11 Finance Mistakes Small Business Owners Should Avoid when starting a Business after a Pandemic like COVID

Pandemics have a direct impact on biological, psychological and economic dimensions. Its intensity varies depending on the mortality and morbidity rate of the pathogen at hand, as well as the time it takes for it to spread. 

If you’re a small business owner, doing your personal and corporate books can be doubly taxing.

The American dream of starting your own business remains alive and well — the trick is to avoid becoming a statistic. According to the Small Business Administration, approximately one-third of small businesses don’t make it past the first two years, and 50 percent of small businesses fail within five years. It comes as no surprise that one of the biggest challenges for these small business owners is money management.

What are the biggest money mistakes small business owners make and how can you avoid these potential pitfalls to keep your doors open for years to come? Here are the 11 most critical missteps to avoid:

1. Paying themselves more than they need
2. Not Paying themselves enough
3. Using their Business Account for personal expenses
4. Not taking advantage of low interest rates and depreciation, when available
5. Not having the correct corporate structure
6. Not having a succession and tax plan
7. Using liquid funds to make illiquid purchases
8. Not having the appropriate retirement plan or any retirement plan.
9. Not having a good bookkeeper
10. Not delegating or hiring a financial professional
11. Not having appropriate insurance plan

The fact is, entrepreneurs often get stuck in the “weeds” of the day to day management and operations of the business, failing to think strategically about how they can leverage their business to improve their personal finances.  Specifically, many small business owners end up being extremely negligent when it comes to thinking about future retirement savings.  Unfortunately, only 44% of small businesses offer 401(k) plans and even fewer offer defined benefit pension plans.

Running a small business can be both rewarding and challenging.  Knowing your numbers, investing in the right people, properly capitalizing your business, planning for tax liabilities and planning for the future may help you to leverage your business to positively impact your personal financial goals.  Since everyone’s situation is unique, consider speaking to your legal, tax and financial advisers to determine the most appropriate approach for you.

Plan your budget, track your expenses, save for emergencies, keep the lines between business and personal clear, and always think of expenses in terms of how they'll generate future revenue for the company.

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