Right now you may be logging hours in a coffee shop or co-working space trying to make your idea a reality, but project yourself a couple of years into the future. The business is a success, with customers, employees and an office of your own, you’ve turned a profit and now someone wants to buy your company for a cool million or more.
You’re in the position to take a breath and think about your next steps in this new financial bracket. How do you make the most of what you’ve earned and manage your money in such a way that works for you? We collected advice from some top wealth management experts about the things that a savvy entrepreneur turned millionaire will never do with his or her money.
1. Don’t take the first deal that comes your way.
Millionaires will rarely take the introductory deal offered to them, says Gemma Godfrey, the founder and CEO of digital wealth manager Moo.la. “They are much more likely to negotiate better terms as and when they can,” she says.
That mindset of always being on the lookout for the partnerships and ventures that will be of the highest worth to them means that millionaire entrepreneurs aren’t going to throw away their time on investments that they don’t believe in or lose their fortunes on careless mistakes.
“As Benjamin Franklin said, ‘beware small expenses. A small leak will sink a great ship.’ Millionaires don’t want their wealth to be as easily destroyed,” Godfrey says. “Therefore, they will rarely have loose reins over their outgoings and waste money on ‘penalty fees’ for overdue payments.”
2. Don’t be bowled over by luxury.
The millionaires who grow their wealth with a sense of responsibility — whether the money was earned or inherited — are the ones that have the best tools at their disposal to maintain their fortunes and pass them on to the next generation.
Manisha Thakor, director of wealth strategies for women at Buckingham and The BAM Alliance, characterizes this as part of the “millionaires next door” attitude.
“I find that this group generally tends not to drive flashy cars, wear glitzy jewelry and clothes, engage in conspicuous consumption and often values experiences [and]helping others over collecting possessions,” Thakor says. “When they do splurge, it tends to be on something — a possession or an experience — that has deep meaning to them personally, not because of what other people will think of them.”
3. Don’t speculate.
While millionaires won’t put their money toward something that they don’t believe in, smart millionaires won’t put their fortunes into something that they don’t understand.
Garrett Gunderson, the founder and chief wealth architect at Wealth Factory, a personal finance firm for entrepreneurs, says business owners will often pursue investments that may seem solid but ultimately don’t pan out, citing real estate, IPOs and energy as some of the common ways that people look to diversify their portfolios without doing the proper research.
“If you’re seeing a business owner that is a millionaire, they’re not chasing and speculating with the majority of their money,” he says. “They’re going to keep a lot of it in places they understand and know — whether that’s inside of their business, places where they can access the money [or]paying off loans.”
Gunderson adds, “They’re not going to be chasing the latest, greatest thing, often because they don’t have time to worry about those kinds of things. Millionaires stay focused.”
4. Don’t risk it all on your next venture.
Carl Richards, director of investor education at BAM Advisor Services and the author of The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money, says that entrepreneurs who are successful once and want to stay that way are smart about not plunging the entirety of their newfound fortunes into the next company.
Why? The new idea could fail to gain traction, and a few years later, they could end up right back where they started.
Because of this, Richards says that the savviest millionaire entrepreneurs “realize that things can change and often do. They also realize that the skill that made them a successful entrepreneur won’t necessarily lead to success in investing. They are humble about the position they’re in.”