Is this scenario of a passive owner making less than some of her/his staff sometimes the norm in small business?
You're comparing compensation between yourself and your employees, which
isn't the correct way to think about it as a business owner. The wages and
benefits you pay your salespeople are simply business expenses. The question to
be addressed: After paying all my business expenses, is the resulting margin
worth my time, compensation, and risk?
+1 to everything Rubic said. I will add a few of my own thoughts:
Current owner is lying if he says he spends no time on the business (or even just a few hours a week). If it was almost completely passive as he is describing, why sell? Most businesses sell for around 3X multiple of net profit. There are a lot of variables on top of that, but it is a decent rule of thumb. So why would the guy/gal sell a business for $60-$80K if it is already netting him $20K/year while only spending 100 hours year to manage/oversee? Most prudent folks would simply keep the business for cash flow and not sell IF what he is telling you is the truth!
"Passive Income" is all the rage these days. In the small business world (think under $100M in revenue), it is almost all complete BS. Yes, you can create systems, hire key employees, etc. But EVERY SINGLE SUCCESSFUL small biz owner I know or provide services for works A LOT. Most love the work, and the biz is their entire life (hobby, identity, fun, etc). I am not bashing that lifestyle, but I think you are living a pipe dream if you think you are going to purchase a business and work 5-10 hours a week.
Might as well throw your money out the window...
What is the owner asking for the business? Could you replace one of the higher compensated employees to increase your income?
My main advice would be to give up on the passive income pipe dream unless you are willing to work 10 or more years to give the business a chance at becoming a passive income source.