As an entrepreneur myself, I tend to have firsthand experience of some of the financial mistakes that many entrepreneurs make.
On top of that, I LOVE working with entrepreneurs. The creativity and flexibility they display, as well as the ability to set and achieve goals quickly, is so inspiring.
But along the way, they’re going to make a mistake or two. Hopefully, if you’re an entrepreneur, I can help you avoid those mistakes!
Mistake No. 1: Not saving for themselves
I am totally guilty of this! When you’re an entrepreneur, you have to be convicted in what you’re doing. But if that conviction leads to you putting all your money into your business, instead of saving for yourself and your family outside of your business, that can become financially dangerous.
The first thing I look at with a client is risk — what can I help this person protect themselves from first, before we look at ways to expand?
And the biggest one I’ve seen is entrepreneurs that aren’t saving for their retirement and their future.
You guys, I totally get why this is such a struggle! As entrepreneurs, we see the possibilities. We see the potential for our business to way outpace the traditional stock market gains. And while this is great, it also comes with a lot of risk.
Often, we assume that a risk we control is automatically a lower level risk. But this isn’t true at all! So even though you’re in control of your business, putting all of your money into it in the hopes that it will pay off is still a huge gamble.
Instead, I recommend that my clients diversify their risk. You can still put more money toward your business (as that is an investment in your future), but make sure you’re partnering it with a strong portfolio and well-managed retirement account.
The best way to go about this is by running a financial plan, and deciding on a number you should be saving on a monthly basis. Then, set up an auto-transfer from your business account so that money ends up in your retirement without you even thinking about it!
Mistake No. 2: They Don’t Know Their Endgame
What is the endgame of your business? Is this a job, or is this a business you plan to sell one day (hopefully for a sizable amount of money)?
There’s absolutely no wrong answer here! But it will change how you approach your business and your financial situation.
If your business is more akin to a job replacement, you need to make sure you’re on top of your retirement plan regardless of what happens in a sale. However, if your plan is to sell your business one day and use that money to retire, then it’s important you have an endgame and plan your business accordingly.
Mistake No. 3: They Don’t Know Financial Basics
One of the biggest mistakes I see A LOT is that entrepreneurs don’t do the financial basics. What do I mean by that?
You have to have a plan for what happens after you die. Of course, the hope is that this plan never gets put into action. However, if it does, you need to have a plan.
A few years ago, I had a client who owned a business. Unfortunately, he experienced a tragedy that left him incapacitated. His wife has to take over the business with no warning and very little idea what she was doing, creating even more stress than there already was.
So what happens if you’re no longer capable of running the business? Does your business stop? Go to an employee? A spouse?
These are incredibly difficult but incredibly important questions to ask.
Life and disability insurance are both important. These are the pieces you need to protect yourself in case something does happen.
Disability makes sure your family is still protected, even if you’re unable to continue working.
And likewise, life insurance protects your family if you pass away, leaving them without your income.
One of the smartest things you can do is get these insurances now, while you’re healthy, to keep yourself protected.
Now, if you read through this and thought… “oh no, I’m making these mistakes,” that’s totally okay!
I would love to chat with you and help you plan your financial life to avoid these mistakes and create a safety net for you and your family.