65. Case study: OnlineInk Cartridges.com Janet Simmons used to work from home and did a lot of printing from her computer. Over the years, the price of high-quality printers fell, but the replacement ink cartridges always seemed expensive. Ten years ago she formed OnlinelnkCartridges.com to buy low-cost generic cartridges from China and sell them through the company website. Seven years ago, she added a recycling unit to refill customers' old cartridges. At first the business made a steady loss, but now sales are climbing steadily by around 10% a year. The last financial year showed a gross profit of A80,000, giving a margin of 7% and a return on investment of almost 5%. The long-term prospects for the company seem good, and Janet has to make some major decisions. Firstly, she can stay with the company and take it through a period of continuing growth. Her financial backers already own 35% of the shares, and her second option is to sell the rest of the company to them and either invest the money or start up another business. Her skills undoubtedly form part of the company's assets, and if she leaves, the remaining shareholders are likely to discount the company's value by about 50%. Her third option is a compromise, where she will sell some of the shares - perhaps 15-20%. This will have less effect on the share value, and still give her a lump sum to pay off her debts and invest for the future. Janet's aim is to maximise the value of her assets over the next 10 or 15 years, by which time she will be ready to take early retirement. Her accountant is adamant that her best future lies in running the company. This has the disadvantages, though, of putting all her assets in one place. Her bank's business advisor recommended the middle option of selling some shares to release money for other opportunities. She could add another A5,000 a year from her salary and build up a reasonable amount, perhaps using: n a Saving Account which gives a return of 4.5% a year n a Gold Account for the fixed sum, which gives a return of 6.5% but leaves the money tied up for at least a year; the additional savings could go into a Saving Account n a Personal Accumulator which gives 5% interest on a minimum of A50,000, but 10% on any additional savings. Janet also visited a building society manager who gave similar advice, but offered two other options. Firstly, she could put the money into an 'Inflation Fighter' account, which links the interest rate to the Retail Price Index and guarantees a return of 1% above inflation. Secondly, she could buy another house as an investment. The manager explained that, 'The rent-to-own market has been very unsettled lately. But if you take a long-term view, house prices have risen by 10% to 15% a year for the past 20 years, while inflation has become progressively lower. You can also generate income from rent - usually about 0.5% of the value of the house per month, a quarter of which is needed for repairs and maintenance.' Janet thought about these alternatives, but found them all a bit boring. Perhaps she should go for the excitement of starting a new business and seeing it grow over time. Questions: If Janet asks for your advice, how would you summarise her main options? What analyses would help her? Based on the information available, what recommendations would you make? What other information would you need for a reasoned decision?