Most business owners wake up every day on a mission to answer the following question:
“How can I make MORE money?”
This is the wrong question and leads to poor decisions. Focusing on short-term profits, always results in short-sighted decisions that are often in conflict with the QUESTION you should be answering which is –
“How can I increase my EQUITY?”
This is really the question you should be asking the one that helps you accomplish what you really desire most – FREEDOM.
FREEDOM = having autonomy in your business and life.
To have autonomy in your business and life, you must have “ENOUGH” – that is ENOUGH MONEY to ALWAYS do business on your terms.
This is the goal that you really want to accomplish that oftentimes gets forgotten due the conflicting goal of “HOW CAN I MAKE MORE MONEY?”
You might be thinking right now… “but, aren’t these the same thing?
The reality is – THEY ARE NOT.
Equity = Wealth
Income = Lifestyle
In other words, equity is your wealth. Income is your lifestyle.
Wealth has permanence. Income dissipates.
Wealth is preserved. Income is spent.
Your income = what you are paid which is used to support your lifestyle.
Your wealth = what you are accumulating to preserve your legacy.
Therefore, a focus on “HOW CAN I MAKE MORE MONEY?” is focused on the wrong goal. This is focused on INCOME which remember IS SLIPPERY AND GETS SPENT.
The right goal is “HOW CAN I INCREASE MY NET-WORTH?”. This is focused on INVESMENT and GROWTH which IS ENDURING AND PERSERVED.
Wealth grows when you increase your equity by –
- Enhancing the value of your business
- Investing excess income into assets
Asking A Better Question
Therefore, when you ask the question “HOW CAN I INCREASE MY NET WORTH?” you begin to focus on the right things like –
Enhancing the value of your business with systems and processes.
Typically, 60-70% of a business owner’s net-worth is tied up in their business. Therefore, when we consider the best ways to increase net-worth it makes sense to focus on the area that will have the most leverage in ENHANCING NET-WORTH, which is your business.
Making A Shift To Viewing Your Business As An Investment
If you catch this concept – you will change the way you look at your business forever.
If you learn how to think of your business as investment… as a way to enhance your NET-WORTH (EQUITY), you’ll change your life forever.
That is not an understatement. It’s a fact Jack!.
I value businesses for a living.
And there is nothing more tragic than telling someone who thought they had a business for 30 years, that their business is worth nothing.
So, helping people enhance the value of the asset that comprises 60-70% of their net-worth IS LIFE CHANGING.
That’s what our SMART system is all about.
It’s about enhancing your equity through strategy and de-risking.
SMART stands for the following:
(S)trategy – What are we trying to accomplish? How are we going to do it? When are we going to do it?
(M)aking Tax Payments / Implementing Tax Planning – When I execute strategy, am I taking care of my tax obligations in a way that is legal, ethical, and minimizes my exposure?
(A)bate Debt – After I have planned for taxes, am I paying down my debt?
(R)ecapitalize – After I’ve planned for taxes, paid debt, am I ensuring that my business has enough capital for current and future growth?
(T)ake Distributions/Dividends – After I’ve made tax payments, paid debt, and ensured capital needs are satisfying, am I rewarding myself with the pleasures of owning a business?
In this system, I am going to discuss all of the above and provide a workbook to help you on this journey.
I also want to point out that the STEPS are sequential. They should be executed IN ORDER.
When I’m working with a business owner that is in trouble, it usually is because they did take heed to all of the steps OR did the steps out of order.
Specifically, they managed their business as an investment successfully and used the profits to pay down all of their debt…
BEFORE paying taxes…
Which equals a BAD SITUATION because if they were able to pay off all of their debt then that means they had a great year and should be expecting a tax bill that is correlated to that success…
If you follow these steps, you will have a better business and you will have more peace of mind.
So, What Should You Do Now?
If you are ready to start managing your business as an investment – with more clarity and purposes, then request our SMART System.
There you’ll discover –
- The ONLY type of ratio you should use to measure your business as an investment
- Insider secrets about enhancing your business’ value
- The A-B-C formula for increasing your net-worth
- A simple system for protecting your business in good times and bad
- The truth about what your business is worth
Hope to see you on the inside!
ABOUT THE AUTHOR: Joe Gallegos has created tax strategies and operating systems for businesses that have saved taxes, increased cash flow, and profits. As the Managing Partner of Tax and Consulting for JAG + Argueta CPA Firm , Joe has taught hundreds of business owners his step-by-step strategies for creating their own success and obtaining more time and more profits. For more profit creating business tips, tactics and strategies, sign up up for our tips here.