10 Common Mistakes Small Business Owners Should Try To Avoid

About the Author

jon d. moore

Jon D. Moore, CFP®'

Regional Director, Partner
Littleton, Colorado

Author: Jon Moore 

HubSpot Video

Ask virtually anyone who owns a business, and they’ll tell you they have plenty on their mind. Managing operations, not to mention marketing, employees, vendors, financial tasks and legal matters, can leave little time for other concerns. As personal financial advisors for small business owners, we at EP Wealth understand the challenges business owners face and We provide valuable perspectives through a set of fresh, professionally trained eyes. We look out for possible pitfalls common to growing businesses such as increasing risk exposure, retirement plan construction and tax planning.

Above all, as a financial advisor, we understand what it means to be a business owner and the importance you place on retaining control over your finances and destiny. With that in mind, there are many ways an we can add value to your business, including identifying frequently encountered opportunities for improvement such as those below.

10 Common Mistakes Business Owners Make 

Small-Business Owner Financial Mistake #1. Paying themselves more than they need

Salaries are often first set in the budgeting and planning stages, when there are no budget overruns and sales are great. As reality sets in, cutting back salaries can seem like admitting defeat, even if it is the right choice. There are ways to lower gross salaries without changing net salaries. These can be employer provided services, contributions to retirement plans and preferring shareholder distributions over salaries for example.

Small-Business Owner Financial Mistake #2. Using their business account for personal expenses

Money not in your personal bank account often is easier to spend and the potential tax savings can make otherwise imprudent purchases seem like a good deal. Mixing personal and business expenses can create legal, accounting and tax problems. It can create personal legal liability, difficulties in monitoring the health of the business and extra scrutiny from the IRS.

Small-Business Owner Financial Mistake #3. Not taking advantage of low interest rates and depreciation, when available

Typically, they’re unaware of current interest rates and don’t know how to capitalize on them or have an emotional aversion to debt. Instead, they’re using their own money to self-finance business operations. Debt can lower your personal risk and partnering with a tax professional that promotes proper accounting practices can contribute to your net profit. While complicated and possibly costly, experts in these fields may identify savings opportunities.

Small-Business Owner Financial Mistake #4. Not having the correct corporate structure

Often business owners select the legal structure of their business for convenience, simplicity or cost of administration. The choice of legal structure has tax, legal and management considerations. The importance of each of these factors is nuanced and can change over time as a business matures and grows.

Small-Business Owner Financial Mistake #5. Not having a succession plan

Thinking about the later years of one’s life and retirement can be difficult for business owners, so they neglect to do it or rush through the process.

A well-thought-out succession plan encompasses contingencies unique to the business owner, accounting for a variety of possible scenarios, making the succession easier when the time comes and assessing tax implications. For example: A business owner was hit by a falling rock while driving. He survived, so his succession plan, a life insurance policy, didn’t help; but, unfortunately, he no longer could operate the business and his wife had to sell the company for pennies on the dollar.

Small-Business Owner Financial Mistake #6. Using cash to make large purchases

Writing a check and being done is simple, safe and quick. There are no loan documents, mortgage officers or stress of monthly debt payments. Cashflow can often be just as important as profit, financing large purchases may free up cash to pursue other areas of growth.

Small-Business Owner Financial Mistake #7. Not having the appropriate retirement plan or any retirement plan

Business owners are busy and retirement plans complicated. Many times they will overlook the potential incentives in favor of being done with the process. The earlier one starts planning for retirement the better, trusted advisors can help you create an exit plan.

Small-Business Owner Financial Mistake #8. Not having a good bookkeeper

Bookkeepers and accountant can seem expensive up front and business owners often think that, either they can do it or find a low-budget solution. Accounting is the language of business, having accurate numbers to base decisions off of is key to making the correct strategic choices. Paying slightly extra, or verifying the abilities of bookkeepers is usually well worth the effort.

Small-Business Owner Financial Mistake #9. Not having an appropriate insurance plan

Insurance can seem expensive when it is not needed and there are a multitude of types of insurance out there so figuring out what one needs can be difficult. But insurance brokers can guide business owners through the variety of insurance options, highlighting the benefits and negatives of different choices as well as how to create a comprehensive insurance strategy.

Small-Business Owner Financial Mistake #10. Not delegating or hiring a personal financial advisor who specializes in small business owners

Business owners are the masters of their domain and have worked many difficult years to amass their financial holdings. Entrusting these holdings to someone else can be a challenge. Financial advisors are partners who work alongside business owners to magnify their abilities.


How a Personal Financial Advisor for Small Business Owners Can Help

Many scenarios and contingencies can affect your personal life and business. From a mishap that prevents you from continuing to run your operation, to recessions, market forces, competition and diversification, a multitude of factors can shape your future. For those whose only experiences with financial advisors have been sales pitches for financial products, the team at EP Wealth offers a refreshing alternative. It’s an opportunity to build a trusting relationship with a network of financial and business experts dedicated to providing objective advice that is intended to help you build and protect your business, while attempting to simplify your life.


To learn more about the support we can provide, I invite you to contact me. You also can visit our Business Planning page for a detailed introduction to the numerous ways EP Wealth Advisors can assist you.



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  • Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.
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