6 Money Decisions New Small Business Owners Always Regret
Written by
Heather Taylor
Edited by
Gary Dudak
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Every dollar counts when you run a small business. Entrepreneurs who aren’t careful may accidentally put their hard-earned revenue toward poor money moves or make decisions they think are in the best interest of the business, but end up netting a negative ROI.
GOBankingRates spoke to Stephanie Heredia, CEO and accountant at Taxes Tampa, who specializes in working with first-time business owners According to her, here are the six money decisions new business owners always regret.
Not Hiring the Right Accountant
The most common money regret Heredia sees from small business owners is that they wish they had hired the right accountant earlier.
Over the past 10 years, Heredia said this includes business owners who self-created their LLC and left money on the table for years overpaying taxes as a single-member LLC instead of converting to an S-Corporation. Another instance is hiring an accountant who is a poor communicator or not a specialist in their area.
Choosing the Wrong Accounting or Payroll Software
This may seem like a small regret, but Heredia said choosing the wrong software and later deciding to switch to another because it offers lower fees and a better user experience can make for a tricky transition. Heredia recommends thinking beyond the fees and doing your research to find a software you can grow into.
Not Understanding the Difference Between a Salary and a Distribution
Is taking out money from your business considered a salary? According to Heredia, this is a distribution.
“A salary involves formal taxes being deducted,” said Heredia. “When tax season rolls around, it can surprise a lot of people when they realize they can’t write off the payments they made to themselves for ‘salary’ expenses.”
Not Understanding Your Own Business Before Hiring
Heredia said there are a lot of people who buy or build businesses, hire and operate, and try to stay passive in their businesses.
This model can work well for those with experience, but this is usually not the case. Those who don’t understand their business before hiring, Heredia said, can end up spending thousands of dollars paying other people to train employees on systems and processes you could be learning and turning to standard operating procedures (SOPs) for free.
Hiring Too Many Full-Time Employees Based on Seasonal/Temporary Revenue
At the last firm Heredia was at, too many full-time employees were hired based on seasonal and/or temporary revenue. On a 20-person team, six people were let go.
“At the time, the firm didn’t know the revenue was seasonal/temporary but considering the business had only been present for under six months, making long-term hiring decisions around it was a big mistake,” she said.
Being Cheap
This is a money decision new business owners commonly regret, specifically when it comes to dealing with their employees.
“If you have an amazing team, you should hold onto them!” Heredia recommends. “They should always be well compensated and appreciated. You should never take a great team for granted, because your business is likely only doing great because of their efforts. If you’re too cheap, you can lose whole sectors of your business if your team leaves. It isn’t worth it to undervalue your people as they’re your greatest asset.”
More From GOBankingRates
