I was thinking about yesterday’s post and the Newhouse family’s strategy for reducing their estate tax liability. The fact that they had a tax strategy, and the results, stuck with me and reminded me of a tax conversation I had.

A successful entrepreneur once pointed out that taxes are a successful entrepreneur’s biggest expense, yet most spend less than 1% of their time thinking about them. They don’t have a strategy or defined actions around taxes. Most entrepreneurs spend time scrutinizing and optimizing their biggest business expenses on their profit-and-loss statement but don’t do the same with taxes. He believes this is a big mistake and that founders should spend some percentage of their time, say 5%, on their tax strategy every year. Doing so can have a material impact on business finances and the ability to reinvest in growth opportunities.

Regardless of how you feel about Newhouse's estate tax strategy, the result highlights that an effective tax strategy can indeed have a material impact on a business. To be clear, I don’t believe in tax dodging or doing shady things to avoid paying taxes. That’s just silly and can land you in jail. But I think there’s something to be said about having more of the capital your company generated available to reinvest in growth.