Smart Investment Strategies for Business Owners: Growing Your Wealth Wisely

For small business owners, the pursuit of success is a journey of unwavering dedication and visionary thinking. As their business flourishes, they might find themselves seeking ways to multiply their hard-earned profits and secure their financial future. In this ever-evolving landscape of investment opportunities, the quest for prudent wealth growth can be both exciting and overwhelming. To achieve this, business owners need to develop a well-thought-out investment strategy that aligns with their risk tolerance and financial objectives. 

Assess Risk Tolerance and Investment Goals

Before embarking on any investment journey, business owners must determine their risk tolerance and establish clear investment goals. Risk tolerance is the level of uncertainty an individual is willing to withstand concerning their investments. Business owners, often accustomed to risk in their entrepreneurial pursuits, need to strike the right balance between securing steady growth and diversifying their investments.

To assess risk tolerance, business owners should consider their financial capacity, investment timeline, and personal comfort with uncertainty. Additionally, understanding their long-term investment objectives, such as wealth preservation, growth, or retirement planning, will help tailor their investment strategy to meet their unique needs.

Develop a Customized Investment Strategy

Creating a solid investment plan is a crucial step in growing wealth wisely. With a clear risk tolerance and investment goals in mind, business owners can design a strategy that suits their individual circumstances. This plan should outline how and when to allocate funds for investment purposes, taking into account the various stages of the business lifecycle.

During the early stages of a business, excess capital may be limited, making it essential to focus on business growth. As the business becomes more established and generates surplus profits, the focus can shift towards diversification and wealth accumulation outside of the core business.

Understand the Importance of Diversification

I never like to see my clients with all their eggs in a singular basket, which is why I am a big fan of diversification. Diversification is a fundamental principle of investing that helps business owners manage risk and improve long-term returns. By spreading investments across various asset classes and industries, business owners reduce their exposure to the performance fluctuations of any single investment.

Diversification also enables business owners to insulate their wealth from potential downturns in their core business. By having a portion of their assets outside their primary venture, they create a safety net that can sustain them in difficult times, ensuring their financial security.

Explore Investment Options

Today’s investors have more investment options then ever before. Participation in investment pools, giving access to the types of opportunities that were previously reserved just for pensions funds and high-net-worth investors, are now more widely available. By creating a holding company (HoldCo) and investing outside their primary business, business owners can mitigate risk and secure an additional source of income.

A key part of the investment equation is regularly monitoring investment performance to evaluate the effectiveness of their strategy and make necessary adjustments. Key metrics and indicators to consider include overall portfolio returns, volatility, and alignment with their risk tolerance. Benchmarking against industry standards and reputable indices can provide business owners with a reference point to assess their performance objectively. Additionally, reviewing investment performance with your accountant can offer valuable insights around tax strategy.

Growing wealth wisely is an essential goal for business owners seeking to secure their financial future beyond their core enterprise. By working with their accountant on a thoughtful and well-informed approach to investing, business owners can build a robust and diverse portfolio that offers stability, growth, and financial security.

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A member of the Integrated Advisory Network, Graham Thiessen is a Partner and Co-Founder with SummitPath LLP.  Graham is passionate about educating his clients, enjoys being a sounding board for them, and is deliberate about asking the right questions to show them a different way to look at their business. Graham’s driving purpose is to leverage his client relationships to make a positive difference in the lives of others.

The Integrated Advisory Network consists of progressive CPA firms, along with best-in-class professional advisors, service, and product specialists, who work together to deliver an elevated and holistic client experience. One that optimizes both their personal and professional lives with an integrated financial strategy designed to help clients reach their goals.