Wednesday, June 4, 2008

SMEs - harvesting and reinvesting (2/2007)

I spoke to a SME/SMB/SMME business colleague today. He was raving about how going into debt and moving from a supermarket manager to a supermarket owner has been such a wonderful experience. This to the extent that they bought the small shopping centre they were located in, which has appreciated by 400% in 3 years and that other than the property bond, they were debt free.

When I suggested selling his business he was initially horrified. “I do not want to retire and live off the interest. I am not sure there is enough”. I then suggested that he reinvest the money in a number of smaller businesses and properties and build them up again. Alternatively use the capital to buy a bigger business which would provide large capital returns and growth potential.

It took him a while and a lot of discussion to accept the idea, and then only I think because I said that he would be financially better off if he did.I just find it amazing that so many business people see their business as the beginning and the end of their business careers, instead of just the beginning. Each to his own I suppose?!

However, sit down some time and work it out. You will soon see that buying and selling will create more wealth for yourself than retention. This is a generalisation but often does hold true. So check it out for yourself!

Rob Smorfitt

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