Your Business Is Growing – But Is Your Personal Net Worth?
You’ve poured everything into your business. The time, the
risk, the vision – it’s paying off. Revenue is strong. The brand is growing.
You’re building something meaningful.
But here’s the question we often ask our clients: If your
business stopped tomorrow, would your personal financial life stay intact?
This isn’t fear-mongering – it’s strategic awareness. Many
successful entrepreneurs find themselves asset-rich on paper but dangerously
under-diversified in reality. Their wealth is locked inside their business,
their lifestyle is tied to fluctuating cash flow, and their exit plan? Often
vague or undefined.
If that sounds familiar, you’re not alone – and you’re not
off track. But now is the time to create a strategy to build personal wealth
outside your business so that your legacy, security, and freedom don’t depend
on one source.
Let’s break down how to do it.
The Founder Trap: Why Business Growth Doesn’t Always Mean Personal Wealth
Entrepreneurs tend to fall into a pattern: reinvest,
reinvest, reinvest. It makes sense – your business likely offers the highest
ROI and the most control. But this instinct to “double down” can backfire
without guardrails.
Here’s what we see most often:
- 80%+
of net worth tied to the business
- No
personal retirement savings or liquidity strategy
- No
clear succession or exit plan
- No tax
strategy beyond the CPA’s annual filing
That’s a lot of risk concentrated in one place. If market
shifts, partner disputes, or health issues hit unexpectedly, everything could
unravel fast.
The key mistake? Thinking that building your business is
the same as building your wealth. In reality, they need to run in parallel but
independently.
Strategic Moves to Grow Wealth Outside Your Business
You don’t need to pull the plug on reinvesting in your
business. But you do need a plan that builds personal wealth in tandem. Here’s
how we guide our business-owner clients through it:
1. Start with a Personal Financial Plan
Even if your business is complex, your personal financial
plan can be simple but it must be intentional. Know:
- Your
ideal annual income (now and in the future)
- Your
lifestyle costs (including kids, home, travel)
- Your
financial freedom number (how much you need to be work-optional)
From there, you can calculate the personal savings rate
required outside the business to hit your goals.
2. Pay Yourself Like a Future You Would
Too many founders leave themselves last in the cash flow
hierarchy. Flip that.
- Set a
consistent salary (reasonable compensation helps with IRS compliance too)
- Use
distributions strategically, but don’t treat them as your only source of
income
- Automate
personal savings – just like you would with a W-2 income
Treat yourself like the most valuable employee in the
company.
3. Diversify Your Assets (and Your Tax Buckets)
Once you have margin, start building personal accounts that
give you flexibility:
- Tax-deferred:
SEP IRA, Solo 401(k), or Defined Benefit Plan
- Tax-free:
Roth IRAs (via backdoor strategy), Roth Solo 401(k)
- Taxable:
Brokerage accounts for liquidity and long-term growth
Don’t forget to build an emergency fund for your personal
life, not just business operating reserves.
4. Build Exit-Readiness Now (Not When You’re Burnt Out)
Exit planning isn’t just about selling – it’s about
optionality. The earlier you build structure around your financials, team, and
systems, the more your business becomes a transferable asset, not a personal
job.
And the more you build wealth outside your business, the
more leverage you have to walk away when the time is right.
Other Strategies Entrepreneurs Should Consider
Every founder’s situation is different, but here are a few
additional moves we tailor to high-income business owners:
Cash Balance or Defined Benefit Plans
If you’re earning high income and
want to reduce taxes while turbocharging retirement savings, these can allow
contributions of $100,000+ per year, depending on age and income.
Best for: Older business
owners, profitable businesses with few employees
Asset Protection Trusts and Entity Structuring
Using LLCs, S-Corps, or irrevocable
trusts can provide legal protection and help separate your personal wealth from
business liability. It’s especially relevant if you have a high-risk profession
or significant real estate.
Best for: Founders with
complex risk or real estate exposure
Real Estate as a Diversification Tool
Strategically owning investment
property, outside the business, can offer both passive income and tax benefits.
Just make sure it’s part of your plan, not a scattered opportunity grab.
Best for: Business owners
who want a tangible, semi-passive wealth stream
FAQs
How much should I reinvest in my business vs. save
personally?
There’s no perfect ratio – but a good rule is to set aside 20–30% of
profits toward personal savings and wealth-building once your business is
sustainably profitable.
Can I use a 401(k) or IRA if I’m self-employed?
Yes. Solo 401(k)s, SEP IRAs, and even Cash Balance Plans are available for
business owners, depending on your structure and income.
What’s the best way to get liquidity out of my business?
Pay yourself a consistent salary, use distributions carefully, and explore
installment sale strategies, profit-sharing, or partial exits with equity
partners.
How do I know if I’m on track financially outside my
business?
A financial plan will quantify your savings rate, ideal asset mix, and
income needs based on your lifestyle and goals. Without that clarity, it’s all
guesswork.
What if I want to sell my business eventually?
The earlier you start preparing, financially and operationally, the more
leverage you’ll have. That means cleaning up books, reducing owner dependency,
and building a personal plan for life after the sale.
Final Thoughts: Real Wealth Means Optionality
Running a business is bold. But true wealth? That’s about
having freedom of choice to scale back, sell, shift, or take a sabbatical
without financial stress.
You’ve already taken the biggest risk by building something
from the ground up. Now it’s time to take the next step: securing your personal
financial life with the same strategic energy you bring to your business.
At Truly Aligned, we help founders turn momentum into
long-term wealth without sacrificing purpose, family, or freedom.
There is no guarantee that a diversified portfolio will
enhance overall returns or outperform a non-diversified portfolio.
Diversification does not protect against market risk.
LPL Financial representatives offer access to Trust Services through The
Private Trust Company N.A. an affiliate of LPL Financial.
Investments in real
estate may be subject to a higher degree of market risk because of
concentration in a specific industry, sector or geographical sector. Other
risks can include, but are not limited to, declines in the value of real
estate, potential illiquidity, risks related to general and economic
conditions, stage of development, and defaults by borrower.
This information is not intended to be a substitute for specific
individualized tax or legal advice. We suggest that you discuss your specific
situation with a qualified tax or legal advisor.
The opinions voiced in this material are for general information only and are
not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice
offered through The Wealth Consulting group, a registered investment advisor.
The Wealth Consulting group, WCG Wealth Advisors and Truly Aligned, INC are
separate entities from LPL Financial.