Why Taxes May Matter More Than Investment Performance for Business Owners

If you're a successful business owner, there's a good chance you spend considerable time thinking about investment performance—tracking markets, analyzing returns, and adjusting allocations. It's what most wealth conversations center around. However, in practice, I've found that for many business owners, taxes often have a larger and more permanent impact on long-term outcomes than investment performance itself.

This isn't to say that investment returns don't matter. They absolutely do. But when it comes to building and preserving wealth as a business owner, the tax decisions you make—or fail to make—can fundamentally shape your financial future in ways that market performance simply cannot.

The Difference Between Investments and Taxes

Let's start with investment performance. Markets go up, and markets go down. Over time, they experience volatility, cycles, and recoveries. That uncertainty may be uncomfortable, but it also means that performance is variable and, to some extent, reversible. If an investment decision doesn't go according to plan, there's often an opportunity to adjust—whether you rebalance, change strategies, or simply allow time to do its work. In other words, investment performance is important, but it's rarely permanent the moment it happens.

Taxes, however, are very different. Tax decisions are usually locked in once they occur. The structure of your business, how income is recognized, how assets are sold, and when the transaction occurred—all of these factors carry consequences that are difficult, if not impossible, to undo.

For example, is your business structured as a C corporation or an S corporation? Did your business sale occur as an asset sale or an equity sale? Did the transaction close on December 31, 2025, or January 1, 2026? These may seem like subtle differences, but they carry vastly different tax consequences and can rarely be reversed later. There's no rebalancing a tax bill. Once a tax year closes or a transaction is complete, that outcome is largely set.

This is why taxes represent more of a one-way door, while investments tend to be a two-way door. You can recover from a bad investment year. You cannot recover from a poorly structured exit.

Why Business Owners Are Especially Exposed

Business owners are especially vulnerable to this dynamic because so much of their financial life is concentrated in the business. Income is uneven. Liquidity events are infrequent but significant. And many planning opportunities only exist before those events occur.

What we commonly see is that owners tend to focus on growth and operations—which makes sense—but defer tax strategy until a surprise forces the conversation. Maybe it's an unsolicited acquisition offer, a partner buyout, or a sudden need for liquidity. At that point, the planning window is often much narrower than expected, and the range of available strategies has already shrunk.

The result? Business owners who have spent decades building value may end up leaving significant wealth on the table—not because they didn't work hard or make smart business decisions, but because they didn't plan proactively around the tax implications of those decisions.

The CPA Misconception

A common assumption we hear is, "My CPA will handle it." And while CPAs play a critical and valuable role, it's important to understand the scope of that role. Much of a CPA's time is spent looking retrospectively—reporting what has already happened, ensuring compliance, and filing returns based on past activity.

Effective tax planning, however, is a forward-looking discipline. It requires coordination between your tax advisor, your wealth advisor, and your exit planning team. It involves scenario modeling, entity structuring, timing strategies, and long-term goal alignment.

Without that coordination, opportunities may be missed—not because anyone made a mistake, but because timing matters, and no single advisor may have visibility into the full picture.

This is not a criticism of CPAs. It's simply a recognition that proactive tax strategy requires a different approach than tax preparation, and both are necessary.

Proactive Tax Planning: The Foundation for Wealth Preservation

This is why we believe that tax planning should come before performance optimization, especially for business owners. The sequence matters.

When tax strategy, business structure, and long-term goals are all addressed early, investment decisions can be made within a clearer and more efficient framework. When they're addressed late—or not at all—even strong investment results may be overshadowed by what could have been avoidable tax outcomes.

To be clear, investment performance absolutely matters. But for many business owners, taxes often represent the largest and most permanent cost they'll face over their lifetime. It's a cost that deserves proactive attention, not reactive scrambling.

Thinking about tax strategy earlier rather than reactively can materially change the range of outcomes available to you later. It can mean the difference between paying a 20% capital gains rate and a 40% ordinary income rate. It can determine whether you're able to defer taxes, offset gains, or structure a sale in a way that preserves wealth across generations.

These aren't small differences. Over the course of a liquidity event or a multi-year exit, they can amount to millions of dollars in preserved wealth—or lost opportunity.

When to Start Thinking About This

If this perspective is relevant to your situation, it might be worth stepping back and reviewing how tax considerations fit into your broader planning—not just at year-end, but over the next several years.

This topic tends to become more important the closer an owner gets to a liquidity event or a major transition. But the irony is that the best time to act is well before that moment arrives. The earlier you begin coordinating tax strategy with your overall wealth plan, the more options you'll have and the more control you'll retain over the outcome.

Whether you're five years away from a potential exit or simply looking to optimize how your business and personal finances are structured, now is the time to start the conversation.

About the Author: Michael Mann works with business owners across the country on proactive tax and wealth planning, particularly in the years leading up to a liquidity event.

Disclaimer: This content is provided for informational and educational purposes only and should not be construed as investment, tax, or legal advice. The information discussed is general in nature and may not be appropriate for all individuals. Investment strategies and concepts involve risk and are not guarantees of future results.

Securities and advisory services are offered through Ausdal Financial Partners, Inc., member FINRA/SIPC. FirstGen Planning and Ausdal Financial Partners are independently owned and operated.