Content: Page 16, Becoming Your Own Banker Fifth Edition

Now we are going to face the complications at your grocery store. Let’s assume that you are a male, married, with children – where is your spouse going to shop – your store or somewhere else? Your store, of course! She comes in and fills her cart with groceries. Here comes the complicated part, so pay close attention. This point is critical and requires complete honesty. Out of which door does she want to take the groceries – front or back?

When asked this hypothetical question, an amazing number of people will admit that “she will probably want to go out the back door, avoiding the cashier at the front door.” This is a polite description of theft! More retail businesses have been destroyed or severely limited by this factor than any other. It is a feeling among owners and those related to them that “this is our business and I can do anything I want to!” Unless this feeling is overcome the business is doomed. Remembering from lesson 5 the small markup on the can of peas – this means that if your spouse steals one can of peas, you must sell 20 to make up for it.

Furthermore, can she go out the back door with groceries, over a period of time, without the employees witnessing her act? And what will they do? Right! They will do the same! I’m trying to paint the picture of how devastating theft is to a retail business. I’m told that 85% of theft in a retail business is by employees.

There is another factor that makes owners want to go out the back door with goods. All businesses have a “silent partner” – the IRS. If your spouse goes past the cashier at the front door and pays retail for the peas, it means that your store will make more money than if she went out the back door. And the IRS posture is – “the more you make, the more we take.”

Imagine a situation where there is no income tax on the sale of groceries. Now we have eliminated one of the reasons to go out the back door. The only problem that remains is the urge to use the back-door privilege. This must be overcome – your business is at stake.

In addition, you and your family (plus maybe some others) are “captive customers.” You are not going somewhere else to buy groceries. If you charge these captive customers wholesale prices you will make no profit and you have defeated the entire reason for being in business. If you charge them retail prices you are assured of profit. But these are “captive customers” – why not charge these folks 62 cents for the can of peas? Instead of making 3 cents you are now making 5 cents. Your have increased your profit margin significantly! The extra 2 cents will go directly to additional capital and it will enable you to buy more peas to sell to other customers – and there is an unlimited demand for peas! Hopefully, you can see what continued use of this practice can do to the profitability of your business. Do this over a long period of time and your record books will show a superior profit picture.

When you sell your business many years later, you are in competition with others that have not obeyed these principles. He and his family members took goods out the back door. His record books will never look as good as yours. In fact, he will probably have gone out of business some years ago.

Even if he is still around, can you guess which business will bring the better price? Yours!

With the proceeds from the sale you can buy a huge annuity and have income deposited monthly directly to your bank account at retirement time.

I hope that you have learned this little lesson well because we will re-visit the grocery store many times in this course of study. If you understand the grocery store, the rest of learning how to be your own banker is a “piece of cake.”

Grocery stores are in the business of moving groceries to customers. When you sell something, you must replace the item to sell again. If you own the store don’t steal the peas.

Banks are in the business of “renting money” to customers. When they lend money, they must get it back, with interest. If you own the bank don’t steal the money!

Pretty simple, isn’t it?