You Built the Business. But is 85% of Your Net Worth Riding on It?
Most trade business owners don’t realize how much of their financial future depends on one thing — and what happens if that one thing has a bad year.
By William Yex, CFP®, CEPA®, Wealth Management Advisor
Imagine you’re bass fishing and every single one of your lines is in the exact same spot. One spot. No spread, no coverage, no backup plan. If the fish aren’t biting there that day — you go home empty-handed.
That’s exactly what’s happening with most trade business owners’ finances.
According to research from the Exit Planning Institute, the average business owner has roughly 80–85% of their total net worth tied up in their business. One company. One illiquid asset. No guaranteed exit date and no guaranteed price.
Your business might be humming right now. But what happens if it has a down year? A key tech walks out the door, a big commercial contract dries up, equipment breaks down at the worst time. A rough year for the business doesn’t just hurt the business — it puts a real strain on your personal finances too, because for most owners, the two are inseparable.
The Problem with Having All Your Lines in One Spot
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Most advisors talk about “diversification” — but they usually mean moving money around between stocks and bonds inside a brokerage account. That’s like rearranging the furniture when the house itself is on a shaky foundation.
The real diversification problem for trade business owners isn’t inside their investment portfolio. It’s the fact that the business IS the portfolio. And a business, unlike a stock, can’t be sold on a Tuesday afternoon when you need cash.
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QUICK MATH A trade business owner with a $2M business and $400K outside of it has roughly 83% of their net worth in one illiquid asset. A 20% down year in the business doesn’t just affect the company — it affects nearly everything. |
The goal isn’t to stop believing in your business. The goal is to start building wealth outside of it at the same time — so a bad year stays a bad business year, and doesn’t become a bad life year.
Asset Allocation vs. Asset Location — There’s a Difference
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Here’s where most advisors stop: they look at your accounts, move some money from stocks to bonds, call it a 60/40 portfolio, and send you on your way. That’s asset allocation — deciding what to own.
Asset location is the next level. It’s about where you hold things — which account type, which tax structure — so that you keep more of what you earn. Think of it like storing your gear. You wouldn’t keep your best hunting rifle in an unlocked truck bed. Asset location is about putting your investments in the right “storage” based on how they’re taxed.
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EXAMPLE Tax-inefficient investments (bonds, REITs, actively traded funds) belong inside tax-advantaged accounts like IRAs or a 401(k). Tax-efficient investments belong in taxable accounts where they generate less drag. The difference over 15–20 years can be meaningful — not from taking more risk, just from being smarter about the structure. |
Tax-Loss Harvesting — Turning a Loss Into a Win
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Even in a well-performing portfolio, individual positions can be down in any given year. Tax-loss harvesting is the strategy of intentionally selling those losing positions to create a tax deduction — then reinvesting in something similar so your overall portfolio stays on track.
It’s a bit like a quarterback throwing an incomplete pass on purpose to stop the clock. It looks like a loss in the moment, but it’s the right move for the bigger picture. Done consistently over time, this strategy can meaningfully offset capital gains — including gains from eventually selling your business.
Return-of-Capital Income Vehicles — Getting Paid in a Tax-Smart Way
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Some income-generating investments are structured so that a portion of what you receive back is classified as a return of your own capital — not taxable income. That means you’re receiving cash flow now while deferring or reducing the tax hit. For a trade business owner in a high-income year trying to manage their tax bill, these types of vehicles can be a valuable part of the overall picture.
Beyond Stocks and Bonds — Tools Most Advisors Never Mention
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Most financial advisors operate with a limited playbook: stocks, bonds, mutual funds, maybe some ETFs. But there are other asset classes available to business owners — private credit, private equity, private real estate, infrastructure investments, and others — that can provide income, diversification, and returns that don’t move in lockstep with the public stock market. When your business already gives you plenty of exposure to economic ups and downs, having some assets that behave differently can be genuinely valuable.
The Bigger Picture
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Your business is your greatest asset. Nobody is suggesting otherwise. But right now, if that business hit a wall tomorrow — a key employee leaving, a slow season, a bad economy — how much of your personal financial life would feel that too?
Building wealth outside the business isn’t a sign of doubt. It’s the same thinking you’d apply to anything else you’ve built. You don’t run one service van with no backup. You don’t keep your whole parts inventory on one shelf with no reorder plan. You manage risk because you’re good at this. Your financial life deserves the same approach.
Apollon Wealth Management, LLC (“Apollon”) provides advice and makes recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, Apollon has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. The information contained herein is intended for information purposes only, is not a recommendation to buy or sell any security and should not be considered investment advice. See Apollon’s Form ADV Client Disclosure Brochure for information about risks and considerations relating to the services offered through Apollon. This is available on our website, www.apollonwealthmanagement.com. Apollon does not provide tax advice; individuals are strongly advised to consult with a tax professional before making any tax-related decisions. Tax strategies are general in nature and may not be suitable for all individuals. The information provided herein may not be relied on for purposes of avoiding taxes. The specific considerations for you may need expertise or review by a tax professional, licensed insurance provider, estate planning attorney or other professional to determine how it applies to you. Information provided is generic in nature, for educational purposes and not specific advice. Speak with your tax professional about your specific personal considerations before making any planning decisions.
Apollon Wealth Management · For educational purposes only. Not personalized tax or financial advice.
