Welcome to the 11th issue of Metrix that Matter, a weekly newsletter from WEALTHMETRIX that helps you focus on what matters most for building and sustaining wealth. Every Saturday, we share an educational essay with actionable takeaways to guide you on your journey to financial independence.
What you’ll learn in this issue:
- The question you should be asking yourself about your business
- The importance of turning business success into personal wealth
- How to build wealth outside of your business
- How to calculate your Business Term score
Business ownership is hard. Really hard.
As the fourth pillar of wealth, it is undoubtedly the most difficult, yet potentially most rewarding one of them all.
Many business owners wear multiple hats, especially if they are just starting out. From marketing to sales to accounting to operations, they're in charge of everything.
On top of that, business success is not linear. One month, you’re on cloud nine celebrating all the success you’ve had. The next month, you’re wondering where your next customer or client is going to come from.
This roller coaster ride makes it difficult to see the big picture and remember why you went into business in the first place.
That’s exactly why it’s important to step back and remember the fundamental relationship between you and your business.
Who’s running who?
What gets lost in the day-to-day grind of running a business is that your business is a tool to serve your life, not the other way around. It should help you accomplish your goals, not consume your life.
But somewhere along the way, many business owners flip this relationship. The business becomes the master, and they become the servant.
Before you can build lasting wealth through business ownership, you need to get clear on a fundamental question: What do you want your business to become?
Michael Gerber, author of The E-Myth Revisited, calls this understanding “Your Primary Aim." He asks business owners to step back and consider: What do you value most? What kind of life do you want? Who do you wish to be?
These are life questions more than business questions. But the answers should drive every major business decision you make.
Do you want a business that gives you flexibility and freedom? Do you want to build something that can eventually run without you? Are you looking to create generational wealth, or do you simply want a vehicle that supports your desired lifestyle?
There's no right or wrong answer, but there is a wrong approach: building a business without ever asking these questions.
Once you're clear on your Primary Aim, you can start making business decisions that actually serve those goals, including how you build wealth through your business.
Turning business success into personal wealth
A successful business is highly profitable and generates good income to support your lifestyle. The key is turning that income into wealth that moves you closer to your personal goals.
Some businesses can be sold one day, some cannot. Either way, you need to build liquid and qualified assets along the way. You don't want to completely rely on the sale of your business as your exit plan.
This is where many business owners struggle. They're so focused on growing the business that they forget to grow their personal wealth outside of it. They reinvest every dollar back into operations, expansion, or new opportunities.
The business gets wealthier, but the business owner doesn't feel any wealthier. It’s because they're building equity in an asset they can't easily access or spend. Their net worth might be growing on paper, but their actual financial flexibility isn't improving.
The most successful business owners understand that their company should be their wealth-building engine, not their wealth-building destination. They regularly take profits and invest them into assets that don't require their daily attention.
How to build wealth outside your business
Priority 1: Establish Strong Liquidity
As a business owner, you face higher potential for unforeseen expenses and income volatility. You need more liquidity than the average employee.
Start with a solid emergency fund covering 12 months of personal expenses. Then build liquid investment accounts that can provide additional flexibility and options.
This liquidity serves multiple purposes: it provides a cushion during business downturns, gives you capital for opportunities, and ensures your personal financial stability isn't entirely dependent on business performance.
Priority 2: Maximize Your Retirement Plan Advantages
As a business owner, you’re in charge of setting up your own retirement plan, but this can become an advantage. You have access to a range of different options, each with different rules and contribution limits.
From SIMPLE IRAs to SEP IRAs to 401(k) plans to defined benefit plans, there are plenty of tools at your disposal to help you build long-term wealth in a tax-smart manner.
As always, you need a plan
Like any other investment, it's important to approach business ownership with a plan.
Not just a business plan for operations and growth, but a wealth plan for how your business will serve your broader financial goals.
Your business should be creating wealth in two ways: building equity in the business itself, and generating profits that you regularly convert into liquid and qualified assets.
Both matter. Business equity can create significant wealth if you eventually sell. But liquid and qualified assets can provide security, flexibility, and independence along the way that business equity alone cannot.
The goal isn't to extract every dollar from your business, but rather to find the right balance between reinvesting for growth and building wealth outside your business.
WHAT TO FOCUS ON THIS WEEK
Calculate your Business Term score. This indicates the number of years you could theoretically live on your current business equity.
Business Term = Business Equity ÷ Annual Living Expenses
More importantly, it reveals whether your business dominates your net worth. If your Business Term is significantly higher than your Liquid Term and Qualified Term combined, you may have too much concentration risk.
Ask yourself:
- What percentage of my net worth is tied up in my business?
- Am I building wealth outside my business, or just building a bigger business?
- Does my current approach align with my Primary Aim for what I want my life to look like?
The answers will guide your wealth-building priorities for the year ahead.
ELEMENTS INVITATION
Thank you for reading. Understanding the metrics that matter for your wealth requires more than tracking individual pieces. You need to see how everything works together. That’s what Elements is designed to help you do.
Elements is a financial planning tool that organizes all your financial information in one place, then calculates the 11 key metrics that truly matter for building wealth. You'll see not just where you stand today, but how each metric relates to the others and impacts your overall financial trajectory.
Most importantly, Elements empowers you to make better financial decisions. When you understand how all the pieces fit together, the path to financial independence becomes much clearer.
If you're ready to gain this level of clarity and control over your financial situation, click the link below to get started with Elements. You'll answer basic questions about your income, spending, debt, and account values. The whole process takes about 10 minutes.
Once complete, we'll review your personalized scorecard and send you an email to schedule a complimentary 30-minute call to discuss your situation, answer any questions, and explore whether there's a fit to work together.
GET YOUR FINANCIAL SCORECARD IN 10 MINUTES
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WEALTHMETRIX
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