I will give you an example. Recently I was at a convention where many CPAs were gathered and I asked one of them, "What percentage of your tax planning has to do with deferring taxes from the current year to a later year?" I was expecting the number to be high, but still I was shocked by the answer: "One hundred percent of the tax planning we do is deferral." Let me explain what is going on here. Like most CPAs, that CPA is deferring his clients' taxes year by year with the expectation that when they retire, they will be at a lower tax bracket than they are today. In other words, he is planning for his clients to retire poor.

With all due respect to my CPA colleagues, that's insane. Why would anyone want to retire poor? We know from years of testing our methodologies that you can multiply your net worth over a few short years, by the correct application of leverage and the velocity of money (see my last email). Your tax strategy should be designed for you to retire rich - in fact, richer than you are today.

What is needed is a strategy that does not defer year by year, but installs permanent tax savings. This is where exceptional knowledge of the Internal Revenue Code comes in. You can only achieve such savings by understanding the law in all its curious and anomalous details. You have to figure how the Code is actually designed to help you reduce taxes. Specifically, this means more than knowing about individual tax laws; you have to master the ways different laws interact. It's like a good doctor who knows more than which drug to match with which disease; he or she also understands how various drugs affect each other.

In the field of taxation, don't settle for fixing your annual symptoms...look for the permanent cure!

In this final portion, I would like to introduce some fundamental principles about business strategy. If you don't own a company in the conventional sense, with buildings and employees, please stay with me for a moment. Even though your "business" may simply be a one-person professional practice, or a real estate or stock investment portfolio, the same principles apply.

What does it take to grow a business? The answer may seem obvious, yet the principles I will share here are very rarely applied. I know this from my experience counseling hundreds of business owners over many years.

You must know where you stand now, and where you wish to go.

Simple, huh? Here is what is missing in 99% of privately owned businesses I have encountered. The company may have revenue targets (a surprising number don't even have that.) What is missing is a valuation target. What do you want your company to be worth to a potential buyer, and by when? Never mind if you have no intention to sell: valuation is the best way to "keep score" because valuation places your business under the toughest possible scrutiny.

Perhaps you are one of the few owners who has a ready answer to this question. Perhaps you do have an exit strategy such as a sale or IPO, and you have a figure in mind for the company's worth, with a future date.

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