Paul Butler | The Foundation of Business

In the fall of 1978, the day finally came when I was old enough to have a newspaper route. In the previous summer, I tried to ring the clock, but the owner of the shop was dismissed with the same message said in different ways: “You are not old enough yet, boy. Come back when you become a teenager.” And so, I did – starting my first newspaper route two days after my 13th birthday.

As I look way, way back into that triangular transaction between newspaper publishers; Shop owner and a little boy on his bike – it taught me a lot about the foundation of business in a free-market economy.

Not everyone had a newspaper job and no one was forced. Some of my friends received such generosity from their parents every week in what we would call “pocket money” there, and here a “knowledge”, they didn’t have to work. Isn’t it like today, how the government will issue a “Hensh” for some who don’t want to do anything? Just like the parents who gave their children money for nothing; I wonder what the wisdom is, in a government that does the same.

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On a trip back to the summer of ’78, some of my friends had two newspaper routes – one in the morning and one in the evening. What capitalists! The children always had money. A small percentage of my friends also had a Sunday route, which was when the big money came in – due to the increase in the Rut, and the form and price of the newspapers. These were the “Sunday boys” who could save or get what they wanted – all from their abundant funds.

See, free choice in a free-market economy has led to some continuing to depend on their parents; Some have a little extra; Some have more and some have a lot – all driven by an individual’s choice not to work; Work some; Work more or work a lot. When a child didn’t show up, others took the opportunity to sneak in another way before school – often up into the schoolyard with seconds to go until the bell rang.

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The store owners – what we called across the pond, “the news agents” – clearly had their margins worked out. As a child I never thought about their money-making model, but now I calculate their labor cost was about 15%.

Workers today sometimes complain about the gross margins their employers make. I am reminded of the fact that nearly 250 Starbucks stores in 40 states have voted to unionize since 2021. , “gross” to someone who does not understand the fundamentals of commerce.

Just as we could have soon on our bicycles if we knew our news agent was making 85 pence for every 15 pence we were paid, I can understand the bail of a barista thinking the same.

The cost of goods sold for Starbucks is about 15 cents on the dollar, hence the 85 cent gross margin, but from that they must deduct their cost of labor, which according to last year’s publicly available P&L was 40%. You might be thinking – “hey but 45% profit is still pretty rich!” And… you would be wrong because they actually only made 12% net margin after deducting all the operational (non-labor) expenses in the stores; The overhead at the corporate headquarters and paying the three-letter word that ends with “X” we all love – tax.

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I don’t know how much my first boss made in the first job, but I reckon it couldn’t have been more than 10% when he closed shop, every late evening. Most importantly, his entrepreneurial venture gave me an opportunity to make money and, most importantly, to learn about the fundamentals of business in a free market economy, and for that I am eternally grateful.

Paul Butler is a resident of Santa Clarita and a client partner with Newleaf Training and Development of Valencia (newleftd.com). For questions or comments, email Butler at [email protected].

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