and nothing else”.

    @ Jeff 😉 – same comments for you as I made for Scott: prioritize building up your ‘war chest’ to fund your business/es, and perhaps for the real-estate that sits under it/them.

    Any ‘spare’ cashflow should go wherever you feel you will get the best combination of high return/safety (obviously, that’s usually a tradeoff) as a ‘safety net’ …

    Having said that, if you feel so inclined, I like your forays into the stock market: it seems that you have a similar investing profile to Scott (and, to me), preferring business and commercial real-estate, but also feeling that you should know something about stocks.

    With all thee investment types, it helps to have an eye for ‘value’, anyway.

  • Lee 5:40 pm on April 20, 2009 | #

    I’m sorry but didn’t you mean your comments to be directed to Jeff and not Ryan?

  • Jeff 6:58 pm on April 20, 2009 | #

    @ Lee….I think you are correct…I’m indeed Jeff. 🙂

    Lee, my RCGR puts me in the real estate and stock investing arena. However, I have always planned to overshoot a bit by including a business or two in the mix.

    I’m in an interesting position regarding businesses. I do have an idea in the the wings but have one thing holding me back, the US Navy. I’m not in a position to be able to set my current career aside and pursue a full time business of my choosing.

    The irony is that I found a possible business opportunity just last week. You may recall, that I’ve alluded to my interest in starting an Air Taxi/Air Charter business, but have been perplexed by the necessary capital requirements.

    I came across an air charter business for sale that is priced just over the asset’s value. It’s running profitably, clearing in excess of 200K/year (~37% profit margin) and is priced at about 750K.

    Five airplanes, employees, processes, an FAA operations certificate and a profitable business for only 50% more than the cost of my house! Needless to say, I’m very intrigued by this opportunity. But I am unable to seriously entertain it at this point in time due to my current obligations to the military.

    Timing is everything as they say, and right now the timing is poor.

    But it gives me hope that maybe I can pursue this dream for a lot less money than I anticipated needing.

    Oh, have I mentioned that I’ve been shopping for an airplane? I really like the Mooney M20F.

    Someone please remind me about the finer points of the 5% rule! 🙂

    Temptations, temptations….

  • Mark 10:05 pm on April 20, 2009 | #

    @Jeff – You are in the MM201 zone. There is so much to learn! Now don’t forget MM101 rules – sorry, looks like you have to delay the plane purchase. How about finding a business or rental property that can help finance the plane purchase ala Robert Kiyosaki or better yet, Adrian’s example here:
    http://7million7years.com/2008/12/21/rich-rat-poor-rat

    Do me a favor, remind me as well next time I’m thinking about taking a vacation overseas or purchasing a big ticket item.

  • Adrian 1:41 am on April 21, 2009 | #

    @ Lee – Thanks, typo fixed … comments were indeed aimed at Jeff, although both Ryan and Scott are in much the same boat (plane?) right now, so I could pretty much cut/paste across all three 🙂

    @ Jeff – Apologies. I couldn’t see you under all of that mud 😛 Seriously, though, I will make these kinds of mistakes from time to time, so feel free to keep pulling me up, if I do …

    As to the plane …. Mark is tough, but correct.

    Financially, I agree, but your money is there to support your Life, not the other way around … so, if you think you just HAVE to risk your financial future for the plane, read this [oh, and an upcoming post at 7million7years will also tell you that you should wait a year before making this purchase]:

    http://7million7years.com/2008/04/10/10-steps-to-whatever-it-is-that-you-want-how-to-weigh-up-the-cost-of-a-lifestyle-decision/

    You have a major decision ahead of you (and, it’s not the plane):

    1. You DON’T need a business to reach your Number, but

    2. You DO need a career post-military.

    Number 2. actually takes a higher short-to-medium-term priority because you need to feed your family. So, do you feed your family best (for you AND them) by:

    a) Staying in the military until you retire?

    b) Getting a corporate job in a related (or even new) field?

    c) Starting / buying a business?

    d) Other????

    If c) then you need to build the war chest for this purpose as your highest priority; but, if you decide that a) or b) are likely, then you need to be building up your asset base (RE/stocks) – and, related skills – now.

    So, we are only ‘talking’ via b-mail (Blog Mail), so I may way off base here [AWOL even 😉 ], but I wouldn’t be risking going into business UNLESS either my Number/Date ‘forced’ me to, OR I was so bitten by the entrepreneurial bug that no amount of repellent spray can make it go away (and, believe me … I know EXACTLY how this fees). Reason: risk (esp. if you don’t NEED the reward) …

    Just my 2 cents before tax!

    @ Mark – I’m glad somebody reads my posts 🙂

  • KC 4:49 am on April 21, 2009 | #

    @Jeff. Hi. I always get a bit nervous when someone is offering a great business.

    I do know of cases where the existing owner is getting elderly, and is frankly sick of the day-to-day mundane-ness of operating the business and just “wants out”.

    But many UK companies have bought what look like great businesses in the US and frankly have got burnt, e.g. Stagecoach trying to get into US buses. So I fear there are some great salesmen in the States! (Or very stupid business-assessors in the UK).

    In the past, business purchasers would expect to pay 7 years profits for a business, while this one is available for 4 years profits.

    Further, if the current owners took the advice of both “Rich Dad Poor Dad” and “The E-Myth demystified” they’d get in managers to run the business for them and then take off on their yacht, i.e. the business appears intrinsically profitable, so why not just go off and keep banking the profits, if working day-to-day in the business is getting you down (also the philosophy of “the 4 hour work week”).

    You don’t own a business to work in it yourself – you own it to give employment to people who want a job, and who are not entrepreneurial themselves.

    So you can imagine that they could set things up to get that 750k price by holidaying around the world while the 4 years are passing.

    Personally, unless they gave me some other convincing reason, I’d say they’d seen a fall-off in business because of the credit crunch, and don’t expect it to be making 200k a year over the next 4 years.

    So if they can hand it on to someone else, the 750k is guaranteed and in their hands without waiting any time, and the purchaser has to deal with winding it down because of the recession – mothballing aircraft and making staff redundant.

    There are so many negative people who post on investment websites, who spend all their time saying “That’s no good” or “There must be a catch” but I’m not of that personality type.

    But I would think that in a time of tightening belts, an upmarket business like this one would probably have to prepare to contract.

    Indeed, if it’s “Phil Town true-value” is 7 years profits, then the anticipated profits would be $750k/7 years = $100k per annum – but in a way that’s just playing with numbers to try to make my point another way.

    It would be interesting to watch that whole sector of the economy and see how journalists and share prices show what’s happening.

    Sorry to be so gloomy, but maybe it could get you to closely monitor the sector while you’re prevented from entering it, so that you could consider getting in when someone else has slimmed it down and are themselves tired of the pressure, just in time for the up-turn!

  • Jeff 12:42 pm on April 21, 2009 | #

    KC, thanks for the comments. The current owner claims he’s selling because he’s ready for retirement. He has noted that recent economic and fuel situations has caused the business to contract.

    In the mean time I asked for 10 years of financial information (they’ve been in business since 1992) rather than just the last three (which I received initially). So far, the lack of response from the broker on this one has me a bit suspect.

    I like the idea of owning it an letting others run it, but I have a desire to be actively involved in making changes. This particular Air Charter business needs to be redirected a bit to meet my desires and purpose.

    @Adrian – I do plan to retire from the military at some point. I’m just not eligible to do so for another three years. After that point I can leave with pension in hand if I so choose.

    Hopefully the Air Taxi/Charter idea would be my post military job.

  • Josh 2:03 pm on April 21, 2009 | #

    Jeff, how parallel are fuel prices and air taxi business profits? Would buying an air taxi business ultimatly be the same as being short oil?

  • Jeff 2:11 pm on April 21, 2009 | #

    Josh, I look at fuel prices as a direct cost that I won’t have a lot of control over, short of entering into some type of long term contract/bulk fuel buy.

    As far as comparing it to shorting oil, I’m not sure. There is probably some inverse relationship to the price of oil and the profit margin. But I don’t believe the viability of the business will be solely tied to the price of fuel. That’s just one of several variables in my book.

    I think the benefits of point to point, no hassle travel that has a measure of flexibility to it will be the draw that brings business in the door. That service will likely cost a slight premium to airline travel.

    I think the customers are those who put a premium value on their time.

    If that’s shorting oil, then count me in. 🙂

  • Adrian 3:10 pm on April 21, 2009 | #

    @ Jeff – And, then what? Why go into business if you don’t ‘need’ to (at least to get your Number)?

  • Jeff 5:53 pm on April 21, 2009 | #

    @ Adrian – to get richer quicker.

    And further more, Why shouldn’t I?

    What about the Entrepreneurial spirit?

    What about staying involved in flying?

    Why not build a team?

    Why not do something fun?

    Why not lead and develop leaders?

    Wait a minute, that’s my life purpose….maybe I can fulfill my LP in my own fun and exciting business venture….even better. 🙂

  • Adrian 8:01 pm on April 21, 2009 | #

    @ Jeff – Great! That means, forget about the investing stuff (other than dabbling / learning) … YOU need to build your war-chest and business plan.

    Small problem:

    1. If you divert ALL of your MM201 energy, $600k Net Worth, and future savings towards real-estate + stock investing, then Michael Masterson says that you can get to your $10 mill. Number by your 10 year Date.

    2. But, if you wait 5 years to start a business, then you only have 5 years to CGR it to $10 Mill. … a MUCH harder task (CGR is 130+% IF we assume a $150k starting net worth by then)

    And, trying to ‘hybrid’ by investing in stocks/RE now with the idea of ‘cashing out’ in 5 years to start the business is too risky, assuming that I read your timing issues correctly?

    One ‘compromise’ is to assume an RE/Stock road to your Number but start a part-time business now (package up your ideas and sell via the Internet?).

    But, if you truly want the Bricks’n’Mortar (Planes’n’Blacktop?) business then I think you should give that some further thought and share your plans with the ‘team’ … let’s see what some hot-seating can do to help?!

  • Financial Tune Up « 3:01 am on April 22, 2009 | #

    […] Jeff’s ‘quick and dirty‘ post became an intriguing set of discussions around his business / investing aspirations, I […]

  • Diane 12:22 pm on April 22, 2009 | #

    @Jeff, I would not worry too much (yet) about the broker’s inability to get the older numbers to you. Most financial systems are not set up for older numbers to be accessible easily, and the owner probably did not anticipate needing to go back further. That said, they may be of very little value to you in the end. Even the past 3 years worth seem unlikely to be repeated in the near-term.

    You and I know the value of your staying in the military for 3 more years. The rest should assume that as a given. The retirement benefits are too great to chuck.

    Not sure what else you did besides fly (obviously lead people) that is marketable to aeronautical companies, but that may be secondary again, too. Seems if you can fulfill your life’s purpose running this business and trying to make it excel all the competition, then you should do this on your military retirement. Kids should get scholarships (that’s their job – getting good grades, right?) and wife can find something that brings value to the family as well (perhaps run the books – is she qualified for any of the jobs in such a business now? It’s not always a good idea to put your eggs all in one basket, but with the military retirement, this is not quite that. You both might be better off if she got a separate career going that added more cash than simply saving on an employee who had a job more than a career (i.e., she should find something with promotion potential/more cash). Granted health insurance is not an issue for you much with the military retirement, but even that might be good for the family post-retirement to supplement the CHAMPUS or whatever it’s called now.

    Then, again. The market is down all around. The business records for the “great deal” still read good, but those are starting to tank as well.

    I agree with Adrian that stocks are likely to go up quicker than a business in value (e.g. check the price of about 10 stocks in varying industries and estimate how quickly they would GROW if they reached the value they were a year ago in just the same amount of time. Much more UP% than what went down.) Still, if your life’s purpose is served by the business, evaluate this particular offering but also keep looking for others. You will learn from your mistakes and by asking questions.

    If you can, get permission to contact their customers and do a survey to see how apt these customers are to continue doing this business. If you can’t get this, try to guess who the customers are. If you have not yet down a SWOT analysis of this market – identifying threats particularly – then you need to stop and ask yourself what you’re doing. You may have already done this in your head or the back of a napkin, but you do need to scribble it down somewhere and do some market research.

    You need to minimally look at this business as a business and figure out who its competitors are, what the barriers to entry into it are (which you should know, but are basically what is to keep someone else from doing a competitive business and going after your customers), opportunities for reducing costs (e.g., do the customers pay for both directions? have you got package-courier deals lined up at the airports you fly out of most? can you set up some back-haul business to fill empty flights home?)

    I don’t know how much information the owner will release to you, but this is definitely a time to read between the lines and look for what is not said, then ask questions. The price can only come down while you wait.

    Conversely, take Adrian’s approach of 7 yrs to cost it; if that’s the case, what’s the true estimate of the annual income? What would that do to you and the business if that is all it turned in a year starting the day you bought it? Are there any environmental concerns? If renting, maybe not a problem, but if you end up owning a piece of property, these could be major considering the fuel issues. Local and state regulations will also come into play on environmental issues. Do you know what those are yet?

    I like short posts. I have the same problem as you in making them however. This one (yours above) was not short, just shorter than your normal ones.

  • Adrian 3:26 pm on April 22, 2009 | #

    @ Jeff – I’m with Diane on short posts … can’t do ’em 🙂 Ooops, I see you said 3 years, not 5: thanks for picking that up, Diane.

    Jeff, you should run those CGR’s for 10 years of investing v 7 years for a business (I’m assuming that you can’t start / buy THE business while yo are still in the military, from a practical perspective) … let us know what this analysis tells you?

    @ Diane – Great comments re the business; Jeff should read VERY carefully, if he intends to pursue this business opp. any further …


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