Six Business Mistakes That Can Be Prevented

It’s easy to push future or improbable financial events out of your mind. But a bit of preparation now can save a business owner from costly mistakes later.

This was the message at a financial planning workshop the Professional Landcare Network’s Green Industry Conference in Louisville. Brian Marino and Bernard Garrah of Cleveland-based Skylight Financial Group explained six common ways of thinking that can get business owners into trouble and how to avoid making those mistakes:

1. “I know the value of my business.” – If you haven’t had a business valuation in the past two years, it’s time for a new one, Garrah says. Moreover, have a plan in place in case the need ever arises to hand it over to someone else. “Get it valued and try to find some key people you would want to groom to take it over,” he says.

2. “I’m too busy running the company to think about succession planning.” – “There is never a good time to do this planning because they’re always in the business,” Marino says, adding business owners usually don’t think about succession planning until it’s late in the game. But taking just a few steps in the right direction now can prevent a huge headache later. “Jot down how long you want to be in business – what’s the plan to make that happen?” Marino says. Also, think about what will happen to the company? Will you give it to someone or sell it? If you’re leaning toward selling it, look to other companies in the community that might make a good buyer (they have to be interested in buying as well).

3. “That will never happen to me.” – This thinking is flawed, considering someone becomes disabled every 14 seconds on average, Garrah says. Are there managers who would be prepared to take over if something were to happen to you? Consider putting an employee retention and incentive program into place and groom the next leaders of the company and be prepared if the unthinkable happens.

4. “There’s plenty of time for that later.” – This is another flawed way of thinking that results in making arrangements after it’s too late. Start thinking now about diversifying to ensure replacement income upon retirement, Marino says. “If you have all your assets tied to the business, you have no options and no flexibility,” he adds.

5. “My business is my retirement.” – As mentioned above, putting all your eggs in one basket – the business – is a dangerous strategy. What if the business devalues? Take steps to ensure income streams will be there when you need them. Where the business is concerned, be sure to plan for how to dispose, sell or transfer the worth of the business to generate funds for retirement.

6. “I don’t see the value in looking into tax reduction strategies.” – You could be missing out by not taking advantage of the tax advantaged retirement plans that are available. Worse, you could be paying more in taxes than you need to. If the tax code is foreign to you, hire accountants and financial advisors to help you keep as much as you can. “Have someone else think about it,” Marino says. “It will take a load off your mind.” Just having these advisors isn’t enough, though. Make sure they communicate with each other. “The inefficiencies of having separate advisors not working together is costing you more than you think,” Marino says.