When I approached Audrey Maxwell about being a subject for this book, she told me I had the wrong girl.
"I'm not a millionaire," she said. "In fact, I'm nowhere near it."
But because she was a partner in a business I'm familiar with, I had a different take on her net worth. "Just for the heck of it," she agreed to do a quick calculation of her assets. This is what we discovered.
Her house, net of her mortgage, was worth $550,000.
She had $40,000 in bonds.
Her stock portfolio was worth about $20,000.
She had $135,000 in her retirement plan.
And she had $30,000 in cash.
That came to a grand total of $775,000.
"What did I tell you?" she said.
"But what about your business?" I asked her.
"What about it?"
"You do have equity in it, don't you?"
"Well, of course I do," she said.
"And your equity is worth something."
"Well I guess it is, but I'm not planning to sell my shares."
"You don't have to sell your shares to recognize their value," I reminded her.
Normally, valuing shares in a small, privately held business can be dicey. But in Audrey's case, the matter had been settled. Soon after the business began making profits, the partners got together and established a way to value the business. They agreed, and incorporated into their partnership agreement, that the company would be worth the sum of three years' net earnings divided by three times four. And they agreed ...