As a small business owner, you know the ins and outs of your business better than anyone. Yet no matter how well you know your industry, managing your personal and business financials can be an immense challenge.
When you run a small business, your personal wealth is often entangled with the wealth of your company. This can make managing a small business that much more stressful.
9 Common Myths and Mistakes in Small Business Management
From less than stellar time management, to scattered planning and budgeting, to a lack of appropriate consultation, there are many factors that can contribute to stress over managing your personal finances. Here are the most common mistakes and myths to avoid when running your small business:
1. Not Managing Your Time
One of the most common pitfalls for small business owners is not managing your time effectively. Juggling multiple tasks and wearing several hats is normal for you, so it is essential that you organize your to-do list wisely. Vital tips for small business management include:
- Always planning for the future: Setting goals is an important part of effectively managing your time and your small business. Make a habit of setting both short term and long term goals for your business.
- Using technology to boost productivity: As a small business owner, technology is your friend. Using services like 24/7 live web chat and text-enabled phone numbers ensures that your customers always feel well taken care of.
- Limiting unnecessary distractions: Staying productive is a key factor contributing to your success as a small business owner. Your business is undoubtedly a huge part of your life, so try to establish clear boundaries between your time with family and your business hours.
- Delegating tasks when needed: It may feel like you need to do it all when running a private business, but you will often benefit from delegating tasks to other capable hands. At times delegating tasks to virtual assistants, like 24/7 customer service representatives, can help free up your time for bigger tasks.
- Scheduling time to regularly track your finances: Creating a designated time for you to track your personal wealth and business finances is a must. Use finance tracking software or apps to ensure that you always have a clear picture of your budget.
2. Missing the Mark With Planning
Creating an actionable plan is a non-negotiable part of running a small business. A great business plan should address:
- Management: Management should be a constantly evolving endeavor. Stay open to onboarding managers or adjusting your management plan in order to meet the specific needs of your business.
- Strategy: While day-to-day planning is important, your long term strategy is just as vital — if not more so. Set aside the time to envision what the long-term goals of your business are and create a strategy to attain them.
- Consultation: It can feel like the full burden of building your business falls on you, so it is important to harness all of your resources. Know when to reach out for expert advice when growing the different aspects of your business. Welcoming the strengths of others will only help your business in the long run.
- Communication: Communication with both your employees and customers is an essential element of great business planning. When running a small business in home services, for example, utilizing services in emergency dispatch and 24/7 lead capture will ensure that you never miss a connection.
- Marketing: Marketing and sales are the lifeblood of every modern business. Neglecting your marketing plan will leave you invisible to potential customers. Instead, invest in the appropriate marketing channels and focus on your marketing strategies.
3. Not Creating a Budget
Failing to establish a budget is a common but damaging mistake for many small business owners. Creating and maintaining a budget is the key to building a great small business. Skipping a budget creates unnecessary risk. It also exponentially increases the chances of you needing to draw from your personal wealth in order to sustain your business.
Consider these aspects of your budget that you will need to pay regularly to keep your business thriving:
- Rent and utilities: If you run a brick and mortar storefront, rent should be your top priority. Even virtual companies rent office spaces. Be sure to set aside enough money to keep the lights on.
- Professional services: If you plan on investing in professional services like sales and customer service solutions, all of these should be accounted for in your budget.
- Insurance and payroll: Employee payouts can add up quickly. As such, it is important to fully account for all of your employee expenses, like payroll and insurance.
- Marketing and advertising: A marketing plan is a significant part of your small business. Paying for advertisements is one of the primary methods for executing that plan. Investing in marketing will help you reach more customers.
- Purchases: If you run a service company, your budget should include any supplies or equipment that you will need to purchase.
4. Not Classifying Your Business Correctly
A common mistake that small business owners make is classifying their business incorrectly. Your business should be classified as an LCC, S-corporation, or C-corporation. These classifications effectively differentiate your business assets from your personal assets. This creates financial protection for you in case of catastrophe.
Choosing the appropriate business classification will also help you identify the correct savings and retirement plans that you can offer to employees. By choosing a tax-qualified plan, you will protect your wealth even further by avoiding excessive taxation or fines.
5. Not Growing Your Assets
Many private business owners make the mistake of concentrating the majority of their investments and assets within their company. Instead, it is important to diversify your investments in a way that fosters the health of your small business. Diversifying lowers the risk of loss by distributing your wealth among multiple types of investments in diverse interests.
6. Neglecting Trusts
If you own a small business, an asset-protection trust is an excellent tool that can protect your personal assets from creditors. Creating a long-term trust can help protect your personal wealth and the future of your family.
The benefits of trusts are also far-reaching in terms of protecting the legacy of your private business. They include:
- Consistent management of assets
- Potential reduction of tax liability
- Keeping assets within the family
- Protecting your business from missteps
- Protecting wealth from creditors
- Making it easy to donate
- Protecting the future inheritance of your family
7. Not Considering a Succession Plan
It may feel as though you will be at the helm of your carefully built business forever. Yet the reality remains — all things come to an end eventually. Accordingly, it is critical that you take the time to determine who will run your business when you are gone.
This planning should consider who could run the business in the case of your short-term absence, as well as who should permanently take over the business once you are no longer able to run it.
While it is daunting, developing a comprehensive succession plan is necessary. A successful plan helps create a smooth transfer of ownership, fosters a healthy retirement lifestyle, protects your heirs from loss of wealth, and prepares your business for untimely or unexpected events.
While it can be difficult to discuss, a succession plan is always a great use of your time and energy.
8. Not Communicating To Your Successors
If you have family or children to whom you plan to transfer your business, it is important to be transparent and communicative about your finances. Any successors — who are adults, of course — should have a thorough understanding of your wealth management plans.
The key to effective succession in family business is communicating clearly and often. Focus on building bonds within your family business and taking steps to fully prepare your family’s next generation of leaders. This will pave the way for smooth transitions and make it easier to blend family with nonfamily employees within your company culture.
9. Not Using a Financial Advisor
A common myth among small businesses is that you don’t need a financial advisor. However, managing wealth can be tricky. It is highly recommended that small business owners invest in a financial advisor.
Doing so can help protect the future of your company and alleviate some of the pressure that comes with managing your personal wealth and business assets on your own. A financial advisor can help develop saving and spending strategies, navigate tax requirements, make banking recommendations, manage cash flow, and analyze the state of your business.
Great business owners know their way around their industry, are familiar with the strengths of their employees, and have a good feel for the future of their market. It can be easy even for seasoned and savvy small business owners to take one or more of the many common missteps of personal wealth management. Knowing when to delegate and how to plan will contribute to the longevity of your hard-earned business.
One of the best ways to delegate is by outsourcing your customer service, dispatch, and lead capture needs to a trusted third party. This can help you focus on building a great business with your expertise and passion.
If you’re ready to invest in customer service and sales capture solutions that free up your time and energy, Slingshot can help. From dispatch services to virtual services, Slingshot gives you the tools you need to build the strongest version of your small business.