Ten Common Money Pits Even Brilliant Entrepreneurs Fall Into
If you’re relying on your top line to grow your wealth, you could be missing out on easy opportunities to save money and improve profits, independent of your revenue.
Many entrepreneurs waste precious time and money by falling prey to these common mistakes. However, there is no need to sacrifice, work harder, or take on new financial risks when they can be easily avoided.
Here are the 10 common money pits that entrepreneurs may fall victim to:
1. Not Monitoring Credit Score
Discrepancies in your credit score can cost you thousands in interest rates and premiums. Monitor your credit report every six months for accuracy.
2. Scrimping on Productive Expenses
Differentiate between wasteful consumption expenses and rainmaking expenses that can produce big returns—you can't afford to scrimp on those.
3. Relying on Investment Advisors
Commissioned-based advisors want to keep your assets under their control. Stay conscious of this bias, and consider having an objective trusted advisor who is not paid a commission, such as your attorney, review all investments before you make them.
4. Reactive Tax Planning
During tax season, your accountant’s focus is on filing returns, not strategizing. Meet off-season with your accountant at least once to prepare a proactive—not reactive—tax strategy. And always get projections before the end of the year so you can strategize end of year tax decisions.
5. Using the Wrong Business Structure
Review your business structure with an attorney every three years to ensure your structure is still advantageous.
6. Monthly Payments on Multiple Loans
Refinancing or restructuring your loans could save interest and potentially even taxes. Pay off your least efficient loan first, and you could qualify for lower interest rates on the rest.
7. Blind Investing
Invest in what you know. You—not a commissioned-based advisor—know what’s best for your business. And that requires you to be tracking your financials at least monthly, and likely weekly, to be making wise choices consistently.
8. Sharing Profits
Profit sharing with employees solely for tax purposes is like giving the IRS control of your money. Don’t spend money to save money. However, do invest money to create more of what you want. Thus, consider profit sharing to motivate long-term growth and legacy of your business.
9. Funding 401(k)s
Your contributions 401(k)s are tax-deferred, but you have to pay those taxes at some point. Because taxes are expected to go up, you’ll end up paying more to the IRS.
10. Losing Passion
Losing the passion you have for your business means lost productivity, which is easy to do when you're bogged down with daily details and decisions. Take the time to be proactive about your legal, financial, and tax planning so you can fuel the passion that brought you to this business in the first place.
At Kira Doyle Law, we are here to help you implement legal and financial systems that will free up your time and money so you can focus on what matters. If you’re ready to be proactive about the financial success of your business, begin by calling our office in St. Petersburg, Florida, at 727-537-6818, to schedule an appointment with one of our experienced Business Attorneys today!