For a business owner, achieving financial security is an undeniable indicator that you’ve finally made it. However, the road to get there is a demanding, challenging, but ultimately rewarding one. It requires you to set clear goals and devise strategies that will ensure that you’re positioned toward wealth-building at every turn.
In this regard, it is important that wealth for business owners doesn’t only refer to how much profit you make at the end of a period. For a sustainable measure of building wealth, you have to develop approximately the same level of growth across your savings, financial assets, accounts, stocks, and even non-financial assets.
To help you develop your path to getting there, here are some wealth-building strategies for business owners:
1. Master your business
As a business owner, your own enterprise is your greatest asset in generating your wealth. Make sure you’re aware of how it works and that you understand cash flow. By knowing how your own business works, you can find ways to further improve it. More importantly, you will know it on a personal level, which will give you a significant advantage in any endeavor that the organization will take moving forward. Remember that in business, there is no one-size-fits-all and the better you define these tools for your business’s specific needs, the faster you will reap its benefits.
For the second part, understanding cash flow is having a clear sight of everything that comes in and everything that has to come out. Take note that it doesn’t translate to you micromanaging things that your accountants and payroll officers do on a daily basis. It simply refers to see how a change in one aspect could affect another, at least financially. As the leader in the organization, your direction will help determine whether you get to minimize costs and maximize profit, which brings us to the next strategy.
2. Make the most out of existing systems
To accelerate wealth-building, you basically have to increase your income and decrease your expenses at every possible turn. For you, the business owner, this means seeing the larger picture. While some businesses are tempted to cheat the system at the risk of their very existence, there are actually perfectly legal systems and techniques to help you accelerate how you build your wealth–and it has something to do with how you save on taxes.
There are legal ways to slash your business’s tax bill, which means you get to keep more for the company. This, in turn, can be invested in other assets that would generate income for you. The amount of money you pay for taxes that could otherwise be avoided is the same money that you could use to earn more income.
For example, you can check if your company is a qualified small business, which can issue qualified small business stocks or QSBS. This is a strategy that greatly benefits investors and stockholders such as founders and employees. By meeting the QSBS requirements as detailed in the IRC Section 1202, any capital gain made from the sale of QSBS can be excluded from taxes. Furthermore, the QSBS tax break can be compounded and be made virtually limitless thanks to an investment strategy known as QSBS stacking. These are perfectly legal strategies and learning them could come in handy should the opportunity present itself.
3. Distribute your business income
As you start making more money, you have to remember not to rest on your laurels just yet. Distributing your wealth through trust, reinvestment, or any other method isn’t always done in pursuit of more wealth; it can also be done to protect what you’ve built thus far and make sure you don’t lose them somewhere in the process. In trading specifically, this is known as diversifying, which minimizes your risks.
Also, by defining a budget plan that works for you and sticking to it, you create a cycle of wealth that potentially creates an increasing return on your end.
4. Keep on learning
The most important asset you have in managing your business and directing how you build your wealth is still yourself: your skills and your mindset. Some business owners lose their way as they start reaching new heights, often falling victim to maladjustments from a growing organization or rapidly increasing assets. By continuously educating and training yourself, you prepare yourself mentally for any changes. This minimizes the risks of you being blindsided by any challenge that might come with the growth you worked so hard to attain.
For some leaders, they maintain their vision and grounding by supporting themselves with equally-driven colleagues or better yet, finding mentors in the industry that serve as their beacon while they navigate their own path as an entrepreneur. There are experts in almost any field imaginable, you have to find the specific ones that you need.
As a business owner, it is important that your company is the platform with which you can change your life for better or worse. More importantly, this is the same medium with which you can affect the lives of others, starting with your very own employees. By taking the initiative to accelerate building your wealth, you open yourself and your organization to more opportunities for expansion, growth, and security.
Sophia Young recently quit a non-writing job to finally be able to tell stories and paint the world through her words. She loves talking about fashion and weddings and travel, but she can also easily kick ass with a thousand-word article about the latest marketing and business trends, finance-related topics, and can probably even whip up a nice heart-warming article about family life. She can totally go from fashion guru to your friendly neighborhood cat lady with mean budgeting skills and home tips real quick.