How do business owners build wealth outside their business?

Your business may be the best investment you’ve ever made. That doesn’t mean it should be your only one.

For many successful business owners, the business becomes their income, their largest asset, their retirement plan and the place where most of their financial attention goes. That can work incredibly well while you're building.

But at some point, I want to ask: What are we building outside of the business?

Should I take money out of a successful business?

I don't start by telling a business owner to take money out simply for the sake of diversification. First, I want to understand the opportunity.

What could another dollar earn inside the business? How much liquidity does the business need? How concentrated is your overall net worth? When do you want financial independence from the business? What do you want your personal wealth to eventually do for you?

Once we can see those answers together, we can make a much better decision about where the next dollar belongs.

Your business has a balance sheet. So do you.

Business wealth might include operating cash, retained earnings, equipment, real estate and equity in the company. Personal wealth might include liquidity, taxable investments, retirement assets, income producing assets and longer term family or legacy capital.

The goal isn't necessarily to move as much money as possible from one side to the other. The goal is to intentionally build both.

What might this look like?

For one owner, the answer may be keeping enough cash to comfortably operate the company, then systematically building a diversified personal portfolio.

For another, reinvesting in the business may offer an attractive opportunity, so personal wealth gets built more gradually.

For an owner approaching a sale or retirement, liquidity, diversification, taxes and future income may deserve much more attention.

Same question. Three very different answers. That’s why I don’t start with the product. I start with you.

Why build wealth outside the business?

Building a successful business can make you wealthy. Building wealth outside of it can give you options. The option to retire. The option to sell when the timing is right. The option to keep the business because you want to, rather than because your financial future depends on it.

That’s the kind of freedom I’m trying to help business owners build.