As a CPA, business owner, and advisor to a number of small businesses across the U.S., I know without a doubt that the #1 path to building personal wealth is through business ownership. It isn’t the ONLY path, but done correctly, entrepreneurs and investors have amazing opportunities to build wealth that average employees do not. Here’s why…
Sure, you can get a high paying job, invest wisely, and live a frugal life and save millions over a lifetime.
Yes, you can invest in real estate, stocks, and bonds with a day job and save tons.
And yes, we all know plenty of stories of failed entrepreneurs who dumped their life savings into their business idea and never saw a penny of profit from it.
But for those who figure it out, those who rise to success by building (or acquiring), a profitable, growing, and thriving business, the benefits extend beyond just the high salary potential of being an entrepreneur.
Here are 5 Financial Benefits to Business Ownership that you may not have considered.
#1: Control Over Your Time
Listen, nobody ever said that business ownership is a cakewalk. In fact, CEOs usually have to work harder than the average American employee to get the business off the ground, get it turning a profit, keep customers and staff happy, and basically do everything a business owner needs to do to succeed.
Especially in the early days, when it’s just you doing everything to serve your customers, it can be overwhelming and literally require around-the-clock attention from you, the entrepreneur, just to break even and generate that precious momentum.
However, once you get a client base, increase cash flow, turn a profit, and have the ability to hire staff to take over the low-level work, you may find yourself having a more flexible schedule.
Just think about it.
In the early days, you do everything to get momentum and save cash. You do the marketing, sales calls, customer contracts, billing, customer fulfillment, customer service, paperwork filing, bookkeeping, office cleaning…everything!
And if your spouse and kids are honest with you they will let you know when you are spending way too much time at the office – so make sure you keep things good at home and always make time for your family.
Ok back to business.
But once you have some employees to take that work off your shoulders, you can get back to focusing on what you do best: Growing your business.
And if you structure your business properly, the success of the business can be less and less dependent on you to be physically present or involved in every aspect of the business…which frees up your time.
Now in some professions, it can be very difficult to scale your business since the customers require your physical presence to serve them.
Some examples are typically professional services like chiropractors, surgeons, doctors, dentists, attorneys, accountants, and coaches, where the value of their business is in their skills and credentials.
But still, there are plenty of ways to scale these businesses…primarily by bringing on partners of equal or greater skills to essentially duplicate the work you know how to do and manage their own book of business underneath your firm.
But in general, as you start to build efficiencies, bring in new customers, and hire staff and managers, you can begin to grow your business and spend less time yourself personally serving your customers.
And this frees up your time.
And since time is money, you just created wealth out of thin air by removing yourself from day-to-day business operations…at least a little bit.
#2: Business-only Tax Benefits
If you look into a few history books and ask a few CPAs or attorneys, you’ll probably find that most of America’s laws, including the tax code, were originally built to benefit wealthy business and landowners who founded this country in the first place.
And while laws and government have changed pretty drastically over the decades, it’s still generally true that business owners get many benefits that employees do NOT.
And you don’t necessarily have to be wealthy (at least not yet), to enjoy the tax benefits unique to business owners.
Let’s look at a few examples…
The basic income equation for a business is revenue – expenses = taxable income. Yes, there are many intricate exemptions, credits, and exceptions that complicate this equation but in general, a business is taxed on the net income it generates by selling products or services and deducting its expenses.
If you don’t own a business, you don’t have too many deductions in normal, everyday life, compared to that of a business owner.
Basically, you are taxed on the income you earn from your employer, you subtract out some expenses, and a lot of people take the standard deduction, and you are taxed on this amount.
Sure, you get benefits for contributing to your retirement accounts, deducting certain home expenses, and having passive investments, but in general – Individuals have many fewer options to reduce their taxable income compared to business owners.
Business owners can deduct the purchase price of equipment, machinery, cars and trucks, and even software that they use in the normal course of business, which reduces their taxable income.
Here’s an example:
Let’s say you own a home, and you buy a new pickup truck, a $5,000 lawnmower, put a new roof on your house, and pave your driveway with fresh blacktop.
Do you think the IRS gives you any benefit for spending that money?
But, what if you owned a landscaping company and a residential rental property?
A business owner gets big tax benefits and write-offs by purchasing qualified equipment for carrying out business and owning a rental property.
The landscaper can write off the value of the truck and lawnmower, deduct the gasoline, insurance, and employee salaries it takes to operate the business, and she can also write off the roof replacement and driveway over a defined period of time.
All of these things reduce the taxable income that they generate, for the benefit of the business owners.
You don’t get these benefits as an employee working for the man!
Travel, Hotels, and Meals
Wish you could get money back from the government for driving your car, paying for public transportation, staying in hotels, and even buying lunch on the road?
One of the perks of business ownership is that if your business requires you to leave the office for client work, training, marketing, and basically any business-related activity, those expenses are deducted from income.
Now you’re probably saying to yourself, “well Chad, my uncle Jim takes vacations to Disney every year and takes us out for steakhouse dinners and laughs when he calls it a ‘business writeoff.’”
Well, hate to break it to you, but your Uncle Jim may not be correct, at least not entirely.
There are ways to combine business travel with personal holidays and still get a partial tax benefit.
And even if you save $20 on your taxes, that’s $20 saved that you would not have had as a non-business owner.
Many business owners, especially those with good accountants, take advantage of multiple retirement account strategies to minimize taxes and maximize their take-home income.
While I won’t get into specific strategies in this section, just know that the tax code can provide big advantages to business owners who have a plan and leverage the code to their benefit.
#3 Access To Information and Resources
Have you ever heard the saying, “you are as good as the average of the give people you spend the most time with?”
Well, what if you spent a lot of your time with other successful business owners and investors who were even more successful than you were?
What if you regularly rubbed shoulders and had coffee with the CEO of the biggest company in your town, the developer who just built 10 homes in as many weeks, or the mayor of your city?
What if you had access to information about your local business environment, zoning, economic decisions, and other developments that directly impacted your business – well ahead of your competitors?
That’s how connected business owners benefit.
If you own a local business, you would do very well by connecting with decision-makers, competitors, and complementary businesses to exchange information about your local markets.
Here are some examples of how being connected can impact your income and wealth drastically:
- You are a real estate developer, and you are constantly buying land, pulling permits for construction, and seeking certificates of occupancy for your projects. You need to know how to work with the town clerk, zoning office, tax office, and building inspector, among others.
- You are a business banker, and you are constantly opening checking accounts and writing loans for local businesses. You want to know of any economic decisions, that would impact your clients so you can help them make better decisions and avoid taking on loans right before, say, your town decides it doesn’t want to issue more permits for your client’s business.
- You are a restaurant owner, and you are making a great profit. You want to know when your town issues new liquor licenses or denies new applicants, so you can gauge the competition and know if it’s time to open another location, or get out of town as quickly as possible!
All of the above examples will all translate into you knowing more information about your business’s ability to succeed, your competitors, and just how supportive your local community is of your particular business.
This can literally make a 7 figure difference in the success of your business over time.
# 4 Unlimited Income Potential
The not so secret benefit of owning a business is that when you design your business properly, you can enjoy virtually limitless revenue potential as you build a meaningful and quality business.
And I have mentioned proper business structure several times in this post so I will clarify what I mean since it has everything to do with how much time you have, your ability to optimize taxes, your access to information, and your income…
The structure I am talking about relates to building operational systems that minimize the time you spend on nitty-gritty operations and maximizes the time you have to spend generating more value for customers that translates into more income, on a repeatable basis.
You see, many business owners start off strong, doing all the work themselves, but once they reach a point, they stall.
They get burned out, their client service suffers, or they find themselves spending 18 hours a day working on low-level MWAs (minimum wage activities).
I still struggle with this, my clients struggle with this, and the majority of business owners struggle with this at some point in their delicate early stages.
They do everything themselves up to the point where they have no time for anything else, and something suffers.
That ‘something’ is typically: Customer service, sales, or personal life.
But many business owners, the ones who actively focus on solving this problem for themselves, learn how to build systems, documentation, and delegation into their workflows so they can increase sales, hire staff, train staff, and optimize profits.
Isn’t that what you want?
Now back to the income.
It doesn’t matter if you start an accounting firm, a construction company, or a dropshipping website on Shopify, if you own a business in most areas of the world, there is nobody to stop you from building a really big business, no matter how big you want it to grow.
- $100,000 side business – no problem
- $1 million lifestyle business – you got it.
- $100 million technology company – It’s been done plenty of times before.
It won’t happen overnight. It won’t happen in a week or a month.
But if you consistently focus on building a quality product or service, manage your money, and build systems that create scale, you can have what you want.
As a result of these systems all working in harmony, you will have a more resilient, profitable, and even fun business for as long as you want it.
You can have more control over your time, enjoy fulfillment through building your community, making friends with other successful CEOs in your area, and growing your income and personal wealth to unimaginable highs.
The only question is…do you want it?