Business Owners: Are You Making These Costly Mistakes?

The commercial landscape is rapidly changing as technology becomes a central driving force in most industries. Even solo practitioners feel the effects of a drastic changeover to cloud storage, app-driven operations, artificial intelligence (AI), and robot-assisted tasks. The overwhelming change has managers, founders, owners, and entrepreneurs worried about navigating such a turbulent economic period. What sorts of mistakes are they making?

Besides ignoring the necessity of having a competent lawyer on call, people who own and operate companies make other common errors, like not carrying enough life insurance, neglecting the role of advertising, not preparing their companies for a potential recession, carrying too much inventory, and saving money by filling out their company’s tax returns. Some mistakes are more costly than others, but the following are the main ones plaguing today’s business leaders.

Mistake: Not Having a Lawyer

It’s human nature to assume your business won’t be sued. However, the stark reality is that the probability is much greater than anyone suspects. The 2020s are a litigious era. People are more willing to sue at the drop of a hat. All it takes is a lapse of customer service, a disgruntled consumer, or a late delivery to spur a lawsuit.

For anyone who owns and operates a commercial entity, it is imperative to hire competent legal counsel to be available. One of the first things every entrepreneur should do before opening their doors is to arrange to have a law firm on retainer. Compared to the potential cost of litigation, annual retainer fees are low and competitive. Consider legal services part of ordinary, ongoing expenses. When the time comes, you’ll be glad you took this vital step and developed a formal relationship with a firm or individual lawyer specializing in commercial cases.

Oversight: Ignoring the Need for Life Insurance

There are two parts to the insurance issue. First, an owner must have a life insurance policy. Second, that policy needs to be large enough to provide financial security for an entire family in the event of the policyholder’s death. While most savvy entrepreneurs understand the first part of the equation, they often err by not carrying policies large enough to provide for their surviving family members.

The most efficient way to remedy this all-to-frequent oversight is to explore online resources like Navient Marketplace, where top insurance carriers list their policy features, prices, and other pertinent information in one place. It’s easy for users to compare policy rates, terms, and features. Then, you can decide which company and specific policy suit your financial needs. It’s essential to remember that business owners tend to need more life insurance than adults who work traditional jobs.

Misconception: Assuming Customers Will Find You

Hard-working founders fall victim to a human impulse: believing their product or service is unique enough or good enough to attract customers. Those who labor under that misconception usually spend less on advertising and promotion. They need to have the correct idea that customers will beat a path to their door or website as they launch.

Unfortunately, these overconfident types can take a few months before they come to their senses. What’s the solution? For startup founders, finding things to try if business is not growing is the wisest path and they should assume that marketing will be the single largest initial expense. Then, build a budget that acknowledges that reality by devoting a significant percentage of available capital to promotional campaigns. There’s no better way to get the word out and let the public know your organization exists.

Typical Mistake: Not Hiring Outside Tax Help

It’s a fact that many entrepreneurs are well-versed in financial matters. Many hold college degrees in subjects like finance and accounting. However, one of the most frequent errors owners make is to assume that they can and should prepare their company’s tax returns. Sometimes the error is ego-based, but in most cases, it’s simply a misjudgment.

Why not do the paperwork yourself? The main reason for hiring outside help from a professional accountant is that business returns are completely different than personal ones. Unless you have experience as a paid preparer, contact a trusted CPA firm specializing in business taxation matters, including filing quarterly or yearly documents with state and federal authorities.