Unless your last name is Bezos, Buffett, or Gates, you likely won’t have the answers about how to run a successful business, and you’ll have to figure things out the hard way. Fortunately, those who have already been down that road can offer some pieces of advice aimed at steering you clear of some all-too-common financial potholes:

  1. Not Having an Emergency Fund

Mike Tyson said, “Everybody has a plan until they get punched in the face.” Like life, running a business can be volatile and unforgiving. Prepare for turbulent times by stashing away at least three months’ worth of operating expenses.

  1. Poor Tax Planning

Unless you’re a math nerd, tax planning is about as fun as folding laundry; that’s why most people put it off until it’s time to file. But not being proactive about taxes can lead to overpayment and the lost opportunity for savings. Meet with your tax advisor at least once during the off-season (May to December) to proactively strategize for significant tax savings.

  1. Inefficient Loan Repayment

Structure your loan repayments to pay off the ones costing you the most first. Then use your improved financial standing to consolidate the rest and get the lowest interest rates possible. That might seem like common sense, but most business owners simply do not track their debt or structure their repayment plans correctly.

  1. Not Monitoring Your Credit Score

Those “free credit score” commercials are kind of funny, but knowing your score (and ensuring its accuracy) is a serious matter. The difference of just a point or two can cost you thousands in interest rates and premiums, so check your credit score at least twice a year, monthly if you’re working on repairing your credit history.

  1. Using the Wrong Business Structure

Is it time to incorporate? When it comes to your business structure, don’t guess; meet with your legal advisor annually to re-evaluate your company’s entity status and any potential for liability, and determine where you may be able to change your structure to save more on taxes.

  1. Treating all Expenses Equally

Learn the difference between a) wasteful expenses (overdraft fees), b) consumptive expenses (vacations), and c) productive expenses (consultants), so you can maximize c, manage b, and eliminate a.

  1. Losing Passion

Business ownership’s daily demands can quickly diminish your initial passion for entrepreneurship. Whenever possible, delegate the most tedious tasks, and focus on the endeavors you not only love most, but that are within your zone of genius, to maximize your passion, productivity, and long-term sustainability.

  1. Poor Customer Engagement

As a business owner, it’s easy to lose touch with your consumers. But whether you sell microchips or microbrews, customer happiness impacts your bottom line like nothing else. Have a system in place that keeps you in touch with your clients on a regular basis, so you can keep track of their evolving needs and create raving fans at the same time.

Although some of these tips may seem like common sense, you’d be surprised by how many entrepreneurs fall prey to these easily avoidable financial pitfalls. When the day-to-day responsibilities of running a business consume you, however, it’s quite easy to become hyper-focused on your top line. That can cause you to lose sight of the numerous opportunities, other than straight revenue, for saving money and boosting profits. By avoiding these mistakes, small business owners can save copious amounts of time, money, and energy that can be devoted to much more valuable endeavors.

 

Please follow and like us: