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Plumbing Web Connection Guest Column

Do you Have the Mercedes Benz Syndrome?
By Ruth King
A colleague was helping a business owner look for funding for his business. He introduced him to a potential investor at lunch. The next day the investor called my colleague and told him that the person was nice but he would never invest in his business. My colleague asked why. The investor said that he had the “Mercedes Benz syndrome”.

“What’s that?” asked my colleague. The investor explained that during the conversation at lunch he found out that this person was funding a $2200 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 personal “finer things of life”. He went on to explain that he called this the “Mercedes Benz syndrome” where the business pays for unnecessary personal assets, i.e. the owner’s “Mercedes Benz”. Investment that is supposed to go towards the business’ needs goes towards the owner’s personal needs.

It struck me that a lot of company owners do this too. I know some. You probably know some. These are the owners who don’t understand that cash does not mean profits and that having cash does not mean that you have to spend it. These are the owners who use the business cash to buy boats, have the company pay for expensive trucks and cars, write off vacations, build an expensive home, have a non-working relative on the payroll, etc. Instead of investing in the business, they invest in themselves.

Don’t get me wrong. There is absolutely nothing wrong with enjoying the fruits of your labor. However, you can’t do it at the expense of your business. You have to save cash for the downturns. You have to save “for a rainy day”

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So how do you avoid the Mercedes Benz syndrome? You make sure that you are earning enough on your jobs and service work to generate reasonable profits and you save some of the money you generate from collections. You can actually save relatively painlessly.
First, save all of your maintenance agreement money. When customers pay you in advance, that technically isn’t your money until you perform the services. It should go into a savings account until the maintenance is performed. Then you can transfer it, if you need it, into your operating account. This money forms the basis of your “rainy day account.”

Second, save 1% of every check that comes in the door. That means if your deposits for the week total $1,000 you write a check into a savings account for $10. You’ll never miss the $10. And, that $10 will start earning interest.

This savings plan is not difficult to do. However, it takes discipline to do it. Whenever a customer pays an invoice you have to have the discipline to write a check to a savings account for the portion of the payment that needs to go to savings.

How much should you save? This is totally up to you. It depends on whether your company has a line of credit. If you have a line of credit and it isn’t used, that can be a form of emergency cash. However, even with that safety net, many company owners like to have at least two to three months overhead expenses saved. Others have the value of at least six weeks payroll and payroll taxes in the bank at any moment. Their reasoning is that if nothing came in the door in terms of work, then they could at least pay their people for a reasonable time. You’ll need some savings that are fairly liquid, i.e. you can turn them into cash quickly. Other savings could be more long term which probably will earn more interest.

Hopefully you don’t have the “Mercedes Benz syndrome”. Good profits and savings will prevent you from a financial hardship in years to come.

Ruth King is CEO of and the author of the best selling book, The Courage to be Profitable: Get and Stay Profitable in Less than 30 Minutes a Month. Email Ruth at




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