By Steve Crifasi, CTFA, CFP®
Small business owners expend as much as they can to turn their entrepreneurial dreams into reality. No matter how diligent and hardworking they are, they’re still prone to financial mistakes that can trip up their efforts.
Many of these financial mistakes amount to errors of omission. Those are understandable in the normal course of business, and they don’t take too much work to repair. Still, if they are left unfixed, these financial mistakes can turn into serious roadblocks that stall your business.
In my experience, I’ve seen five financial mistakes surface more often than others. They’re points of concern every business must deal with at some time—and they can be handled with just a little bit of foresight and planning.
1. Skipping Comprehensive Estate Planning
When you’re in the middle of building a business, it may seem counter-productive to think about the end. What can you do when it’s time to hang up the business and pass it down to future generations?
It’s never too soon to start thinking about a succession plan. Consider what type of person would be the most capable to carry on your business’s tradition and profitability. Find out how to use trusts, buy-sell agreements, and other estate documents to facilitate an easy transition for both your business and yourself.
2. Misjudging Risk Management and Tolerance
As a business owner, your business is probably your singular focus. It’s how you plan to grow your wealth, and you’re always thinking about your next decision for your business and the well-being of your employees.
Sometimes, though, financial mistakes come from miscalculating how much risk you’re willing to tolerate.
Though it’s good to have a few aggressive, active securities, you don’t want them to comprise 100% of your portfolio. Take time to evaluate how much exposure you’re willing to endure and strive for a balanced diversified portfolio going forward.
3. Not Planning for the Unexpected
Sometimes it just takes one sudden event to derail normal business operations. It can come in the form of economic turbulence or market instability. Personal events like childbirth, divorce, or death can cross the work-life boundaries and affect your business in unforeseeable ways.
Leaving room for unexpected events doesn’t make you paranoid—it makes you prepared.
Think of all the events that might affect you and your employees adversely. Talk to other business owners who have gotten through tough times. You don’t need to come up with a plan immediately, but you can embrace that mindset to lessen the blow.
4. Overlooking Social Security Planning
Social Security was designed to be a safety net to sustain you through retirement. Again, that’s something a little difficult to think about when you’re actively running a business. But taking full advantage of Social Security is something to prepare for in advance so you can maximize benefits in the future.
Build a custom strategy for Social Security based on your individual and business goals, needs, and preferences. Encourage your employees and peers to consider their Social Security strategies as well.
5. Forgetting About Taxes and Fees
Misunderstanding or underestimating taxes is one of the most common business failures. While you shouldn’t exactly live in fear of taxes and fees, you need to have comprehensive knowledge about how they can affect your financial freedom.
Be deliberate about grasping your tax exposure, related costs, and fees. Also, look for hidden tax breaks and advantages that might work in your business’s favor.
Steer Clear of Financial Mistakes
At Westover Capital Advisors, we help simplify business owners’ financial pictures, acting as their personal advocate in all wealth matters. We strive to create sustained, long-term relationships in order to support them through ever-changing circumstances and inevitable transitions of life.
Should you partner with us, our team collaborates with you and your chosen professionals to create and manage solutions that work for you. Our greatest satisfaction comes from working with every age and generation to build a legacy that lasts for years to come.
If you’re curious to hear more about how we can help your business avoid these common but troublesome mistakes, call (302) 427-9600 or email steve@westovercapital.com. We look forward to hearing from you!
About Steve
Steve Crifasi serves as Associate Director of Wealth Management and Business Development at Westover Capital Advisors, an independent, fee-only, and privately owned investment and wealth management firm founded in 1999 and based in Wilmington, Delaware. Steve provides tailored guidance and works in partnership with his investment, tax, and planning colleagues to understand clients’ wealth management goals and objectives and help fulfill them. Steve thrives off developing personal relationships with clients, serving as their reliable and trusted financial partner; and as a fiduciary, he provides advice that is always in their best interests.
An advisor since 2008, Steve has over 15 years of experience in the financial services industry. He began his career as a research analyst at Penn Square Capital focusing on the equity and private real estate markets and spent over 13 years at Glenmede and Wilmington Trust as a relationship manager for high-net-worth clients. Steve received a BBA in Finance from Villanova University and also holds the CERTIFIED FINANCIAL PLANNER™ certification and Certified Trust and Financial Advisor (CTFA) designation from the American Bankers Association. In addition to his role at Westover, Steve is a member of the Delaware Estate Planning Council and Wilmington Tax Group. He has also served on committees for several local charitable and nonprofit organizations in and around Wilmington. To learn more about Steve, connect with him on LinkedIn.
