Becoming wealthy isn’t everyone’s primary goal, but for those who want it, there’s a relatively predictable path to getting rich (at least in the Western World). Despite being easily definable, these steps are no means an easy way to get rich quick. However, this has been the foundation built upon by nearly everyone who has created their own wealth from the ground-up.

Step 1: Ignore Your Family

Family members often advocate for the “next generation” to pursue higher education to secure a “good job,” typically in professions like engineering, law or medicine. However, while these professions can lead to a comfortable lifestyle, they don’t typically lead to significant wealth (unless they invest wisely). High-income jobs face three major obstacles to wealth accumulation: taxation, spending habits, and a growth ceiling.

Taxation
Relying solely on a salary makes it challenging to amass wealth due to high tax rates on income, leaving you with little more than half of what you earn.

Spending Habits
High-income earners often succumb to the “wealth effect,” leading to increased spending. As noted by Thomas J. Stanley, author of “The Millionaire Next Door,” certain professionals, particularly lawyers, tend to spend a considerable portion of their income to project success and status, given the lack of social recognition in their careers. Hence, a substantial income may lead to purchases like luxury cars or enrollment in prestigious private schools to create an impression of affluence.

Growth Ceiling
For most professions, income is predetermined and capped at a certain rate with a relatively small bonus for the lucky few. Your efforts are rewarded through a rigid compensation structure, likely with little to no meaningful equity and profit sharing available to you. This results in a ceiling of earnings that can provide some certainty for income, but trades-off for the potential upsides of being an owner of a well-performing company.

Step 2: Start Something

Most wealth in North America is generated through business ownership. Recent research by Mass Mutual reveals that business owners constitute a significant portion of various wealth brackets. For instance, 17 percent of Americans with investable assets ranging from $100,000 to $500,000 are business owners. There are approximately 9 million employer-based businesses in the North America, indicating a natural business ownership rate of around three percent in the general population. This suggests that individuals in this wealth segment are over five times more likely to own a business than to be employees.

This trend intensifies as wealth levels increase. Among investors with $500,000 to $1,000,000 in investable assets, the proportion of business owners rises significantly to 27 percent. For those with $1 million to $10 million, this figure jumps to 52 percent, and among those with $10 million to $50 million, 67 percent are business owners. Moreover, a staggering 86 percent of individuals with $50 million or more in investable assets are business owners.

In essence, encountering someone very wealthy makes it highly probable that they are, or were, a business owner.

Step 3: Achieve Liquidity

Once you are a business owner, one of your long-term goals will be to enhance the value of your business to command a premium upon sale. Merely being a successful entrepreneur may not suffice to accumulate substantial wealth. It’s crucial to convert the equity tied up in your business into liquid assets. When contemplating the sale of your business, you typically have three primary options:

Acquisition
Some entrepreneurs opt for a high-profile exit by selling their shares for cash. For instance, when Facebook acquired WhatsApp for $19 billion, founders Brian Action and Jan Koum got exceptionally rich.

Re-capitalization
This involves selling either a minority or majority of your company (often to a private equity firm) while retaining managerial control, allowing you to maintain a stake in the business while diversifying your wealth into liquid assets.

Management Buyout (MBO)
In an MBO, you offer your management team (or a family member) the opportunity to buy out your stake over time, often using a portion of the company’s profits as well as debt that the managers will take on.

As your business grows, it may be tempting to keep all of your wealth tied up in your company as a means to grow the business. However, this poses substantial risk and also prevents you from enjoying the fruits of your labour. Just ask Lululemon’s Chip Wilson or BlackBerry’s cofounder Mike Lazaridis; you must convert illiquid private market shares into liquid assets to pay for that ski trip in the Alps.

There are many good reasons to start a business; and for you, wealth generation may not be as important as creating a world-changing product or leading a skilled team. With that said, if money is what you’re after, there is no better way to get rich than to start and sell a successful business.