How Serial Entrepreneurs Are Reshaping Wealth Creation

Between innovations in tech and jobs initiatives, it’s become easier than ever for entrepreneurs to develop new companies.

Serial entrepreneurs are capitalizing on the opportunity afforded by the current economic environment to start companies, grow them to profitability and then sell them off and start the cycle over again. In the process they’re also putting a new spin on the way they create wealth and offering some valuable lessons for high-net-worth individuals who want to mimic their success. (See also: Serial Entrepreneurs Venture and Venture Again.)

What They’re Doing Differently

Common sense dictates that if you want to build a solid wealth base, you need to put money into the market. Investing in stocks, mutual funds, exchange-traded funds (ETFs) and real estate investment trusts (REITs) are all proven ways to generate returns beyond what a savings account or certificate of deposit (CD) could offer. Even bonds, which are among the safest investments, earn a spot in the portfolios of savvy investors who want to balance out risk. (See also: The Importance of Diversification.)

Rather than relying on market returns, however, serial entrepreneurs bank on the companies they’re building to create the wealth they desire. That doesn’t mean that they’re not investing in the stock market​ at all. They’re just not relying on it as the sole means of increasing the size of their asset base. So how do they do that?

Typical entrepreneurs develop a great idea that they use to launch a company, then dedicate their time to growing their venture to the desired level of success. Serial entrepreneurs, on the other hand, build up a company and then either hand over the reins to someone else while retaining ownership or sell it for a tidy profit. By doing this over and over, they’re putting themselves in control of their financial destiny rather than subjecting themselves to the whims of the market. (See also: Why, How, Where and When Entrepreneurs Make Money.)

What They Can Teach Investors

Starting a company isn’t something just anyone can do, but investors can apply some of the basic principles that serial entrepreneurs follow to their own wealth-creation strategy. If a higher net worth is one of your goals, here are some tips for adopting a serial-entrepreneur mindset:

  • ​Get Expert Advice – ​Running a business is difficult to do alone, as is growing wealth, particularly for high-net-worth entrepreneurs. According to the 2016 U.S. Trust Insights on Wealth and Worth Survey, 69% of business owners rely on multiple financial advisors to guide their business and personal decision-making when it comes to how they manage their money. If you’re committed to strengthening your wealth foundation, consulting a financial professional is an important part of the puzzle.
  • ​Understand the Liquidity of Your Investments – Liquidity is a key element of any sound investing plan, so it’s crucial that you recognize how liquid or illiquid your investments are. In the U.S. Trust survey, more than half of entrepreneurs polled said they expected a major liquidity event in the next three years. Thirty-seven percent said they were working with their financial advisor to prepare for the tax implications of these events or had plans to do so. As an investor you should also be concerned with how things such as selling off stocks can affect your financial outlook.
  • Have an Exit Strategy – ​A well-thought-out exit strategy is a must for any serious serial entrepreneur, and that rule also applies to your investments. Whether you’re a value investor or you prefer a buy-and-hold approach, you need to be clear on when it’s time to unload a particular stock or mutual fund. Without an exit plan in place, you could be setting yourself up for a loss if some of the securities in your portfolio begin to lose steam.

​The Bottom Line

Serial entrepreneurship isn’t without its drawbacks. After all, the majority of new businesses fail. The same holds true for investing. It can often be hit or miss, but if you’re willing to look at your portfolio from a different angle, it may lead to a bigger payoff than expected.

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  1. Bank of America. "2016 U.S. Trust Insights on Wealth and Worth Survey," Page 15.

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