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Is Your Small Business Really Building Your Wealth?

Success WealthAsk any grey-haired accountant who’s spent his career serving a small business clientele.  It’s hard to make a small business profitable enough build wealth, and easy to let that wealth leak away.  That’s a challenge to small business owners who want their small business to help grow their net worth.

Here are the small business owner’s three most heart-breaking realizations when it comes time to take money out of the business.

Retained earnings that can’t be distributed.  Nothing is more frustrating than accumulating net profits you can’t access. You worked hard, found success, gave your customers solid value, saw the results in a healthy bottom line.  Your top salesman made record commissions.  You contributed the maximum to the company’s employee profit sharing plan.  You even threw a big holiday season party.  The annual personal financial statement you submitted to the bank (it’s probably part of your annual line of credit renewal) says your net worth is climbing. But your accountant and your attorney tell you that you can’t take your profits out of your company.  You have to face the ugly truth; money you can’t use is money you don’t really have.
Assets can’t be liquidated.  Your business has a beautiful building.  Your equipment is from the most reputable brands; they’re reliable and efficient.  You’ve been patenting your inventions and copyrighting your intellectual property.  Every balance sheet your accountant shows you says your assets are becoming more valuable… even after depreciation. But you can’t sell them.  Their paper value can’t be converted into cash, much less taken out of the company.
The Business can’t be sold.  This is a tragic end to years of sweating, working, and building… no one wants to buy your company.  You’ve spent years learning… and living… the truth that your products or services are worth what your customers or clients will pay you for them.  Now though, you’re learning that your biggest product, the company you built, isn’t worth anything. You have the money you saved from your salary, your retirement account… maybe even a series of profit distributions.  But you won’t be getting any more reward from being in business unless you stay in business.

You might find yourself in any, or all, of these situations.  We’ve compiled a list of 17 wealth destroying reasons why your small business might not be adding to your wealth.  In most cases they were the unintended consequences of supposedly sound business decisions.  In fact, you probably took advice at the time and were praised for “doing the right thing”.

but now you’re stuck, facing two unpleasant alternatives.  First, you can learn to live with the big different between your company’s net worth and it’s liquidation value.  Honestly, GoodBusiness can’t help you with that one.

Second, you can start the painful process of backtracking and, one by one, unwinding those wealth-destroying decisions.  It’s hard work, it will take time, and there will be risks.  We’ll talk more about deciding to take sensible risks that will build your wealth rather than destroy it.

Or. You can avoid those decisions.  We’ll go through those wealth-destroying decisions one by one.  We’ll  recommend different decisions that build your wealth.  We’ll do it honestly, describing the risks and other possible unintended consequences.

 

It’s up to you.  We vote for wealth-building small businesses.

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