By Boyce F. Lowery, CLU, ChFC
If you are a business owner, you are well-acquainted with the highs and lows of the responsibilities you carry. Being a business owner gives you the freedom to pursue your own passions, be your own boss, and impact your community. But like any venture, acting as CEO of your own enterprise comes with its fair share of risks. According to Bloomberg, 8 out of 10 entrepreneurs fail within 18 months of starting their venture. (1) In a world with no guarantees, is it possible to increase your chances of success? Here are some common mistakes business owners make and solutions to avoid them.
1. Not Taking Care of Your Family
The day-to-day tasks of running your business probably keeps you busier than you can handle. Unfortunately, this often means that your family doesn’t get the focus they deserve. Your family is the reason you work hard. Not only do you need to find a work/life balance so you don’t miss out on cultivating relationships with your loved ones, but proper planning can ensure that you can provide for them if something happens to you.
Have you ever considered how your family would fare if you died prematurely or suffered a disability and could no longer work? Many businesses are not set up to fully care for your family in the manner in which they have become accustomed. The full range of family financial needs, such as income replacement, mortgage protection, and retirement supplementation, cannot be met through the business alone. Obtaining the proper disability insurance and life insurance can give you confidence that your family will have the finances they need no matter what happens to you. It is also critical to have an estate plan in place that preserves everything you’ve built in a tax-efficient manner.
2. Neglecting to Plan For Employees
Approximately 48% of America’s private workforce is employed by small businesses. (2) Even if you start your company with no employees, your growth and expansion plans may require hiring others on. Successful companies are made up of quality people who are passionate about what they do so you want to ensure that you have the right people on your team and that they are well taken care of. Between insurance options, benefits packages, and retirement plans, there’s a lot to consider. Which plan works best for you and your employees? How much will it cost you? Instead of coming up with solutions on the fly, work with a financial professional to map out a strategy to attract, retain, and provide for your employees.
3. Putting Off Retirement Planning
When you start a new venture and invest a significant amount of your personal assets, retirement probably seems a long way off. But one day you will want to slow down and enjoy the fruits of your labor. If you don’t plan for retirement now, will you be able to afford to retire down the road? Even if your business is profitable and you plan to retire off the proceeds when you sell it, you still need to save and plan.
Planning early and adjusting often is the best strategy, especially for business owners who have a lot of their net worth tied up in their companies. Don’t put retirement planning off until it’s too late. Work with a financial professional to create a sound retirement plan and diversify your net worth so it isn’t all tied up in one place.
4. Failing to Create a Succession Plan or Exit Strategy
Every business owner needs a succession strategy or exit plan. Whether you want to sell or pass your company down to family members, it’s critical that you start thinking about how and when you may want to leave your business and what you can do now to prepare so you receive the highest price possible. Having a strategic transition plan will make your company more appealing to buyers who want assurance that it will continue to thrive without you. Even if you’re passing the business on to family members, you need a plan in place to ensure that it continues to prosper and all family members are treated equally.
5. Forgetting to Account For Taxes
Even the most basic tax filing is overly complicated. Add a business to the mix, and the headaches could come fast and furious. You are an expert in your field and passionate about the company you started, but chances are you aren’t as passionate about the nuances of tax law or an expert in how to best leverage those taxes to minimize what you owe each year. That lack of knowledge could cost you more than you know.
In order to keep as much of your hard-earned money in your pockets as possible, you’ll need to maximize tax deductions, minimize your taxes now and in retirement, and have a tax-efficient estate plan in place. If you are planning to sell your business, you’ll need to consider the effects of capital gains taxes and research your tax options. Since you want to focus your efforts on running your business, an experienced financial professional can help you carry the burden of tax planning and create strategies to legitimately save on income taxes.
Don’t Fall Prey to These Mistakes
Starting and maintaining a successful business isn’t easy. The issues that keep you up at night are valid concerns that need to be addressed. Rather than shouldering the burden on your own, why not invest in a team of people that can help speak to some of the specific challenges you face? At Suncrest Advisors, we offer expertise, advice, and professional referrals to address a range of our clients’ most complex business and planning issues regarding wealth accumulation, protection, and transfer. If you are ready to take the next steps to avoid these common mistakes business owners make, call us at 888-827-0146.
Boyce Lowery is a 40-year veteran and established expert in the insurance industry. As the managing partner of Suncrest Advisors, he, his partner, and their associates all aim to provide financial security and peace of mind to business owners, executives and professionals, and high net worth individuals across the United States. Along with more than four decades of experience, Boyce is a Chartered Life Underwriter® (the premier designation for insurance professionals signifying specialized knowledge in life insurance and estate planning) and a Chartered Financial Consultant® (known as the advanced financial planning designation). To learn more, visit http://suncrestadvisors.com/ or connect with Boyce on LinkedIn.