Business Owner's Mid-Year Gut Check: Balancing Business Growth with Personal Financial Security
James Zahansky, AWMA®
Principal/Managing Partner, Investment Advisor & Chief Goals Strategist
Kevin T. Lewis
Principal, Rocklobs Advisory
As a business owner, you face a constant balancing act: how much should you reinvest in your business versus extracting wealth for personal financial security? This tension becomes even more complex in 2025's economic environment, with tariff implications, potential tax law changes, and an evolving competitive landscape demanding both strategic investment and prudent personal financial planning.
Midyear 2025 presents a critical inflection point for business owners to reassess this balance. Let's explore how to navigate these competing priorities while building both business value and personal wealth.
The Reinvestment vs. Extraction Dilemma: Every dollar you leave in your business is a dollar that's not diversifying your personal wealth. Conversely, every dollar you extract is potentially one less dollar working to grow your business value.
The Case for Reinvestment: Reinvesting in your business can generate higher returns than traditional investments, especially during growth phases. Strategic reinvestment can significantly increase your business's terminal value.
"The key is to grow profit, especially EBITDA [Earnings Before Interest, Taxes, Depreciation, and Amortization] since that is what buyers pay for," notes Kevin Lewis, Principal at Rocklobs Advisory, a consultancy that guides business owners in maximizing business value and securing their legacy in the years leading up to the sale of their business. "To do that, it’s also important to identify investments that create sustainable competitive advantages. I often see business owners chase revenue growth without considering whether those investments actually improve their company's salability and long-term value. But that strategy concentrates your wealth in a single asset—your business—creating concentration risk.”
The Case for Wealth Extraction: Extracting wealth, or swelling your business, allows you to diversify your holdings, reducing dependence on your business's success. It enables you to build retirement funds, create emergency reserves, and pursue other investment opportunities.
Navigating 2025's Economic Landscape
Tariff Implications and Supply Chain Considerations
The evolving tariff environment has created both challenges and opportunities. Some sectors face increased input costs, while others benefit from reduced foreign competition.
Strategic responses include:
Supply Chain Diversification: Invest in supply chain flexibility to reduce dependence on affected imports
Operational Efficiency: Reinvest in technology and processes that improve productivity and offset higher input costs. Consider how AI might be leveraged to make your operations more efficient and resilient as well.
Cash Flow Management: Maintain higher cash reserves to navigate potential supply disruptions
"The businesses that will thrive in this tariff environment are those that view these challenges as opportunities to strengthen their competitive position," observes Lewis. “Taking action now to leverage AI agents to automate processes and better leverage data to adapt to change. These kinds of smart reinvestments in operational efficiency and supply chain flexibility now will pay dividends for years to come."
TCJA Expiration Considerations: With key Tax Cuts and Jobs Act provisions set to expire December 31, 2025, business owners face potential increases in both corporate and personal tax rates, creating urgency around tax planning strategies.
Strategic Recommendations for Current Economic Climate
The Hybrid Approach: Systematic Wealth Building: Rather than an all-or-nothing approach, consider implementing a systematic strategy:
1. Establish a Wealth Extraction Floor
Determine a minimum annual amount to extract for personal wealth building, regardless of business opportunities.
2. Create Investment Hurdles for Reinvestment
Establish minimum return thresholds for business investments. Only reinvest when opportunities exceed these hurdles.
Lewis advises: "I tell my clients to set a 'personal wealth extraction floor'—a minimum percentage of free cash flow that always goes to personal wealth building, regardless of business opportunities. This forces discipline and ensures you're building wealth outside your business consistently."
3. Implement Tax-Efficient Extraction Strategies
Given potential tax changes, optimize how you extract wealth through salary vs. distributions, retirement plan contributions, and deferred compensation strategies.
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Terminal Value vs. Personal Financial Security
Understanding Your Business's Terminal Value: Your business's terminal value represents a significant portion of your potential wealth. However, this value is uncertain, illiquid, and concentrated.
"Most business owners significantly overestimate their company's terminal value," warns Lewis. "They assume linear growth will continue indefinitely and that buyers will pay premium multiples. The reality is that business valuations can be volatile, and timing the market for a sale is just as challenging as timing the stock market. It’s also critical to keep size in mind. Companies need to be big enough to get a multiple larger than two at the time of sale."
Building Parallel Wealth Streams: Smart business owners build wealth both inside and outside their businesses. Inside the business, reinvest to grow terminal value; build recurring revenue streams; and strengthen competitive positioning. Outside the business, maintain diversified investment portfolios and healthy retirement accounts.
Framework for Decision Making
Assess Your Business's Growth Trajectory: Evaluate potential reinvestments based on ROI, risk-adjusted returns, strategic value, and market conditions.
"Business owners often get caught up in the excitement of growth opportunities without properly vetting them," explains Lewis. "I recommend applying the same analytical rigor to business investments that you would to any major financial decision. Ask yourself: does this investment make my business more valuable and more attractive to potential buyers, or does it just make it bigger?"
Evaluate Your Personal Financial Position: Before making reinvestment decisions, assess your personal financial security including emergency reserves, retirement readiness, family obligations, and risk tolerance.
Planning Your Business Exit Strategy
For business owners considering selling their business in the next 3 to 5 years, now is the time to begin maximizing your company's value and preparing for a successful transition. The decisions you make today about reinvestment, operational improvements, and financial structure will significantly impact your ultimate sale price.
Kevin Lewis and the team at Rocklobs Advisory specialize in helping business owners navigate the complex process of preparing for and executing business sales. "The most successful exits begin planning years in advance," Lewis explains. "We work with business owners to identify value drivers, address potential buyer concerns, and structure deals that maximize both financial returns and preserve the owner's legacy."
The Path Forward
Successfully balancing business growth with personal financial security requires ongoing attention and strategic thinking. The current economic environment makes this balance more critical than ever.
At WHZ Strategic Wealth Advisors, our "Plan Well. Invest Well. Live Well.™" process helps business owners develop strategies that support both business growth and personal financial security. Ready to discuss how to balance business growth with personal financial security? Contact us for a complimentary consultation at whzwealth.com or call (860) 928-2341. Let us help you create a strategy that provides Absolute Confidence. Unwavering Partnership. For Life.
If you're a business owner considering selling your business in the next 3 to 5 years, reach out to Kevin Lewis of Rocklobs Advisory at rocklobs.com for specialized guidance to help maximize your business value, ensure your legacy, and make the sale transition with confidence.
Authored by Senior Managing Partner, Chief Strategist James Zahansky, AWMA® with commentary by Kevin T. Lewis of Rocklobs Advisory. AI may have been utilized for some research and initial drafting of this piece. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084, 860.928.2341. http://www.whzwealth.com. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice.
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