The Hidden "Silent Partner" and Screw doing any more Start-ups
An economic napkin analysis of your business's "Silent Partner"
I decided to try to understand one of my last Company's cumulative cash flow economics. I came back with some very startling results and found out that I had a "Silent Partner" in the business with super rights that circumvented all forms of fiduciary responsibility, to shareholders, investors, debtors and customers. And the partner was in plain sight all the time, but hidden from critical review, and I was being continually programmed not to correct the issue.
The "Silent Partner" is the Government, the Government at all levels and identities.
So, I started a very methodical analysis, starting with the following large buckets to identify my Company's "Cash Flow Leaks"
• Founding costs
• Supply side costs
• Labor costs
• G&A costs
• Cost of Goods Sold
• Selling & Marketing Costs
Founding costs
I started this Company with about $250,000 in cash, most of this cash was from savings, that I had set aside over several years and a basic analysis showed that I had paid about 43% (Savings from ordinary income) on top of the $250,000 in taxes for the right to have this money and use it as I please. So, starting my Company really cost me about $438,596. Which, the calculations roughly say I paid my "Silent partner" about $188,596 to start my new Company.
I fund the Company with my $250,000 and I decided to take a modest $60,000 per year salary. Wow, what an eye opener, I am now paying about 53% of my salary in taxes, Social Security (I have to pay double since I am an owner), Unemployment Insurance (Which I am ineligible for, since I own the Company), Medicare, State Taxes, yada, yada yah....
Now here is the first real big rub, I had just paid taxes on this money at 43% so now my hard earned savings has been taken down by about 70 cents on the dollar by my "Silent Partner" and oh yeah, my "Silent Partner" demands I pay them upfront, or go to court and maybe jail.
And this is all before any real revenue and way before any profits, or even break-even. My "Silent Partner" is not very patient.
I also had to pay to have the right to spend my money to build a business to the “Silent Partner”. This was another $2000-3000 to get the company even started.
At this time, even before any revenue over the next three years my "Silent Partner" will have made
$292,400 from me starting business with my $250,000 not a bad return for them, with me putting all the
money in, and doing all the work for them, taking all the risk.
This means that all the hard-earned savings will be reduced from $250,000 by my "Silent Partner" to
about $150,000 to run the company over the next three years.
Now time Jump 7 years later, we are successful, good sales, raised lots of money.....and we are a real
company, 600 employees, multinational operations.....
Supply Side costs
This Company utilized a lot of telecommunications equipment and also network circuits from various
carriers. Over the next few years we would purchase several hundred million dollars’ worth of this type
of equipment and circuits. Our "Silent Partner" got a cut from all the telecom carriers at about 17% of
the monthly bill for so-called fees, taxes, etc.
On the capital equipment we averaged about 2% per year in property taxes, ad valorum, and all the little
fees just to own the equipment.
We also paid an average of 6% so-called sales tax on maintenance and repairs on the equipment.
Labor Costs
Your "Silent Partner" is your largest component of cost to labor which is a direct cost to goods sold and
earnings. As a Company we had an above average payroll, we hired lots of engineers and professionals.
Our Labor costs ran about 60% of our cost of goods sold. The average burden cost to the Company for
so-called payroll tax/government costs was just under 50%. This was paid to the “Silent Partner”
upfront at every payroll period. This equated to approximately 30% of our cost budget going to "Silent
Partner".
To put this in perspective, when we hired a $150,000 per year senior engineer we immediately signed
on to Guarantee a $75,000 per year revenue stream to our "Silent Partner", regardless of the Company,
revenue or profitability.
G&A Costs
We averaged about 3% of our overall budget for so-called Compliance, and regulatory costs
Costs of Goods Sold
Our "Silent Partner" also earned about 2.5% on our wholesale services, through various so-called cross
boarder transaction fees, service taxes, and nexus claims.
They also participated in our business through so-called shipping taxes, and import duties and fees,
these Equaled 1% of the overall budget.
Selling and Marketing Costs
We had a significant amount of travel required for our services, so-called fees and taxes on Travel
averaged 17% of the travel budget or about 2% of the overall budget.
Summing it all up
A company that I created from nothing had a "Silent Partner" that had zero investment, zero risk, and
received payments upfront from inception until it ceases to exist, oh and these are guaranteed
payments or go to jail.
Our "Silent Partner" was able to capture 44% of our company’s cash flow over a 7 year period. The
Company had the following basics budget numbers in its seventh year. The Silent partner captured
$69,720,000 from my hard effort of starting a company that year.
Operating Budget $157,000,000 per year
Revenue $225,000,000
Overall, I made my "Silent Partner" over $400,000,000 and that was from 1994-2001, the company has
grown, it is now 2 companies and the "Silent Partner" has been able to improve their take to over 53%
of the cash flow, I figured out they are pulling down about $120,000,000 per year, on my ideas, my labor
and my investment, my “American Dream”.
Since I founded the Company my "Silent Partner" has reaped over $1,200,000,000 in pure cash, from
this Company's value creation. Thousands times more than I have, or ever will receive......
Again with zero investment, zero labor, zero risk...I am bitter....but I will not be fooled again....I am
smarter.....And I resign from building anything of value to be taken by the "Silent Partner".
I reserve my right to say "No"
The "Silent Partner" is the Government, the Government at all levels and identities.