The 3 Critical Stages Of Wealth Every Successful Entrepreneur Must Master
Posted In: Entrepreneurial Wealth Management

Being wealthy is more than just making money.

It’s also how much you have access to, what you can do with it and what happens if there is an unexpected tragedy.

The choice you make to become wealthy depends on the plans, strategies, and structures you have in place.

While the road to wealth is very different for every business owner, there are 3 critical stages that each must master.

1: Financial Security

As a business owner, your most important asset at this stage is your ability to bring in revenue and keep things running smoothly as your business grows.

While some mature businesses may be at this stage, it’s a common place for start-up entrepreneurs to grind through the first few years of business trying to keep everything moving forward.

In the scramble to juggle the many hats of operations, admin, and business development, security plans are often forgotten or put off until later.

This is an extremely risky position for your business and family in the case of your death, disability or a critical illness.

What will happen if you suddenly aren’t around?

Without the proper protection, the business might need to be sold, either in part or in entirety, often below fair market value.

Buying a business (even one already owned in part) is an arduous task. Valuations, establishing terms, and raising capital are all time consuming.

If there are remaining partners, they may not want to purchase your part of the business, or they may not agree on a price. Alternatively, your partners may want to sell their portion.

Then for the business to continue, a buyer needs to be found.

Ongoing negotiations and legal delays may hold up the deal hindering the business’s day to day operations. Without a resolution, the business may be forced to close.

How to move to the next stage

Before you can start accumulation of wealth, you must focus on protecting yourself, your business and family so you have a strong foundation to build your wealth upon.

To reduce risk, ensure the following:

  • Your family and business are protected in the case of your death, disability or critical illness.
  • You and your business are protected in the case of one of your business partner’s death, disability or critical illness.
  • There is liquidity in your assets in the case of emergency.

2: Wealth Accumulation

Once a business has security and has matured out of the start-up phase, the business owner can focus the acquisition and growth of assets.

A good financial plan will help you put the pieces in place for a tax-free retirement while allowing you to enjoy your lifestyle now.

There are 5 essential principles to the successful accumulation of wealth:

  1. Long-term View– as Warren Buffet says, “It only takes two things to succeed as an investor: first, having a reasonable plan; and second, sticking to it.”
  2. Tax Efficiency– keep more money in your pocket instead of giving “it” to the government in the form of taxes.
  3. Reduce Volatility– while achieving the same net rate of return.
  4. Portfolio Diversification– don’t put all your eggs in one basket, and all your baskets in one truck.
  5. Income Producing Investments– It only makes sense to have assets that pay you to own them and provide liquidity – and this is beyond real estate.

How to move to the next stage

Before you can start distributing your wealth, you must accumulate it, grow it and protect it from paying too much taxes, both now and in your retirement. To do so you must ensure:

  • There is liquidity in your assets.
  • You have the right investment opportunities.
  • You can enjoy tax-free retirement income while still maintaining your desired lifestyle.

3: Wealth Distribution

What are you going to do with the money that you can’t spend in your lifetime?

Perhaps you want to leave your wealth to your loved ones or charity, or start a foundation. Or, you might want to witness the impact of your wealth by sharing it while you are still alive.

For many, the distribution of wealth is a very meaningful stage of their life and death. It deals with answering the question “How do I want to be remembered?”

Wealth distribution involves estate or succession planning to help ensure the money that you worked hard to accumulate and protect goes to family or your favourite charity instead of being lost to taxes.

Being Wealthy Is A Choice

While there are very specific stages you must go through to have financial security, accumulation and then distribute your wealth while protecting it from tax erosion or unexpected tragedy, there is no one-size-fits-all answer.

It’s essential to have a solid financial plan that will get you there. Of course, we’re here to help.

Jeff Devlin | Certified Financial Planner, Director


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