🌐 Re: A Common Money Blind Spot

At my 2025 year-end Mastermind Meeting in December, I grabbed a whiteboard and started mapping out for the group what I call "Wealth Buckets"...

The concept is simple: you should be extracting wealth systematically from your business to build wealth OUTSIDE of the business.

But when I had everyone calculate their actual numbers — business equity, real estate, retirement accounts, cash, everything (wealth buckets) — the room got a bit quiet.

One of the guys, who runs a $3M business, just stared at the board and said, "I've been working my ass off to get wealthy, but I'm really just making my business bigger."

That hit different.

Because here's what nobody talks about: the better your business performs, the more tempting it is to pour everything back in. Hire faster. Expand capacity. Chase growth.

But growth and wealth aren't the same thing…

Growth increases revenue. Wealth builds optionality, security, and freedom outside your daily operations. And right now, with AI creating unprecedented efficiency gains, most business owners are using that extra margin to scale bigger—not extract smarter.

In this week's Main Event, I break down why most service-based business owners are dangerously over-concentrated in ONE asset—and how AI efficiency should be creating extractable cash for diversification, not just fuel for more reinvestment. Then in Your Implementation Blueprint, you'll get the same 15-minute audit I walked my mastermind clients through.

And as always, The Growth Stack team has curated three Top Reads for you this week: Harvard Business Review on how hands-on leaders build systems that scale, Kiplinger on how the wealthy create passive income streams beyond their business, and Entrepreneur on why managing your energy (not just your time) unlocks sustained performance.

AI is creating margin. Margin is creating cash flow. The question is: are you extracting it to build wealth, or just feeding the machine?

Let's go!

Every week, we break down the big-picture strategy behind the shifts happening in business—so you can see around corners while others are still catching up.

It's the asset you know best. The one you control completely. And the one that's quietly putting your entire financial future at risk…

I spent a full day in December walking my Mastermind Group members through this mindset and framework I’m sharing here today. 

These aren’t struggling entrepreneurs. These are business owners with multiple 7-figure enterprises. They were winning. Revenue up. Margins healthy. Teams humming. Clients renewing.

But when I asked them to map their net worth, the same pattern showed up in every single case:

95% of their wealth was locked inside their business.

One asset. One vehicle. One point of failure.

They'd built million-dollar enterprises. But they hadn't built diversified wealth.

Here's what most people miss…

Your business isn't just an income generator. It's an asset. And like any asset, it carries risk.

The difference? Most assets get diversified. Your business gets concentrated.

You pour every dollar of profit back in. You reinvest for growth. You expand capacity. You hire. You scale.

And with every reinvestment, you increase your exposure to a single, illiquid position.

It feels like building. But financially, it's concentration risk on steroids.

The Paradox of Success

The better your business performs, the more dangerous this becomes…

Think about it:

A $2M service-based business that throws off $400K in profit feels successful. And it is.

But if you're reinvesting that $400K back into the business year after year—hiring, expanding, upgrading systems—you're not building wealth. You're building a bigger, riskier bet on one outcome.

Your net worth looks like this, as an example:

That's 84% concentration in one illiquid asset.

Now ask yourself: what happens if the business hits a rough patch? A key client leaves? A market shift disrupts your model? A health issue sidelines you for six months?

You don't have a wealth problem. You have a liquidity and diversification problem.

And the irony? The more successful you are, the more exposed you become.

Why This Happens

Most service-based business owners fall into this trap for three reasons:

1. Reinvestment feels like the smart move

Your business generates the highest returns you've ever seen. Why would you pull capital out when you could reinvest it and grow faster?

Because growth and wealth aren't the same thing.

Growth increases revenue. Wealth builds optionality, security, and transferable value outside your business.

2. You confuse cash flow with wealth

You're making great money. The business is profitable. You're paying yourself well.

But income ≠ wealth.

Wealth is what you keep, protect, and grow outside the daily operations of your business. If all your profit gets reinvested or spent, you're not building wealth—you're just running a well-paid job.

3. Extraction feels like you're "taking your foot off the gas"

There's a psychological block here. Pulling money out of the business feels like you're betting against it. Like you don't believe in its future.

But smart extraction isn't about losing faith. It's about risk management.

You can grow the business and build wealth outside of it. They're not mutually exclusive.

The AI Efficiency Unlock

Here's where this gets interesting…

AI is making service-based businesses dramatically more efficient. Tasks that used to take hours now take minutes. Workflows that required three people now run with one.

That efficiency creates margin. And margin creates cash flow.

But here's what I'm seeing: most service-based business owners are using that newfound cash flow to reinvest even more into the business.

Hire faster. Expand capacity. Launch new services. Build more systems.

The efficiency gains never turn into extractable wealth. They just fuel more growth inside the same concentrated position.

The better play?

Use AI efficiency to run leaner, protect margin, and systematically extract capital for diversification.

Let the business generate cash. Then pull it out strategically and deploy it into assets that don't rely on you showing up every day.

The 70/30 Rule

Here's an example allocation framework. Its not set in stone but it will give you a solid formula to play with…

70% of net worth should eventually be outside your business.

That doesn't mean you pull everything out tomorrow. But it does mean you need a plan to get there over 3-5 years.

If you're currently sitting at 95% business concentration, the goal is to systematically extract and redeploy until you hit a healthier balance.

Why 70/30?

Because your business should be your highest-conviction bet. It's the asset you control. The one where your expertise creates outsized returns.

But it shouldn't be your only bet.

30% in the business keeps you invested and motivated. 70% outside gives you optionality, security, and freedom.

That said, 70/30 is a guideline, not a mandate. Some business owners are comfortable at 60/40 or 50/50 depending on their risk tolerance, age, and business lifecycle. The key isn't hitting an exact number—it's making an intentional choice about concentration rather than letting it happen by default.

The Bottom Line

Your business is an incredible wealth-generating machine.

But it's not a wealth-storage vehicle.

The same way you wouldn't put 95% of your retirement savings into a single stock, you shouldn't put 95% of your net worth into a single business.

Diversification isn't about pessimism. It's about building a financial foundation that can't be destroyed by one bad quarter, one market shift, or one health crisis.

AI is giving you the leverage to run leaner and extract smarter.

The question is: are you using that efficiency to build wealth, or just to build a bigger, riskier version of what you already have?

So where do you start?

Below, in this week’s Implementation Blueprint, I'll walk you through a simple asset allocation audit you can run this week. Plus, a framework for identifying your optimal business size and building an extraction plan that protects growth while building wealth outside your business.

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How to Run Your 15-Minute Asset Concentration Audit…

The first step to fixing over-concentration is seeing it clearly.

Most service-based business owners have never actually mapped their net worth. They know their business is valuable. They know they have some retirement accounts. But they've never put the numbers side by side.

Here's how to do it in 15 minutes:

Step 1: List Your Assets (5 minutes)

Open a spreadsheet or grab a piece of paper. Create two columns:

Column 1: Asset
Column 2: Current Value

List everything:

Don't overthink valuations. Ballpark is fine. The goal is to see the pattern, not calculate to the penny.

Step 2: Calculate Your Concentration (5 minutes)

Add up the total.

Then calculate what percentage your business represents:

Business Value ÷ Total Net Worth = Your Concentration %

If you're at 80%+ concentration in your business, you're exposed.

If you're at 90%+, you're dangerously concentrated.

Step 3: Identify Your Optimal Business Size (5 minutes)

Ask yourself one question:

"What's the revenue level where my business is efficient, profitable, and doesn't require constant reinvestment to maintain?"

For most service-based businesses, that's somewhere between $2M-$5M depending on your model and margins.

Write down that number. That's your target "optimal size."

Once you hit it, your goal shifts from growth to extraction.

What Success Looks Like:

You now have two numbers:

If you're over-concentrated (80%+) and already at or above optimal size, you have a clear signal: it's time to start extracting capital and diversifying.

If you're not at optimal size yet, your focus stays on growth—but with a plan to shift to extraction mode once you hit that milestone.

A Note on Target Allocation:

The 70/30 split (70% outside your business, 30% in) is a guideline, not a hard rule. Some business owners target 60/40 or 50/50 depending on their risk tolerance, timeline to exit, and how much control they want to maintain. The key is intentionality—you're making a deliberate choice about concentration rather than letting it accumulate by default.

Next Step:

Use AI tools like ChatGPT or Claude to model extraction scenarios. Ask: "If I extract $X per year for the next 3 years and invest it at Y% return, what does my asset allocation look like in 2029?"

You'll see exactly what diversification could look like—and whether your current path is building wealth or just building risk.

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