How To Become A Millionaire – Factor NO. 3 – Business Or Professional Practice Ownership

Sometimes working for yourself is a faster way to grow your wealth than working for someone else.  This is one of the research findings supported by Spectrem Group’s ongoing research.  While this is one of the factors in achieving wealth, the temperament and skill set required to achieve wealth through this methodology Is a requirement.

Let’s review the 8 Fundamental Factors that are consistent among Millionaire households.

1. Education. Most millionaire households have graduate level degrees of some type.  Therefore, the first lesson is GO TO SCHOOL.
2. Hard Work and Average Hours Worked.  Most of the wealthiest households actually worked longer average hours than less wealthy households.  PUT IN THE HOURS TO DO A HIGH QUALITY JOB.
3. Business or Professional Ownership as a component of wealth will be discussed in this article.
4. Slightly aggressive risk tolerance will be discussed next week.
5. Use of professional advisors.
6. Balanced portfolios that include alternatives.
7. Investment real estate.
8. Willingness to invest in new but well researched ideas and concepts.

The chart below highlights the most common occupations of various wealth segments.  Note that as wealth levels increase the percentage of individuals that are Business Owners also increase.  Additionally, a large percentage of the UHNW households (those with $5-25 Million of net worth, not including their primary residence) are Physicians/Dentists. 

There are two facts that are important to note as you view this listing of professions.  Note that Professionals such as Physicians/Dentists and Attorneys do not represent as large a portion of the $25 million plus segment as Business Owners and Senior Executives.  Spectrem’s research over the years has shown that the wealth levels of professionals generally caps out at about $15 million.  Now, that’s not a bad level for most people to cap out at, however, Business Owners are the ones that ultimately become the wealthiest.

Secondly, clearly Senior Corporate Executives also represent an important part of the ultra-wealthy landscape.  If you are more suited to work for others within generally a large corporate environment, this is the path for you to take.  Keep in mind, however, that success is this environment is often subject to the political treachery of a corporate environment.

It is very important to note, however, that in order to succeed as a Business Owner, the ability to make tough decisions and handle significant stress is critical.  While some Business Owners are fortunate enough to inherit a Family Business, Spectrem research indicates this is generally less than 30% of all Business Owners.

Professionals also need the ability to run their own practice.  The skills taught in medical school, law school or dental school do not immediately translate into the skills required to run a business….billing, accounting and related functions.  Therefore, these individuals must assess and hire competent individuals to perform the required functions.

Overall, in order to succeed with your own Business or Professional Practice, one must be flexible and order to self-teach the ability to understand certain factors that may not have been taught in school.  Additionally, assessing appropriate individuals to assist you in your enterprise is also a critical skill.  That explains why many of the most successful Millionaire households actually work much longer hours than less successful households.  As the owner of a business or a profession, it is the responsibility of that individual to ensure its success and not rely upon others.