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Four Financial Mistakes DIY Business Owners Make

We have a guest blogger on Direct Talk today - Laird Hepburn, founder of Business-owner Strategies Group, LLC (BSG Advisers).

Donna wrote an excellent post last week highlighting the Top Seven Mistakes DIY Businesses Make. I liked it so much, she asked me to write the next one. (I think I’ll avoid commenting in the future!) Donna noted “Many small businesses don’t know what they don’t know, and one place they often skimp is…” How true! Her post had the word “attorney” where I’ve placed the ellipsis but it could just as easily said “CPA”, “CFP”, “insurance agent” or any of a host of other professions.

Small business owners often think: “Why should I hire you instead of doing it myself?” Invariably, your answer goes back to Donna’s assessment: “You don’t know what you don’t know, and it can cost you down the road.”

From my perch as a CFP, here are four things I encourage you business owners to do (in collaboration with someone who knows what you don’t):

1. Keep a strong working capital account. Imagine only having a few weeks of working capital and then something challenging strikes like, I don’t know, a government-mandated shut down. How long can you float the business? We recommend clients keep six months of emergency reserves for personal planning. When it comes to business planning, there’s a lot more variability. Regardless, it’s rare to find a business with “too much” working capital for either defense or offense.

2. Keep personal and business finances separate. I know, I know, it all goes to the same place so why does it matter? It matters a lot and for a lot of reasons, but I’ll focus on the one I see most often: assessing lifestyle costs. How do you know what your lifestyle really costs when you’re mixing business and personal? How can you plan an exit when you don’t know what it really takes to maintain your lifestyle? Regardless of what you think your business is “worth”, you need to know what you need to clear from a sale to secure your financial future.

3. Take advantage of your business. Remember what I said way back in item two? I still want you to do those things – just do them the right way. The business can pay for a lot of stuff, but you need to know what’s really for the business and what’s really for your personal finances. Make a bright line distinction. While you’re at it, be sure to maximize fringe benefits and their tax advantages. If you don’t know what I mean…(‘nuff said)

4. Manage risks – don’t ignore them. Buy-out agreements are often missing. Those that are in place often lack a strategy for actually executing on them. That doesn’t manage risk – it merely defines it. If you’re going to have an agreement, have a strategy for implementing it. That means getting a funding source whether it’s personal capital, insurance proceeds or retained capital. Deal directly with issues such as disability, death, professional liability, etc. It’s easy to overlook these because they’re not urgent.

Next time you’re thinking about why you should hire someone when you can “figure it out” yourself, make sure you fully understand the consequences of what you are trying to figure out. If you don’t, it could cost you down the road!

You can learn more at

Laird Hepburn is founder of Business-owner Strategies Group, LLC (BSG Advisers), a Registered Investment Advisor that gives insightful advice to families and business owners regarding investment and insurance solutions. BSG comes alongside you over the long run to help improve your financial well-being. We provide analysis-based insight and financial education so you can make the best possible decisions.

BSG Advisers

Phone: 919.267.4753 E-mail:

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