Business owners struggle with knowing how much money they can safely take out of the business versus leaving it in the business for security and to fuel growth. Owners who rely on their memory and self-discipline to take sufficient money out of the business usually find the business’s needs always seem to win — after all, your business’s appetite for dollars will never completely go away. This creates a dilemma: The more you reinvest back into your business, the greater your likely financial dependency on the business. And the greater your financial dependency on the business, the harder it may be to exit with minimal costs, taxes and effort.
To help owners fund a growing business while diversifying wealth outside the business, we often suggest they adopt a M.O.O.S.E. Not the big animal with antlers, but a Monthly Out Of Sight Earning. Ask yourself the following: Would your business miss $10 per month? If it wouldn’t miss $100 per month, how about $1,000 per month? How about $10,000? There is an amount per month that your business would not likely miss. Identify that amount and set up an automatic transfer each month into a personal account. It’s essential that the withdrawal be automatic such as via a checking account sweep. If you rely on memory and self-discipline, your M.O.O.S.E. may go hungry and die a painful death. Often the withdrawal will be taxable income to you. The point is not tax savings but rather systematically creating personal wealth without undermining business needs.
Over time, your M.O.O.S.E. may grow into a significant asset, which diversifies your wealth, reduces dependency on your business and facilitates successful exits — all accomplished without reducing your business’s financial health or slowing its growth.
