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The Top 5 Financial Mistakes I See Small Business Owners Make Thumbnail

The Top 5 Financial Mistakes I See Small Business Owners Make

By Trent Derrick, CMT®

Small businesses are the backbone of our country, especially in cities like Charleston, where we thrive on innovation, locality, and supporting our community. At Legacy Wealth Management, I specialize in helping small business owners manage their financial lives and run their businesses more effectively. 

In working with my clients, I have seen a few common mistakes that many small business owners make. Let’s discuss these mistakes and how you can avoid making them yourself.

1. Pushing Retirement Planning Off Until Later

While putting off retirement planning isn’t a financial mistake exclusive to small business owners, I do see business owners making this mistake often because they have so much on their plate. Between running your business and managing other aspects of your life, it’s easy for retirement planning to take a back seat. 

But when it comes to investing, time is money! It’s never too early to start thinking about retirement because when you have a retirement plan in place, you give your investments more time to grow. As a small business owner, you might not have a clear idea of what retirement will look like (Will you continue to run your business? Will you hand it off to the next generation or sell it?), but that doesn’t mean you shouldn’t start planning. I help business owners take the first steps in setting up their retirement plans and make something that seems very complex easier to understand. 

2. Doing Everything

As a business owner, you have to wear many hats. From bookkeeping to inventory management to customer service, you’re doing a lot. Too often I see business owners get sucked into areas that aren’t their specialty and end up spending too much time on tasks that aren’t helping them grow their business. You started your business to do what you love, not all the other tasks that can bog you down. By working with a financial professional that specializes in helping small business owners, you can take some items off your plate so you can focus more time on growing your business. We can help you:

  • Keep track of expenses
  • Keep up on general bookkeeping
  • Maximize your retirement contributions
  • Calculate SEP contributions
  • Find ways to allocate non-retirement funds tax-efficiently
  • Simplify the financial and accounting advice you receive

3. Not Setting Up a Retirement Plan

Most employers want to take care of their employees by setting up a retirement plan, but they don’t know where to start. Luckily, by working with an advisor who understands employer-sponsored retirement plans, you can implement this benefit without much heavy lifting. Plus, not only do employer-sponsored retirement plans benefit your employees, they also benefit you and your business! You can contribute to these plans as well, and may receive tax advantages for doing so. Plus, you will make your business more competitive to job seekers because you have this benefit to offer. 

4. Losing Out on Interest

If you have the majority of your business’s capital in a bank account, you may be losing money on interest. As of October 2022, the average interest rate on a savings account is only 0.16%. With inflation consistently over 8% this year, every dollar you have in the bank account is losing purchasing power over time, which means you’re losing out on returns that you could be putting back into your business. 

Instead, there are many investment options that pay higher interest rates, such as Treasury bills. We will work with you to determine your short-term and long-term capital needs and invest your assets accordingly so not only are you earning more in interest, but your assets are still there when you need them. 

5. Not Working With a Fee-Only Advisor

Many small business owners are hesitant to work with advisors because they don’t want to be sold products like whole life insurance or annuities. The reason so many firms focus on settling these products is because they pay the advisor a higher commission. But they may not always be right for the client. I am a fee-only fiduciary, meaning that I am legally obligated to act in your best interest and I will always seek the option that’s best for you. Without commission incentives in the picture, I’m able to deliver recommendations that solely serve your best interests. 

Grow Your Business With the Help of a Professional 

I specialize in working with small business owners because as a business owner myself, I understand how much you’re juggling and I want to help ease your burden. By entrusting me with your business’ finances, you can spend more time growing your business and doing what you love. To find out if we’d be a good fit, book a consultation with me here or email me at trent@legacywm.com. I can’t wait to hear from you.

About Trent

Trent Derrick is a financial advisor and Chief Market Technician at Legacy Wealth Management. Trent is passionate about the value small businesses bring to their communities and specializes in serving small business owners by providing seamless financial advisory services tailored to their financial needs, including tax planning, cash flow management, retirement planning, and bookkeeping. Trent has a bachelor’s degree from the College of Charleston and studied economics at the University of South Carolina, Columbia. He is a Chartered Market Technician® (CMT®) professional. Trent serves as a guest lecturer for the College of Charleston’s MBA program and acts as chairman of the Market Technician Association’s Charleston chapter. When he’s not working, Trent, a proud Eagle Scout, enjoys volunteering with the Charleston Animal Shelter’s outreach program. Trent and his wife love to cook international cuisines and host dinner parties with their friends. To learn more about Trent, connect with him on LinkedIn.