4 Proven Strategies for Increasing Wealth for Small Business Owners

11/12/20242 min read

Identify and protect your unique processes or innovations: Conduct an IP audit to uncover valuable assets in your business. This could include unique methods, software, designs, or even customer lists. Protecting these assets can create barriers to entry for competitors.
License your IP to larger companies for ongoing royalties: Once protected, your IP can be licensed to other businesses, creating a passive income stream. This allows you to monetize your innovations without scaling your own operations.
Use IP as collateral for business loans or to attract investors: Strong IP can make your business more attractive to lenders and investors. It can serve as collateral for loans or demonstrate your company’s competitive advantage to potential investors.

Negotiate extended payment terms with suppliers (Net-60 or Net-90): By extending your payment terms, you effectively get an interest-free loan from your suppliers. This can be particularly valuable for businesses with long cash conversion cycles.
Use the float to fund operations or investments: The extra time before payment allows you to use that cash for other purposes. This could include funding day-to-day operations, taking advantage of early payment discounts with other vendors, or making short-term investments.
Improve cash flow without traditional lending: Vendor financing can be easier to obtain than bank loans, especially for newer or smaller businesses. It doesn’t impact your credit score and doesn't require collateral beyond the goods or services purchased.

Contribute significantly more than traditional retirement plans allow: Cash balance plan can allow annual contributions of $200,000 or more for older business owners, far exceeding 401(k) limits. This can be a powerful way to catch up on retirement savings.
Reduce taxable income while building wealth: Contributions to cash balance plans are tax-deductible for your business, potentially resulting in significant tax savings. This allows you to redirect money that would have gone to taxes into your retirement savings.
Catch up on retirement savings faster than with a 401(k) alone: The high contribution limits of cash balance plans, combined with tax-deferred growth, can help you accumulate substantial retirement savings in a relatively short period.

Create a separate management company to handle administrative tasks: This company can provide services like accounting, marketing, or executive leadership to your operating company. It should be structured as an S-corporation for optimal tax treatment.
Pay yourself a reasonable salary from the management company: By paying yourself a salary from the S-corp, you can potentially reduce self-employment taxes. The key is to ensure the salary is; based on market rates for similar services.
Potentially reduce self-employment taxes on business profits: Profits distributed from the S-corp beyond your salary are not subject to self-employment tax. This can result in significant tax savings, especially for high-earning business owners.