"What's that?" asked my colleague. The investor explained that during a conversation over lunch he found out this person was funding a $2,200 Porsche lease through the business. He appeared interested in having the business pay for his personal lifestyle. The investor explained to my colleague that his money was not going to pay for a car lease. His investments were supposed to help grow the business, not the owner's desire for the "finer things of life." He went on to explain that he called this the Mercedes-Benz syndrome, where the business pays for the owner's unnecessary personal assets. Investment that is supposed to go towards the business instead goes towards the owner's personal needs.
It struck me that a lot of contractors do this, too. I know some. You probably know some. These contractors don't understand that cash does not mean profits and that having cash does not mean that you have to spend it. These contractors use the business cash to buy boats, have the company pay for expensive trucks and cars, write-off vacations or build an expensive home. Instead of investing in the business, they invest in themselves.