Jul 152 min read

Finances - The Single Greatest Mistake Small Business Owners Make and How to Avoid It

Tradesman — Skilled but has no idea about his business' true financial situation

Being successful in small business is a two-fold strategy:

Be good at what you do. And
Manage your finances and understand what the numbers are telling you.

In my opinin, the single greatest cause for small business failure is believing that all you need is skill to succeed. Unfortunately, this is a perfect example of simply not knowing what you don't know.

I have seen extremely skilled tradesmen fail when, by all rights, they should have made money hand over fist. Why? It certainly wasn't because they lacked knowledge about their trade! It was because they ignored the part of their business that was the real scoreboard: their finances.

And I'm not talking about bank accounts, either. Any fool can look at a bank statement and see if they have enough money to pay the bills that month. No, I'm talking about KEEPING that money and not paying it in taxes at the end of the year.

Business owners must scrupulously track every dollar coming in and going out of the business and keep the books perfectly updated. This entails categorizing cash flows as either a revenue or expense, and, if it IS an expense, what KIND of expense it is (it matters).

The tax code offers numerous ways to do this, but if you don't have experts by your side to guide you, then you're missing a major aspect of making your business successful. Do you constantly want to have your foot on the gas running from job to job hoping to out-earn any losses that you're experiencing but are unaware of? Of course not!

Efficiency is Key

There are two steps to address this without having to get your own CPA license:

Obtain a CPA's services to help determine your tax minimization strategies. He can guide you on the latest changes to the tax code and answer key questions you'll have through the year.
Partner with BreathEasy Business Consulting and Bookkeeping to help keep your books perfectly organized. The reason you want to do this all throughout the year (weekly) is that, when tax time comes, you want to make your CPA's job as EASY as possible. CPA services ain't cheap. Do you want to force them to spend hours going through your paper reciepts for gas, donuts and tools hunting for deductions? Heck no!

The Process for Finance

The Tradesman's MBA — Learn these Skills, Read the Book!

Let's assume that you are at the very beginning of your journey.

You have done your market research,
You understand your market
You identified your perfect customer.
You settled on your strategy and created a marketing plan.
You summarized all this information in a business plan

Now it's time to get your financial infrastructure in order. BreathEasy can assist you in setting up your books, coordinating with your CPA and tracking all expenses and revenues every week. When you do this, BreathEasy can provide you with monthly financial statements, trend analysis and can even provide recommendations for how to improve performance.