Maximizing Wealth Through Entrepreneurship

There are countless reasons why someone would set out on their own to conquer the business world. For some people, it’s about bringing their ideas to life. For others, the motivation is purely financial. Regardless of the reason, entrepreneurs are hardcoded to pursue success in all of its forms.

Let’s consider two ways you can maximize your wealth by leveraging your entrepreneurial skill set. Both options are viable paths to pursue for small businesses, so read on to decide which one is best for you.

Building Wealth Through Business Growth

The first approach is a long-term solution that rewards dedication and steady growth. Essentially, you will increase your personal financial standing by paying yourself an increased salary or income as the company continues to expand.

The profits of the company will decide how quickly your salary goes up. This requires both patience and a careful balance between keeping the business sustainable, and optimizing your personal wealth.

To accomplish this, you should focus on growing your business while also keeping things manageable on the administrative side.  Establishing systems, cutting unnecessary distractions, and keeping financials up to date will go a long way towards ensuring that your business is both profitable and sustainable as you grow.

Here are some current best practices to grow a business quickly:

• Build a sales funnel early on that incorporates your entire business model and digital marketing strategy. This will ensure that you can scale upward as things ramp up.
• Keep a close eye on your competition. Take a look at what’s working for them, and what they struggle with so you don’t make the same mistakes.  Use tools like LinkedIn, Alexa, ahrefs, and of course, Google, to keep an eye out.
• Keep your current customers happy. Consider a customer loyalty program. It’s far more costly to acquire new customers, so build a lasting relationship with the ones you do have.
• Consider a franchising model that will allow you to expand quickly. This can be a complex endeavor, but it pays in the long-term.
• Focus on driving traffic through marketing practices such as SEO and PPC.

Maximizing Wealth by Selling Your Company

This option allows you to quickly garner wealth by selling your company, but it’s not quite as simple as growing a business and then passing it off. This option is attractive because it can result in immediate wealth (often with a lower tax rate, too) than running the business.

To start down this path, you’ll want to understand your exit possibilities early on. In fact, you can start thinking about the end goal during your first year of business. Start by setting goals for milestones in your company. Where do you want to be in 1, 5, or even 15 years from now? Setting these goals will help you direct the company’s path forward.

Many small businesses are sold as a multiple of EBITDA, or put more simply, profit, (in the 4-6x range).  In other words, if you’re generating $1m of profit, you could expect to sell for $5m. However, high-growth companies with extremely high gross margins (often software) can sell for a revenue multiple — often, startups with recurring revenue streams can garner 5-10x revenue multiples — but of course, recognize that those types of companies will also have well-funded and national/international competition.

Think about if you plan on selling the company wholly or will you allow someone else to slowly take it over for you — that person could be a family member, a close friend, or even another business entirely.

All of this culminates in the sale of the company, which you should also prepare for. Pull in an expert and practice your negotiation techniques and pre-sale corporate planning skills. Understand common language and techniques for selling a small business and you will uncover opportunities to increase the value of the company and walk away with more as a result.

Before you enter into a transaction, make sure that your current financials are up-to-date and properly showcase the company’s worth.  The “diligence” process will be infinitely easier if you’re not digging up receipts from three years back when you’ve got a prospective buyer.

Start thinking about these things as early as possible. The time to sell may come sooner than you think, so having a plan will ensure that you are not caught off guard.

Final Thoughts

Maximizing wealth is a process that starts early in an entrepreneur’s life and extends long into the future. Whether you prefer to grow the business and reap rewards through annual income, or you plan on selling the company, preparation is key.

If you prepare early on, you can pivot your plans quickly and ultimate reach your goal, regardless of how you decided to get there. How do you plan on maximizing your wealth? What tips would you offer to new entrepreneurs? 

Author Bio:

Jaren Nichols is Chief Operating Officer at ZipBooks and ZipBooks Pros. Jaren was previously a Product Manager at Google and holds an MBA from Harvard Business School.

 

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