Why Entrepreneurship Alone Isn't Enough To Make You Really Rich
You can't just be savvy about your business strategy. Keep these steps in mind to make your money work for you.
By Russ Alan Prince •
Opinions expressed by Entrepreneur contributors are their own.
Entrepreneurs become entrepreneurs for a number of reasons. Being your own boss ranks high on the list. The sense of accomplishment that comes with creating a company and making it a success is another motivation for some.
The primary driver for many is the prospect of becoming extremely wealthy. While some entrepreneurs like the idea of being rich simply for the sake of being rich or for the hedonistic pleasures money makes possible, that's not the case for most business owners.
Generally, the desire to become really wealthy is accompanied by loftier goals, including taking care of loved ones and supporting non-profits.
Many entrepreneurs are a personality type known as the family steward. They care deeply about the important people in their lives and want to be able to help them financially. And they also have a strong drive to give back by supporting charitable causes. They want significant wealth so it can be put to good use to benefit their communities or even the world at large via philanthropy.
The good news is owning a successful business is the most likely way to become a millionaire or even a multi-millionaire. Sure, star athletes and celebrity musicians and high-powered corporate executives can become exceptionally affluent. But being a driven entrepreneur is most likely to enable you to amass truly substantial assets.
The bad news, or at least not-so-great news is if you want to be considerably wealthier than "just" a millionaire -- or even a millionaire a few times over -- you probably need to do more than just run a great company. Specifically, you need to take two additional steps:
Related: How to Create a Growth Mindset as an Entrepreneur
1. Solidly commit to creating personal wealth.
If you want to maximize your probability of becoming seriously wealthy, you'll likely have to actively pursue the goal of building personal wealth -- that is, wealth outside of your business.
That means financial and strategic decisions you make -- including those about your business -- need to viewed through the lens of how those calculations will likely translate into greater personal wealth creation. Top entrepreneurs tend to be very skilled at thinking through their choices carefully: They weigh pros and cons, prioritize potential outcomes and assess the probability of various outcomes occurring. Usually their conclusions end up being best guesses and directional in nature. Still, they're thinking through the issues with this in mind.
Put another way, becoming wealthy is a factor they incorporate into all the actions they take. They will consistently ask themselves how a particular strategy or decision is likely to impact their net worth. This is not the only consideration or even the most important consideration -- but it is just about always a consideration.
2. Work with highly capable financial and legal professionals.
Any commitment to building personal wealth as part of plan to become extremely wealthy must be accompanied by specific actions that help ensure wealth is well taken care of. One crucial but often overlooked action is to wisely manage the money you generate through your entrepreneurship so that it grows and is protected, for example, from unfounded lawsuits. But being great at making money doesn't always translate into being great at managing it wisely or effectively.
Too many entrepreneurs, after getting a financial windfall from selling their companies, end up losing a sizeable percentage of their fortune through painfully bad investments and legal mishaps. While these entrepreneurs are certainly intelligent and savvy, they still can and often do make affluence-eroding mistakes due to a lack of expertise in managing wealth.
Such situations can often be avoided by engaging talented financial and legal professionals who are committed to your continued financial and personal success. Often this is best accomplished by building a cohesive team of high-quality professionals and have one of them act to coordinate the efforts of all the others. Indeed, this approach is used by many extremely wealthy entrepreneurs to ensure their financial solutions work together synergistically and nothing important falls between the cracks.
Related: 10 Things Wealthy People Do to Keep Getting Richer
Do you want to be really, really wealthy?
Understand that becoming seriously wealthy takes real work. A commitment to become extremely wealthy likely means consciously reducing the time and effort you put into areas of your life that don't have the highest potential return on investment. That's why it's not the ideal goal for all entrepreneurs to pursue it. And why it's crucial that you honestly determine if you actually want to be more than "just" a millionaire or multi-millionaire.
However, if becoming extremely wealthy is one of your top goals as an entrepreneur, you'll need to commit to building personal wealth and keeping that commitment top-of-mind when you make decisions large and small. Doing so will meaningfully boost your chances of hitting and maybe even exceeding your personal wealth target.
