I thought I’d help my American friends celebrate Independence Day by relating a story about a famous American industrialist and how he sold his business entirely on a note… well, a whole stack of them.
Andrew Carnegie was born in Scotland and went to the US when he was 12 with his parents. (Barnett is a Scottish name too, FYI)
He was industrious and eventually became an investor, stock promoter and the owner of Carnegie Steel in Pittsburgh.
In 1901, JP Morgan (whose bank still bears his name) decided to roll up all the big American steel companies into one big company.
It was to be called US Steel.
He thought he could cut costs by eliminating duplication and reduce the price to consumers while raising wages and making it nearly impossible for anyone else to get into business.
Maybe it was the inspiration for the game Monopoly?
The sale price of Carnegie Steel was $303,450,000.
That would be USD$7.8 Billion dollars in 2019 money.
By the time of the sale, there were other share holders so Carnegie didn’t receive the entire amount.
The purchase price for his shares was $225.64 million.
Now, here’s where the story gets interesting and where most people fall asleep or fail to grasp the significance…
He was paid entirely in $100,000 5%, 50-year gold bonds.
What does that mean?
It means he financed the entire sale and allowed JP Morgan to write him a cheque for 2.5% of the balance twice each year for 50 years with the original principle amount to be paid in 1951.
That’s a $5,600,000 cheque twice each year. No principle was paid down.
If the buyer failed to make that interest payment, or ‘coupon’ as it was called, they’d have to come up with enough gold to settle the debt.
At $20/oz, that would be 5,000 troy ounces of gold for each piece of paper. (US dollars were fixed to gold back then)
Since it was 1901, of course, all of these paper notes were delivered to the seller.
Likely, they’d come by train because the bank that Carnegie used to store them had to build a special vault to house the pieces of paper.
That’s a lot of paper!
Carnegie would have been able to sell some of the bonds to diversify his wealth, but the fact remains… he financed the sale of his steel mill and then went on to become a great philanthropist.
Which means three things:
You don’t necessarily need all the money saved up to buy a great business.
It’s easier to be generous if you’ve enjoyed a life of business success.
You can sell your business to someone who doesn’t have all the money if you believe they are the right person with the right plan.
June/July brings even more
talk of buying online businesses.
What an
exciting month.
We’ve got
new members.
We’ve got
members buying businesses in another country.
We’ve got
members re-engaging with sellers that broke off talks.
We’ve got
a new member who has already sold a business.
We’ve got
an expert guest call with a leadership coach who has been researching the what
it takes mentally to make the move from being in the corporate world to being
an entrepreneur..
-and-
We’ve got
online business buying expert Jaryd Krause coming back in July for a one-hour
in depth call about buying businesses.
If you
missed Jaryd’s appearance on the general YouTube channel you can see it here.
Do you ever
cringe at the day ahead of you when you wake up in the morning?
Do you dread the
ring of your phone?
Do you feel like
you give all you have and it just doesn’t seem worth it?
Maybe you’re
burning out!
This week I
speak to entrepreneurial burnout and momentum coach Linsi Brownson who gives us
some great insights into this problem among business owners.
If you own a
business or will one day, this conversation will be valuable to you.
