From Ordinary to Extraordinary: A Carpenter’s Path to Prosperity

By David Fagan

Most business owners spend years learning how to build a successful company.  They learn how to attract customers, manage employees, make payroll and produce profit.  

But very few are taught what to do when the business begins producing more money than the  family needs to live - That is when a business owner must begin developing a second skill:  

They must learn how to become an investor.  

Why incorporate?  

When clients ask whether they should incorporate, my first answer is often:  

“Absolutely. It is better for your accountant. We can charge you more for your accounting  

services.” That normally gets a laugh!  

There can be important legal reasons to incorporate, which should be discussed with a lawyer.  From a tax perspective, however, the central question is usually:  

Will the business earn more than the owner needs to withdraw each year personally? 

If every dollar must be withdrawn to pay household expenses, incorporation may add cost and complexity without creating much tax deferral.  

The opportunity becomes more powerful when the business produces excess profits that can remain inside the corporate structure.  

That does not make personal tax disappear. It gives the owner greater control over when tax is paid and what happens to the capital in the meantime.

A simple construction business  

One of the best examples I have seen came from a family construction business.  

There was no revolutionary technology, national brand or spectacular exit strategy.  

It was a good business operated by two hardworking people. Both spouses worked in the company. They managed projects, customers, employees, and everyday challenges of construction.  

In the early years, they reinvested in the business, purchased equipment, hired employees and built enough working capital to support its growth.  

At the same time, they did something that would eventually transform their financial lives:  They lived below their means.

We recommended incorporation because the company was beginning to earn more than they needed to withdraw as salaries.  

The business could support the family while retaining part of its annual profit. 

Give retained earnings a job  

Initially, those retained earnings protected and strengthened the business.  

They funded equipment and growth. They provided a cushion when projects slowed down or customers were late paying. That should always come first. Do not invest next month’s payroll. Money reserved for taxes, debt payments, equipment purchases and known commitments should remain safe and available.  

The objective is not to invest every dollar.

It is to identify the capital the operating business no longer reasonably requires.  

Over time, this construction company reached that point. Cash began accumulating, and for a few years, some of it sat idle.  

This is common. Business owners become highly skilled at earning money, but no one helps them decide what the money should do next.  

The company had become good at producing capital - That capital now needed a second job. Build a second wealth engine  

The family established a holding company and began moving true surplus capital out of the operating company. Then they started investing.  

They did not speculate, search for the next winning stock or turn investing into another full-time career. They used a simple, diversified approach and invested in the public markets while continuing to run their business.  

Most importantly, they automated the process: 

Earn. Retain. Transfer. Invest. Repeat. 

Over approximately 15 years, they saved close to $100,000 annually. The exact amount varied, but the habit remained. Through continued saving, investment growth and  

compounding, their corporate investments grew to more than $4 million.  

They are still in their 40s, leaving decades for that capital to continue to grow. 

The most important result  

The most important part of the story is not the $4 million - It is what the money changed.  

The owners never wanted to reach a point where, if they could no longer work, they could no longer pay their bills.  

Their income, time and much of their net worth were tied to the construction business.  

The investment portfolio created a second financial engine. It diversified their wealth and reduced their dependence on their continued ability to work.  

They still operate the company today.  

But now they work because they want to, not simply because they have to.  As their net worth grew, their lifestyle did not grow at the same pace.  

Yes, they built a larger home and drive somewhat newer vehicles. But their spending did not rise every time the business had a successful year.  

Their net worth increased, reliance on the company declined and their future became less fragile.

If they continue saving like they always have, and their investments compound over the  

next 20 years at close to 8% they could potentially approach $20 million by their early 60’s.  

Returns are never guaranteed, but the projection demonstrates what disciplined saving and a long runway can make possible.  

That is more than retirement savings.  

It is generational wealth. 

Turn business success into lasting wealth  

The greatest lesson from this family was not investment brilliance.  

∙ It was discipline and consistency.  

∙ Year after year, they saved.  

∙ They avoided major mistakes.  

∙ They kept the strategy simple.  

∙ And they gave compounding enough time to work.  

You do not need an extraordinary company to create extraordinary wealth.  

You need a good business, a gap between what the company earns and what the  

family spends, and a system that puts that gap to work.  

1) The business creates the profits.  

2) The corporate structure preserves the opportunity.  

3) A disciplined investment system can convert that opportunity into freedom. 

That is how an ordinary family business becomes an extraordinary legacy.