An inheritance. A great stock or property investment. An early retirement package. Longshot, but even a lottery windfall.
These are surefire ways people have acquired wealth for decades. But there’s another approach, one that many women often overlook: wealth building through entrepreneurship.
Women typically start a business to create income, with the short-term goal to put food on the table and a roof over their heads and their families. There’s nothing inherently wrong with that. But, for far too long, most women consider business ownership as a way to make a living rather than a vehicle for amassing wealth. This perception has to change if women want true financial freedom.
During my 30-plus-year career as a corporate banker, and now in my role as COO at the Women’s Business Development Center, I’ve spoken with thousands of women and men about wealth building. I’ve observed hundreds of business owners who operated more or less successfully on a day-to-day basis but under many myths that held them back financially.
The biggest myth is that sheer hard work will inevitably lead to business success and, ultimately, financial security. Another is that only profitability, rather than building business value, will lead to true wealth. There’s also the myth about ‘spending money to make money.’ True, you need to invest to grow, but your profits should be invested wisely and the results measured carefully and frequently. It’s okay to be cautious.
Rather than an ad hoc approach to wealth building, I propose women take a strategic approach and literally start their company with the end in mind. In his book, The 7 Habits of Highly Successful People, author Stephen Covey captures the essence of strategic thinking. “It all boils down to being absolutely clear on the business outcome you want,” he writes.
Many experts agree one of the first things you should do after starting a business is plan your exit strategy. This means having a clear idea of what you want your business to be 5-15 years from now. Do you want to sell the business or hand it over to family members? What do you want your role to be, if anything? Do you want to draw an income over time? What leadership team is required to continue to sustain and grow the company after you’re gone?
By getting clear about your goals, you’re more likely to acknowledge and take advantage of opportunities that support reaching them. Then you need a strategic business plan to start thinking beyond the day-to-day operations and about creating business value. With the right plan in place, your business value should grow exponentially and your long-term vision to create wealth is more likely to become a reality.