You’ve started a new business and you’re bursting with new ideas, or you’re a few seasons in, making some exciting deals and starting to see things move in the right direction – entrepreneurship is an exciting business. It’s easy to get caught up in the rush of taking control, being your own boss and making the decisions. I caught up with CPA, Josh Belk, in Chicago recently to talk about the benefits of taking things slowly and how smart planning in certain aspects of your business can potentially save tens of thousands of dollars, making a measurable difference to your company’s bottom line.
A few years ago, Josh realized that acting in more of a consulting capacity, he and his team could add significant value to start-up entrepreneurs and big business clients alike. He has moved his business away from the traditional CPA business model to provide something that other firms are not.
“Where we can have the greatest impact for our clients is working with them on concepts that typically fall outside the realm of most CPA businesses. We want to open a dialogue about the future – understanding where our clients are right now and a strategy for getting them there.”
A lot of entrepreneurs don’t want to spend the money for consulting in taxes and Josh says this is their first mistake.
“It ends up costing more money and more time, every single time. No matter what, you’re going to end up paying. Often, people have tried to cut corners and they will call us and say ‘hey, I set this thing up, I started this new business and I went and did this myself’ and in the end they way they structured it, it’s going to cost tens, if not hundreds of thousands of dollars more in taxes because they were trying to avoid paying a professional for help on the front end of the process.”
As a young entrepreneur starting out, I did exactly the same thing. I tried to go around asset protection, and it ended up costing me a lot of money. I could have avoided a lot of financial heartaches if I had done it the right way around.
Josh agrees that thinking you can do better than the system is very common. He says, “I got burned recently myself. I had a client that I was passionate about helping, and I’m very trusting. It was going to be a big cash-flow provider for our firm, and boy, I tell you what, it turned out to be a disaster and I created a lot of complications simply by trying to cut corners and do it myself instead of involving my attorney.”
So, how do we learn from others’ mistakes? It’s easy to be overconfident when you’re starting out. I did it myself. Here are Josh’s recommendations for being smart about your taxes and employing a tax strategy to benefit your own bottom line.
1. Take a step back and look at the big picture
“Slow and steady wins the race. Many business owners when they first startup, and even seasoned ones, they get so caught up in the deal and getting something done and getting to the finish line that they’re not taking a step back and asking ‘Am I doing this the right way?’. Many times, we’re getting lost and sometimes not seeing the forest for the trees. It’s important to recognize your expertise and say maybe it’s time to pick up the phone and ask for help.”
2. Implementing tax strategy after you’ve made money
“Make sure your business entity is set up the right way. There’s no way around this. And, if you’re making money, you’re going to have to pay taxes. One of the biggest mistakes entrepreneurs and business owners make is trying to implement tax strategy after they’ve already started making money. Getting your strategy right is the easiest way to increase your profit. Even successful businesses are mismanaging their tax structure – often they’re just focused on profits and they make the mistake of not engaging us throughout the year on this. There are some really simple things that can be done but we need to be part of a company’s team during the year, not only at tax time.”
3. Have a strategy for your spending
“It’s a mistake to neglect structuring your finance to reinvest in your business and not managing legacy in the right way. Don’t fall into the trap of spending all your money and not planning for the future – not just tax, but how you’re going to use the money. Business owners should pay themselves first, so they have a reason to get out of bed in the morning. Once you’ve paid yourself, it’s knowing what to do with the rest. We help a lot of clients with this type of planning.”
4. Don’t spend it all at once
“Discipline is key. Starting a new business or closing a new deal is exciting! People make a deal and then turn around and spend the money straight away. A lot of people do this in their business life and their personal life. It’s about relearning how to manage money and putting discipline before desire. Always make sure you’re fully funding your retirement account, not simply putting money back into the business. Don’t forget that money is a tool to reach fulfillment.”
And finally, Josh’s tips for a balanced life and ensuring you start each day with your cup filled:
- Make sure you take care of yourself physically and spiritually
- Eat well for mental energy
- Turn your phone off: don’t look at it first thing in the morning and don’t have it at the dinner table
- Take time to eat correctly in the evening and decompress from the day