Money isn’t a bad thing and you deserve to build wealth through owning your business.
You’ve worked long, hard hours, taken financial risk, and made sacrifices that non-business owners don’t have to make. You may have other reasons for owning your company, but making a significant amount of money should be a priority because your business is a vehicle to provide for your financial future.
Business wealth comes from two avenues: making money along the way and selling the company someday. Ideally, you should do both. By viewing your business as a long-term investment and building its value, you should be able to take money out while you own the company and maximize your return when you sell it.
Learn how to make money. Many people focus so much on the actual operation of their companies that they never learn how to produce a strong bottom-line profit. Making money is more science than art and can be learned through advisors, classes and self-study. Take the time and make the effort to learn how other business owners have created profits and accumulated wealth.
Pay yourself fairly. A frequent misconception is that business owners should minimize their personal income to “contribute” to the business. This might be necessary for the short-term but is inappropriate for your long-term financial planning. If possible, your take-home pay should be equivalent to or better than what you would earn in the market. Paying yourself fairly allows you to invest elsewhere, whereas funding the business by drawing an inadequate salary is essentially putting all your eggs into one basket. If your company fails someday, you will have lost it all. Just as you wouldn’t run a business having only one customer, your business shouldn’t be your only personal investment.
Determine what is enough. The “enough” figure is a personal decision based on your circumstances. It’s the point you set for yourself to sell the business and once you start nearing that point, you should initiate your exit strategy. We know people who had owned successful companies and had reached their personal goals, but decided to hold out for a little more money. When the recession hit, their companies lost value and they were forced to work in their businesses longer than expected. Plan for your personal “enough” number and don’t be trapped by hanging on for “just a little more.”
Learn how to negotiate. Negotiation with vendors, bankers and customers can increase your company’s profitability and, ultimately, your own. If you’re not a skilled negotiator, take a class or observe someone who does it well. Always research large purchases and try to get the best prices and terms so that you’re not overpaying or stuck with unfavorable terms. Every dollar you save can go toward building personal wealth.
Build a valuable business. Certain things add value to a business and appeal to future buyers while others are seen as detriments. For example, if your business completely revolves around you and has little value apart from your own involvement, it will be hard to find someone willing to buy it. Know what it takes to build your company’s value and incorporate it into your overall business plan. Doing so can make the difference between merely closing the doors someday and walking away with a big, fat check.
If you’re a business owner, decide today that someday you’ll be a wealthy business owner. This means creating personal wealth. It’s reasonable, it’s fair, it’s appropriate, and it should be part of your overall plan. As someone once said, “Money doesn’t buy happiness but I’d rather cry in a Ferrari.”
Laddie and Judy Blaskowski are partners in BusinessTruths Consulting, Inc. and several other businesses, and authored The Step Dynamic: A Powerful Strategy for Successfully Growing Your Business. They can be reached at Judy@BusinessTruths.com.