Avoid These 8 Financial Traps as a Business Owner
Over the last 10 years, I’ve been fortunate to work alongside many business-owner clients across different phases of their business “lifecycle”. Along the way, I’ve learned a few things that I believe business owners should keep front and center to ensure not only their financial health, but that they are experiencing their ideal life.
Most of the financial missteps? They’re surprisingly common—and avoidable.
Let’s walk through 8 of the most frequent and costly mistakes I see:
1. Operating Without a Real Cash Cushion
Cash isn’t a luxury. It’s your business’s safety net. Nearly 4 out of 10 business failures come down to running out of cash.
Start with this:
1 month of business expenses in your checking account
2 more months in a separate business savings account (ideally high-yield)
Then you can fine-tune based on your business’s structure, volatility, and seasonality, etc.
Pro tip: Excess cash sitting idle? Assign it a job—taxes, investing for growth, reserves. Money without a purpose is money that tends to disappear.
2. Not Getting Clear on your Vision
We all get into business for one reason or another. Some of us have a clear vision of the life we’re attempting to build… but I find that many business owners eventually get lost in the day-to-day management and don’t pick their heads up long enough to really determine where they’re headed.
Try this… each quarter, schedule a half day to refocus on your vision:
Brain dump everything in your head onto a piece of paper
Then, ignoring the business for a moment, ask yourself this question… “what do I need in my life that I’m not giving myself right now?”
Reflect on the last quarter —
What went well and you want to continue?
What didn’t go well and you want to stop?
What are you going to do next to live into the vision of what you need (answered in step #2 above). Either do it, or schedule time for it right away.
Pro Tip: Work with a Registered Life Planner® to build a comprehensive vision for your ideal life.
3. Neglecting Your Personal Finances While You Grow the Business
It’s tempting to go all-in on the dream of selling your business one day and retiring rich. But what if the dream doesn’t play out like you imagined?
Use today’s income and profits to build a personal financial foundation:
Build emergency savings
Contribute to IRAs, 401(k)s
Pay down high-interest debt
Invest outside your business (i.e. brokerage accounts)
Don’t wait until “someday.” Start building your freedom now.
4. Getting Stuck in Illiquidity
Owning a business is already an illiquid, high-risk asset. So why stack that with more illiquid holdings—like real estate or private equity?
Some of the wealthiest entrepreneurs I know still maintain high liquidity.
That flexibility gives them freedom, optionality, and peace of mind when things get rocky.
And true wealth is optionality over your time and energy. This is the key.
5. Mistaking a Great Year for a Permanent Trend
Two common traps here:
You ease off the gas. Growth slows, competition catches up.
You upgrade your lifestyle—new house, new toys—only to realize the good year was an outlier.
Avoid both. Build your lifestyle around income from two years ago. Let time confirm what’s sustainable for you and your family.
6. Settling for the Wrong Team Because They’re Cheap
You can’t scale a business on DIY mode forever. I highly recommend checking out “Who Not How”, by Dan Sullivan. Finding the right “Who” creates results, working on your own “How” creates problems to solve.
You need a pro-level team:
A proactive bookkeeper
A CPA who is a tax planner (not just a tax filer)
An insurance advisor
An attorney who knows your industry
A financial life planner who sees the full picture
Cheap hires cost more in the long run. Build your financial team wisely.
7. Filing Taxes ≠ Tax Planning
Here’s the dirty secret: Most business owners don’t actually do tax planning. They file. They react.
But they don’t plan ahead for:
Entity structure
Compensation strategy
Deduction timing
Exit strategies
Done well, tax planning can be one of your biggest profit centers.
8. Treating the Sale of Your Business as a Last-Minute Event
The best exits are planned, not stumbled into. You want a 3–5 year lead time to:
Maximize valuation
Clean up your books
Set up favorable tax treatment
Attract the right buyer
Map out the trajectory this creates in your financial life plan
Your future self will thank you for thinking ahead.
Final Word:
If you’re a business owner, learn from others' blind spots. Most of these aren’t hard fixes. But they require awareness, intention, and the right support system around you.
Want to go deeper on any of these? Let’s talk.