7 Investment Tips for Entrepreneurs

7 Investment Tips for Entrepreneurs

Entrepreneurs face unique challenges when it comes to financial management. Learn key strategies you can use as a self-employed business owner to build long-term wealth.

Building a business provides just as many potential rewards as it does risks. Entrepreneurs of all kinds must navigate continuous change while simultaneously wearing as many hats as it takes to keep the operation going.

Combine this with the basic necessity of managing personal finances, and the responsibilities can quickly become overwhelming.

As an entrepreneur, how do you approach personal and professional money management in the first place? Where do you begin? How does your journey differ from everyone else’s?

Read on to learn our entrepreneur investment tips and tricks that you can use to maximize your wealth—both personally and professionally.

Specific Challenges of Entrepreneurship

The difficult truth is that it’s most often easier to separate your professional and personal life when your workday begins at nine and ends at five.

Entrepreneurs, on the other hand, rarely get to enjoy such a separation, which often doubles as both a blessing and a curse. It’s much harder to tune out of work, let alone keep your professional and personal finances apart.

Income for the self-employed fluctuates. You have good days and bad days, good months and bad months, good years and bad years. It’s simply part of the job. When you’re busy managing those business cash flow fluctuations, it can feel nearly impossible to find the time to take care of your personal financial picture.

A FreshBooks study found that 28% of entrepreneurs lack the funds needed to invest or pay down debt, making it even more challenging to establish long-term wealth and investment goals.

Ultimately, all of this means that entrepreneurs commonly struggle with:

• Finding the time to save and invest
• Creating long-term financial plans
• Effectively planning for retirement

And let’s not forget about the aforementioned risks of entrepreneurship. Fail to properly establish a correct tax structure, and you jeopardize your personal assets should your business find itself in legal trouble.

But it’s not all doom and gloom. With these challenges in mind, let’s now explore how entrepreneurs can effectively establish long-term wealth management goals.

Entrepreneur Investment Tips for Building Long-Term Wealth

Though long-term wealth building may look different for entrepreneurs than for the traditionally employed, you can still deploy strategies that help you invest your money wisely, one step at a time.

1. Diversify Your Investments

A general rule of thumb is to diversify your investments. Instead of putting all your eggs into one basket, invest across several asset classes, like cash, stocks, bonds, and real estate.

Since you’re likely the only one responsible for managing your money, consider discussing your goals, your risk tolerance, and your desired investment timeline with a financial advisor. A professional can help you properly diversify your money and avoid expensive mistakes.

2. Invest in Tax-Advantaged Accounts

Tax-efficient investing is wise for anyone looking to make their money work for them. As an entrepreneur, research retirement accounts, like IRAs, solo 401(k)s, and SEP IRAs, to lower taxable income and maximize your savings. Avoid withdrawing early so you don’t have to pay penalties.

Each type of account has its own contribution limits and requirements, so discuss your options with your tax expert.

3. Strategically Allocate Your Assets

Diversification is important for long-term growth, but allocating assets for unique needs still requires the right strategy and intentions. 

For instance, if you want more control over your investments, consider actively managed portfolios. If you’re comfortable with taking more significant risks for bigger reward potential, work with your advisor on stock options. 

Don’t forget to regularly review your portfolio and rebalance to maintain your desired level of risk.

4. Invest in Business Growth

As a business owner, you’re always thinking ahead. You should apply the same strategy to your long-term wealth management. 

Watch for opportunities to reinvest profits into your business versus paying yourself more. If you’re looking to scale, consider angel investing or researching venture capital opportunities to maximize your growth potential.

Reinvesting in your business is often a great way to set yourself up for greater success in the future. You may not believe you have enough cash on hand to invest now, but with the right reinvestment strategy, you may find yourself in a very different position sooner rather than later.

5. Think Beyond Traditional Investments

Diversifying your investment portfolio beyond traditional stocks and retirement plans can offer significant advantages. Investing in real estate, for example, provides exposure to a different asset class. 

This diversification strategy can help mitigate risk by reducing the impact of potential downturns in any single market sector: Should your stocks suffer a market correction, the equity you’ve built in your real estate can help offset any damage.

6. Build a Succession or Estate Plan

Proactive estate and succession planning is crucial for securing your future and assets. By creating an estate plan, you can designate an executor, identify beneficiaries, and establish trusts to protect your wealth.

Similarly, a well-defined succession plan is essential for the continuity of your business. This strategic approach ensures a seamless leadership transition and protects your business assets, allowing it to thrive even after you’re no longer involved.

7. Work with an experienced financial team

Many entrepreneurs, while skilled in innovation and creativity, may not possess the financial acumen required to navigate the complexities of business ownership. 

Therefore, building a strong team of experts who can make up for this difference in skillset is crucial.

By partnering with tax professionals, legal counsel, and wealth management advisors, entrepreneurs can gain valuable insights and comprehensive support to make informed financial decisions.

Get Custom-Tailored Entrepreneur Investment Tips From Avior

Tailored financial planning is essential for entrepreneurs to achieve long-term success. At Avior, our experienced team understands the specific challenges and opportunities faced by business owners.

We work closely with you to develop a comprehensive investment strategy that aligns with your short- and long-term financial goals. Our services include tax planning, estate planning, business planning, retirement planning, and more.

Contact us today to schedule a one-on-one consultation with our team.

Disclaimer: Nothing contained herein should be construed as legal or tax advice. Avior and our Advisors will work with your attorney and/or tax professional to assist with your legal and tax strategies. Please consult your attorney or tax professional with specific legal and/or tax questions. Investment Management and Financial Planner are offered through Avior Wealth Management, LLC, an SEC-registered investment advisor. Past performance is not a guarantee of future results.  Investments are subject to loss, including the loss of principal.