I mentioned that profits have to do with increased wealth; and increased wealth is not the same as cash. If we fail to understand those differences, we can run into some serious trouble.

I thought I would illustrate what I am talking about. Read the rest of this entry »

What are profits?

I don’t think most of us really understand the concept very well. In fact, I’ll include myself in the number who struggle to understand what profits are.

To illustrate: When you hear that a company made, say, $8 billion last year, what image comes to your mind? –For me, I tend to think: “Oh, wow! They have $8 billion in cash in a bank somewhere–$8 billion that they did not have the year before.” “Profits” mean “cash.”

That’s what many people think. But that’s not right.

I’m sure there are more technically correct definitions of the word profits, but here’s a the best working definition I’ve been able to come up with: Profits are any increase in assets for which a business does not have increased liabilities (or debts) other than to the owners. Put another way, profits are an increase in wealth–and (most important to understand–and something I still tend to forget!) wealth comes in many forms other than money!

I say this because, for the longest time, I thought of profits in the same way I thought of a paycheck: profits are the same thing as a paycheck. You take them, bring them to the bank, and buy stuff with them.

But that’s not the case. Read the rest of this entry »

Last night, a couple from Ohio, serial entrepreneurs, talked a little about their personal “journey in giving.” It’s amazing how encouraging it can be simply to hear someone else express much the same idea you have in your own heart and mind.

The thing that jumped out at me in what they said — more than anything else — had to do with what they said about their latest company: “We are giving 100% of the profits to our favorite charitable causes.”

“????!!!!” –How can they do that?!? You have to pay taxes, at least!

This afternoon, at lunch, I was able to corner the husband and get a little explanation. Read the rest of this entry »

Our proposed legacy plan includes the idea that we should reposition/restructure/transfer the assets of our S-Corp to a 501(c)(3) [non-profit/tax-exempt] organization.

That’s a fairly significant . . . –no; downright radical–proposal. And we’ve got to think and pray about the implications and consequences and just, plain, how to do it effectively (if we do it–indeed, if we are able to do it–at all).

So this morning, at breakfast, I mentioned to some men from our church what we are thinking about.

In response to what I said, Read the rest of this entry »

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, Read the rest of this entry »