How business owners make their fortunes, beyond running a business
Photo by Kayla Linero
While building a successful business certainly is the foundation of building wealth for a lot of entrepreneurs, it is not how all of them actually build that wealth. The income that your business generates is a lot more likely to become long-term wealth when it is protected and, more importantly, diversified. Here, we’re going to think of how you can look beyond wages and profits, focusing on financial freedom so that, even if you don’t own your business years in the future, you’re going to have the independent means to support your lifestyle.
Using your business model
If you have built a successful business, then that very well could be an asset that you could profit even further from. Selling the company is the easiest way to do that (providing you can find a buyer), freeing up money to invest in further opportunities, but there are other approaches, as well. For instance, you can franchise the concept of the business or license systems that you have built. A well-run business with processes and products that are repeatable and able to spread to further markets even without your direct oversight can be a highly lucrative asset, indeed. By making the company less reliant on their personal involvement, owners can create an asset that buyers, franchisees, or partners want to pay for. This turns years of operational work into a larger wealth-building opportunity.
Creating intellectual property
Business owners can also build fortunes through intellectual property, such as trademarks, software, courses, books, designs, processes, or licensing rights. Unlike a service business that depends heavily on the owner’s time, intellectual property can sometimes be sold repeatedly or even licensed out on a repeatable basis. A business owner could turn their expertise or specific niche into a training course, for instance, or create systems that other companies pay to use. Some SaaS businesses begin from internal systems created to suit other businesses founded by the owner, until they prove valuable enough to serve as their own product. Strong intellectual property can also increase the value of the business where it originated in the first place.
Building an investment portfolio
Your business might be the root of how you build your wealth, but it doesn’t have to be the only path to success. Creating an investment portfolio is one of the clearest ways you can build wealth that doesn’t depend specifically on your business. Working with investment brokers, you can spread your risk and find new avenues for growth, be they shares, index funds, bonds, investment trusts, or other vehicles. This strategy works best when you’re able to steadily grow your commitment into different markets, benefiting from compound growth while mitigating your risk. That way, if one investment goes south, it doesn’t necessarily have to impact the other places you have your money tied up.
Buying property
One of the most popular investments of all is property. Buying property typically requires a significantly larger initial investment than most other investment assets, but the potential gains tend to be more direct, as well. Some invest in residential buy-to-let properties, while others buy commercial premises, warehouses, offices, or mixed-use buildings connected to their industries. Owning property can create rental income, as well as the eventual gains made from the increase of property value over time. As with other investments, growing your property portfolio is best done by diversifying, investing in different areas and types of property. However, property requires much more management, whether you decide to take it on yourself or to work with a property management company.
Investing in other businesses
If you’re looking to use your business expertise to keep growing your wealth, but you want to rely less on the business that you have already built, then you could use your capital and knowledge to invest in other companies. This might involve becoming an angel investor, buying minority stakes, joining partnerships, funding start-ups, or acquiring smaller firms in related sectors. This is a proven method by which other founders and even billionaires have grown their wealth. If you have a good eye for strong teams, weak models, and good growth opportunities, then cutting out the waste and improving systems to replicate your own success could see you making companies significantly more profitable before selling your share of them.
There is no one-to-one blueprint for building your wealth outside of your business. What matters is that you’re using your insight and what opportunities come your way to find ways the means of investing, diversify, and grow what you earn.