I met today with G_____, the guy who is helping us set our family legacy goals. He gave me a preliminary read-out on “where we’re headed” financially. Pretty mind-blowing. I’m having him revise his “assumptions” in a few spots, but no matter how the assumptions go, we are looking at a potentially truly HUGE fortune to deal with before Sarita and I die.
Assuming death dates of 2040 (when we’d both be in our mid-80s) and assuming several other things as G_____ did (for example, low single-digit yields and mid- to higher-single-digit growth in most investments), we are looking at a combined net worth of well over a hundred million dollars at the time of our death. Even if we give away 50% to 70% of our Adjusted Gross Income on an annual basis.
Frankly . . . honestly . . . this seems unbelievable. It is . . . just . . . beyond belief. Beyond imagination. It “can’t” be true.
And, honestly, I am unwilling to go along with some of his assumptions. For example, in our primary business, he assumed a profit margin for the next 33 years equal to the profit margin we enjoyed last year. (I.e., he assumed the same percentage rate.)
And that can’t be a reasonable expectation for the future. First, because last year was quite high. But beyond that, profit margins fluctuate. And companies’ profit margins usually decline over time. Competition tends to squeeze them. So we’re starting already high; then he’s maintaining a constant number in an environment where you can be virtually certain the profit margins are going to be squeezed.
But what’s a fair assumption to make?
If we can’t make the kind of margin we made last year–or a margin somewhat in the same range–as G____ asked, “then why wouldn’t you invest in something else that would provide such returns?”
. . . Well . . . One reason: Because we’re not really in this business for the profits (even though we are very glad for them and don’t want to run the business unprofitably).
But even if it were to provide below-market rates of return, there are reasons I think we probably would still want to continue in our current work. (We really believe in what we’re doing, whether it is highly profitable or not.) Still, he is correct to ask: At what point would we abandon the project?
I don’t know.
But 33 years of constant percentage returns on top of an assumed steady 6% rate of annual growth: I don’t think either assumption is reasonable. And, therefore, of course, neither are the results truly reasonable.
But . . . then what?
What assumptions am I willing to make?
And, in the end, suppose I were to make very different assumptions. Suppose our primary business were to grow at only 2% per year and throw off profits, also, at “only” a third of the rate that G____ is assuming. Would the different numbers make any real practical difference in how we plan?
At this point, even if the company were completely eliminated from the picture, we would still be looking at a fortune, in 30 years somewhere in the neighborhood of $80 to $100 million.
Supposedly.
Can this be real?
It’s scary!
The responsibility!
******
I have told G____ that I would like to present his numbers to the family, in his presence and in the presence of our primary financial and legal advisors, L____ and B____, so we can discuss “where do we go from here?” What kind of additional planning help do we want? Who should participate in the planning? And so forth.
I had originally hoped to be done with the entire planning process by August 1st. That is going to be a tough date to hit. But it is still do-able . . . if we keep moving.
Why August 1st? . . . Well, 1) I just want to get this process done. But, 2) Justin will have to be heading off to school pretty soon after that (August 13th). . . . And once he’s gone, it will be pretty tough to move forward until the next college break. . . .
I am asking everyone if we can plan a meeting next Thursday, June 7th, either in the morning or afternoon . . . at our company’s offices. . . .
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