Too often, business owners put off planning for retirement. There will always be another big milestone you can accomplish before putting money into retirement investment strategies.
But what these business owners don’t realize is that with a few strategic moves, you’ll realize how to increase your net worth without reducing your salary or pulling too much out of reinvesting in your business.
That’s the whole reason we created the Wealth Creation 360 process: to teach business owners how to improve their business finances to make room for strong retirement investments. This 4-step Wealth Creation Program starts with reducing expenses and ends with increasing your net worth with what amounts to found money.
In this article, we will explain how to leave time and money for focusing on building your net worth and retirement savings. Be sure to revisit our blog posts explaining the earlier three steps:
- How to Reduce the Cost of Doing Business and Grow Your Personal Wealth
- 3 Steps to Improve Your Business Performance
- How to Increase Revenue by Growing Profit Margins
How to Increase Your Net Worth
When we start working with new clients, they often have much of their net worth tied up in business assets. And while that’s understandable, it also leaves you extremely financially vulnerable.
Our 4-step process starts with the end in mind – increasing your personal wealth. So with all the money you’ve added to your bottom line through reducing your expenses, improving business performance and growing your profit margins, it’s time to reinvest that money in your future.
While it might feel tempting to reinvest this money in your business, don’t forget that we started with your net worth in mind. Here’s the impact small changes can make over the course of preparing for your retirement.
Reduction in Costs
Your business expenses will be highly dependent on your industry. But generally, business owners that really work at it can reduce their expenses by three percent or more. On average, that’s about $3,000 directly toward your retirement savings.
Other businesses can cut expenses even more than that and experience greater impacts on their bottom line. Your results will depend on how tight you’ve kept your business expenses up to this point.
Increasing Business Revenue
When you set out to increase your business revenue, you should be looking at reasonable goals, such as a three to ten percent annual increase. If you set goals that are too lofty, you might feel defeated at the end of the year when you miss those marks.
Instead, focus on attainable goals that still push you and your team outside of your comfort zone.
Increasing Profit Margins
The next area of your business to evaluate is your profit margins. Once again, this is an area where your industry will have a huge impact on what your profit margins are. Some industries naturally have much larger profit margins than others.
But by increasing your profit margins by just three percent, we can often add another $3,000 to your bottom line. Of course, this number depends on gross profits and margins.
Investing with Retirement Plan Consultants
The final step is to take the $10,000 to $20,000 you’ve saved from your business and invest it in a conservative long-term portfolio. You’ll be shocked at the impacts that $10,000 – $20,000 a year can have over the course of 25 years.
See the full calculation in our downloadable worksheet that walks you through each of the four steps to wealth creation in detail.
Still have questions? Talk to our team of retirement plan advisors who understand the unique challenges business owners face in planning for retirement. Schedule a free 30-minute consultation with our owner, John Yeager CPA. He’ll answer your questions about building your personal wealth and explain how to reach your financial goals both in the short and long term.