Business ownership is a path to financial security and wealth building that can be both challenging and rewarding. By owning a business, individuals have the potential to achieve financial success and build long-term wealth that can benefit their families and future generations.
"It is true that ownership comes with its own set of challenges and responsibilities. It goes without saying that it demands hard work and continuous commitment—so much that business owners have to forgo most hobbies or activities, and sometimes even family, for a long time. But when it comes to building wealth, full or partial ownership of your business is the only way to accomplish that," wrote Mark E. Watson III in an article for Worth Magazine.
Business owners can earn more than traditional employees, and their income can grow significantly over time. Business owners can also set their salary and benefits, providing greater control over their financial future. This result is by no means guaranteed, but there is the opportunity.
According to a report by the U.S. Small Business Administration, "Small Business Facts: The Importance of Business Ownership to Wealth," business ownership is an important way for families to build wealth. The report notes that as net worth increases, the probability that families have business equity also increases. In 2019, the report found that 45% of families in the top 10% of net worth had business equity, compared to 23% for the 75 to 89 percentile, 14% for the 50 to 74 percentile, 5% for the 25 to 49 percentile, and 3% for the bottom 25 percentile. This data suggests that owning a business can be an effective way for families to accumulate wealth over time.
So why are we sharing this idea —that business ownership is a path toward wealth building? Because we don't want you to spend your life working for a company that doesn't make you rich. And here we mean rich in some sense, since we realize that money is not the only form of real wealth.
Here are a few of the benefits of ownership.
Business ownership can provide significant long-term wealth-building opportunities through capital appreciation, i.e. the potential for the value of a business to increase over time, often as a result of the business becoming more profitable and valuable. This increase in value can result in significant financial returns upon sale or merger of the business. Capital appreciation can be a powerful factor in building long-term wealth through business ownership, again, as it provides an opportunity for significant financial gains beyond regular income and profits.
Business owners can also reinvest profits to fuel growth and expansion, further building long-term wealth.
Finally, it is worth mentioning that capital appreciation can happen at all levels of business ownership. A blog can be worth millions. A simple email newsletter too. Even low-tech businesses like owning storage units will build wealth.
Multiple Income Streams
Business owners have the opportunity to diversify their income through multiple revenue streams, such as expanding their product or service offerings or investing in other businesses. This ability can provide a level of financial security that may not be possible with a single source of income.
What happens if you lose your job, and that job is the only way you can pay your rent or mortgage?
What's more, these various income streams don't always mean more work for the business owner. As the business owner accumulates capital, that individual can invest in new businesses or product lines that dramatically increase income without adding a proportional amount of work.
Business owners are also eligible for various tax advantages and deductions, including deducting business expenses from taxable income. Business owners may also qualify for special tax incentives and credits, providing long-term tax savings and wealth accumulation opportunities.
There is more to this than can be added to this article, but know that in the United States, for example, many tax codes encourage business owners and provide opportunities to save on taxes.
Finally, owning a business provides flexibility and control over one's financial future. Business owners can set their schedule and work from anywhere, as well as make strategic decisions that impact the financial success of their business. This provides the potential for personal and professional growth and greater control over one's financial future.
In conclusion, business ownership is a powerful tool for wealth-building and financial security. While owning a business can be challenging, the potential rewards are significant. By leveraging the advantages of business ownership, individuals can achieve financial success and build long-term wealth that can benefit them and their families for generations to come.