3 Steps to financial freedom in your painting business
Running your own painting business is an excellent way to build personal wealth, and with the right amount of wealth accumulation, you’ll be able to acquire financial freedom so that you no longer need to actively work for money. But you need a strategy in order to build this wealth. Here is a three-step approach to help painting business owners reach financial freedom:
1: PAY YOURSELF FIRST
As the owner, you need to make sure your business pays its most important employee first: you. Set a percentage of sales as profit in your business. Then, when sales come in, allocate that percentage to a dedicated ‘profit’ bank account. This bank account should only be used to accumulate your profits, and periodically disperse them to you—nothing else.
This method prevents you from spending profit on business expenses. As Mike Michalowicz describes in his book Profit First, allocating your profit for an account that’s separate from your main business expense account helps you pay yourself first and allows you to still work within your budget.
2: SAVE AGGRESSIVELY FOR RETIREMENT
When your business is profitable and you are playing a good ‘offense’ for wealth accumulation, you need to set up a good ‘defense’ for your wealth by aggressively saving for retirement. Contributing 15% to 50% of your pay toward retirement will allow you to accumulate wealth quickly. For example, if you contribute $30,000 a year for 17 years, you can accumulate more than $700,000, assuming a 4% return.
3: PLAN FOR TAXES
To get serious about wealth accumulation, you also need to consider taxes. Luckily, contributing money to retirement savings accounts often leads to significant tax savings. Common retirement savings plans that include significant tax breaks for businesses include solo 401Ks, SEP IRAs and SIMPLE IRAs.
Find a tax professional to walk you through the best scenario to save on taxes throughout the year. Don’t wait until tax time; it’s too late then. Plan for taxes early and often.
Implementing this three-step strategy will set you on the quickest path toward financial freedom in your painting business.
Daniel Honan is a former painting business owner and current bookkeeper and tax accountant at BookkeepingForPainters.com With his painting and accounting experience, he helps painting contractors save time and money.
For more on this subject, read the Jun/Jul issue of inPAINT magazine: inPAINTmag.com