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Value Creation Blog

Sudden Money™ Exists In The Strangest Places

Posted by Josh Patrick

sudden moneyI recently spent a couple of days with a client doing what we call our Object Review.  During the time that we spent together an issue came up that I see with lots of private business owners – having too much cash in the business. 

This particular client had asked me to explain some investment options and things that he could do with this money.  I went through a risk profile conversation with him and then started talking about investments that fit his objectives.  After the conversation ended he mentioned that he really wasn’t comfortable putting a large sum of money under investment.  Not because he was uncomfortable with me, just because it was a lot of money.

When he said this I realized that business owners have Sudden Money™ events that to the rest of the world don’t look like Sudden Money™ events.  I thought all he was doing was transferring money out of a company he owned to his personal account.

In fact, he was doing a lot more than this.  He was taking money out of his corporation where he didn’t really feel he owned the money and moving it to his personal account where he definitely knew he would own the money.  The idea of having this much money in his personal account was something he was having a hard time getting his arms around.  He needed to first get comfortable with having personal wealth before he invested the money in an investment account.

What I learned during this conversation and event is that a Sudden Money™ event happens when business owners transfer money from their business to their personal accounts.  We can’t assume that business owners are blasé about making this transfer.  In fact, it’s the first step many of them will take in creating real liquidity from their business. 

Transferring this money is a special event and needs to be treated as such.  We’re now talking about going through a formal Sudden Money™ process where we treat this personal wealth as new found wealth.  This is how this business owner thinks about the asset transfer and I bet its how many business owners feel the first time, and maybe even every time they transfer a large amount of money from their business to their personal account.

What are your thoughts about transferring money from your business to your personal account?  Is it a scary proposition or something you’re looking forward to?

Josh Patrick

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Topics: financial planning, investment management, sudden money

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