Many successful business owners share a common story: they have the ability to generate substantial revenue and grow their business, but they struggle to hold onto that wealth over time. High income doesn’t automatically mean high savings or a sustainable legacy. With challenges like taxes, reinvesting without a clear strategy, or a lack of structured financial planning, the journey from “making” to “building” wealth can be difficult. This article explores proven strategies that not only help you make money but allow you to keep more of it, setting the stage for lasting financial security and impact.
The “Making vs. Building” Paradox: Why High Income Doesn’t Always Equal Financial Security
Business owners often excel at generating revenue, but growing and preserving wealth requires a different approach. High income tends to feed back into business growth or lifestyle, but without structured financial planning, these gains don’t always translate to long-term security.
To counteract this, structured planning is essential. By aligning your income with long-term goals and implementing intentional wealth-building strategies, you can avoid common wealth leaks and secure your financial future.
Actionable tips: Create and automate a plan that can work for you while you run your business. Here’s how:
- Start with Your Goals: Define long-term goals like financial independence, passing on the business, or creating a legacy. Without clear goals, you can’t make clear financial decisions.
- Build a Trusted Team: Assemble a top-notch team of wealth, tax, and legal professionals who understand your goals and business challenges and can work collaboratively together.
- Make a Plan: Enlist your team to create a wealth-building plan tailored to your needs, with simple, actionable steps. In a few meetings, you should be able to make the educated decisions needed to put a wealth building plan in place.
- Automate Your Wealth Building: Set up automated savings and investment plans. With a wealth building plan in place, automation eliminates decision fatigue and ensures your plan is always moving forward.
- Review and Update Regularly: Have your team schedule regular, agenda-driven reviews to assess progress, fill gaps, and adjust strategies, keeping your plan on track.
With a team and a plan in place, you can confidently focus on running your business because you have a wealth building plan working for you. Here’s How We Work to accomplish this here at Alterra.
The Tax Trap: Maximizing Your Wealth Through Efficient Tax Planning
Taxes are often one of the biggest drains on high-income earners. Many business owners pay more in taxes than necessary, affecting both personal and business finances and slowing down wealth accumulation.
While taxes are inevitable, they can be managed through expert strategies. A well-thought-out tax plan can significantly impact how much income you keep. Strategies using retirement contributions, optimizing your entity structures, and leveraging your business to create tax-advantaged investments can all play a role in reducing your overall tax burden.
Actionable Tips: Here are a few strategies to consider:
- Work with Qualified Tax Advisors: Your Trusted Team should include professionals who specialize in high-net-worth planning for businesses like yours.
- Utilize Retirement Plans: Business retirement plans, such as a 401(k), Mega Backdoor Roth, and Cash Balance Plans, help prepare you for the future but also offer immediate, often substantial, tax savings.
- Leverage Your Business to Create Tax-Sheltered Investments: Use your business entity to establish benefit plans for yourself and key partners, reducing tax liability while building future wealth. While many retirement plans must be offered to your entire team, you have access to unique plans just for you and those you want to reward most—Alterra or a qualified wealth advisor can help you explore and implement these options effectively.
Protect Your Wealth with an Exit Plan: Preserving Value When You Sell Your Business
Business owners invest years into building their company but often lack a plan for transitioning or exiting with their wealth intact. Without a clear exit strategy, they risk losing significant value during the sale or transfer of their business.
A solid exit plan is essential for turning the value of your business into lasting wealth. This includes succession planning, valuation, and structured sale options to ensure your legacy and financial goals are supported, even if you’re no longer at the helm.
Actionable Tips:
- Define Your Vision for the Future: Think about what you want from your exit—whether it’s a family transition, selling to a third party, or something else. This helps clarify your exit goals.
- Be Tax-Smart: Consult your Trusted Team on tax-optimized buyouts, phased retirement, and other strategies to maximize your business value and lose less to taxes. For more, see Taxes and Your Highly Appreciated Business.
- Consider Phased Exits: Transferring ownership or management over time can allow you to remain involved while ensuring continuity and maximizing value.
Structuring for Sustainability: Transforming Business Profits into Long-Term Income
After selling or exiting a business, consistent income isn’t always guaranteed. Without a structured plan for transitioning profits into sustainable income, many entrepreneurs face uncertainty about their financial future.
This is where wealth advisors can provide tremendous value, helping you convert business sale proceeds into reliable income streams, even post-exit. Guaranteed income strategies, income focused portfolios, and other passive income strategies are all ways to replace business income with steady, predictable paychecks you can rely on.
Actionable Tips:
- Know Your Number: In How Much You Need to Retire, we discuss how to set your “Retirement Number”, or the amount you need in your nest egg to create reliable income.
- Establish a Withdrawal Strategy: A structured withdrawal plan based on your Retirement Number helps ensure that you can draw income without depleting your assets.
- Explore Passive Income Options: Build a custom investment strategy designed around your monthly income needs. This can include dividends and interest, guaranteed income strategies, rent, and more, but should focus on sending you regular paychecks in up or down markets.
Making money is an art in itself but keeping it to build your wealth requires a well-rounded strategy. As a business owner, investing time in tax-efficient planning, building an exit strategy, and creating passive income streams can transform your income into a legacy. If managing these elements seems overwhelming, Alterra Advisors is here to help. With a deep commitment to integrated financial planning and wealth management, our team provides the guidance needed to preserve your wealth—ensuring that it supports your lifestyle today and builds security for future generations.
If you’re ready to start keeping more of what you earn, reach out for an initial discussion with us! We can guide you through the essential steps to use your business to build, protect, and grow your wealth and a legacy you can be proud of. Let’s explore how to make the most of your hard-earned success—together.
Grant Monson
CFP®, CLU®, ChFC®
Partner, Financial Advisor
About the Author
Grant grew up on a working wheat farm in eastern Washington. Today, he credits his family – who still manage the farm – for preparing him to build a business serving others. His vision to lead Alterra is built on relentless dedication to the success of his clients and the team – his extended family.
Grant’s dad says that he hasn’t worked a day in his life because “it isn’t work when you love what you are doing.” When combined with his mom’s view that “helping others should be part of every day”, Grant’s view of financial planning comes into focus. Alterra Advisors is very much a reflection of Monson family values.
Grant earned a bachelor’s degree in business and a master’s in economics at Washington State University. He launched his own financial advising practice over a decade ago, an entrepreneurial quest has become one of the most impactful things in Grant’s life. He loves coordinating the complex financial lives of business owners, bringing a depth of understanding that is rooted in his family’s own experience.
The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.