Financial Planning for Business Owners: Avoiding Costly Mistakes

Mar 28, 2024 | Blogs/Articles, Business Owners

By Mike Mess, CFO, CEPA

As a business owner, you’ve embarked on a journey filled with challenges and triumphs. Every decision you make can significantly impact your company’s trajectory, profitability, and sustainability. However, amidst the excitement of entrepreneurship, it’s crucial to remain vigilant and avoid costly mistakes that could jeopardize your success. That’s where the guidance of a trusted wealth advisor can make all the difference.

At Veracity Capital, we specialize in helping business owners like you navigate the complexities of wealth management while safeguarding your hard-earned assets. Here are some key insights into avoiding costly mistakes on your entrepreneurial journey.

Lack of Proper Financial Planning

All too often, business owners become consumed by day-to-day operations, neglecting comprehensive financial planning. Without a clear road map for your financial future, you risk falling short of your personal and business goals. Our team can work with you to develop a customized financial plan tailored to your unique circumstances, aligning every decision with your long-term objectives.

Neglecting Tax Efficiency

Taxes can significantly impact your bottom line, yet many business owners fail to leverage tax-efficient strategies. By optimizing your tax planning, you can minimize your tax burden and maximize your wealth accumulation. Some of these areas include:

Strategic Business Expenses: Business expenses incurred for legitimate purposes are generally tax-deductible, yet some business owners may not fully capitalize on this opportunity. From office supplies and equipment to marketing expenses and professional services, identifying and categorizing deductible expenses can lower your taxable income. Our team can help you navigate the nuances of deductible expenses and ensure proper documentation to support your tax deductions.

Retirement Planning Contributions: Retirement is another area where business owners can benefit from tax advantages that employees can’t. For example, business owners can contribute to self-employment retirement accounts like SEP IRAs and solo 401(k)s, allowing them to save for retirement with substantial tax advantages.

Here’s a little-known tax strategy: As a business owner, you can fund a cash balance plan for the prior tax year up until your extended tax filing date. Cash balance plans are a special type of retirement structure that allows you to make significant tax-deductible contributions. Contributions can reach upwards of $300,000+ annually.

Tax Credits: Tax credits are powerful tools for reducing your tax bill dollar-for-dollar. However, many business owners are unaware of the various tax credits available to them. For instance, the Work Opportunity Tax Credit (WOTC) provides incentives for hiring individuals from targeted groups, while the Research and Development (R&D) Tax Credit rewards companies for innovation and technological advancement. By identifying and applying for eligible tax credits, you can significantly lower your tax liability and improve cash flow.

Asset Depreciation and Capital Expenditures: Depreciation allows you to deduct the cost of certain assets over their useful life, providing tax benefits over time. Additionally, the Section 179 deduction and bonus depreciation provisions enable businesses to accelerate depreciation on qualified capital expenditures, such as equipment, machinery, and vehicles. By strategically timing asset purchases and leveraging depreciation deductions, you can reduce taxable income and enhance profitability.

Entity Structure Optimization: The legal structure of your business can have profound implications for tax efficiency. Choosing the right entity structure (whether it’s a sole proprietorship, partnership, LLC, S corporation, or C corporation) can impact your tax obligations and liability exposure. Another huge opportunity often missed is benefitting from the favorable tax treatment of Qualified Small Business Stock (QSBS). Our team can assess your unique circumstances and provide guidance on the most tax-efficient entity structure for your business, considering factors such as income, ownership structure, and future growth prospects.

Income Deferrals and Timing Strategies: Timing income and expenses can have significant tax implications. By deferring income to future years or accelerating expenses into the current year, you can strategically manage your taxable income and optimize your tax situation. For example, deferring bonuses or income recognition until the following tax year can lower your current tax liability, while prepaying deductible expenses can maximize your deductions in the current year.

Underestimating Risk Management

Risk is inherent in business, but it’s how you manage it that sets you apart. From market volatility to legal liabilities, overlooking potential risks can have devastating consequences. We’ll conduct a thorough risk assessment to identify areas of vulnerability and implement strategies to mitigate these risks effectively, safeguarding your business and personal assets.

Inadequate Succession Planning

Your business is your legacy, but without proper succession planning, its future may be uncertain. Whether you’re planning to pass the business to family members, sell to a third party, or transition to new leadership within the company, careful planning is essential. We’ll collaborate with you to develop a comprehensive succession plan that ensures a smooth transition while preserving the value of your business.

Doing Everything Yourself

Perhaps the costliest mistake of all is trying to do everything yourself. It’s true that business owners have to wear many different hats. From securing sales to executing operations, from managing inventory, to legal and accounting, from marketing to nurturing human resources, the job of a business owner is nonstop.

But too often I see business owners get dragged into jobs that really aren’t appropriate for their skill set. They end up spending way too much time on unfamiliar tasks that aren’t helping them expand their business. 

Most business owners start their business to do what they love—not all the other tasks that can impede progress. So instead of trying to do it all alone, build a strong surrounding team of professionals that can enhance your business and quality of life, and help you get to the next level. 

One of the areas where business owners can lighten their load is financial planning. Partnering with a knowledgeable wealth advisor that specializes in financial planning for business owners, business owners can focus on growing their business instead of grappling with financial planning tasks, including:

  • Budgeting and cash flow analysis
  • Tax planning
  • Risk management
  • Succession management
  • Retirement planning
  • Estate and legacy planning

Take Your Business to the Next Level

At Veracity Capital, we specialize in helping business owners. As a fellow business owner, I know how much work you have on your plate, and I want to make things easier for you. By partnering with us, you can spend more time on the things you love: your family and your business. 

If you have any questions, you can call me at 949.345.1954 or email me at You can also schedule a meeting online. I look forward to hearing from you soon!

About Mike

As a Founding Partner of Veracity Capital, Mike Mess set out on this endeavor to create a profoundly personal boutique for his clients with deep institutional execution. Mike serves as Chief Financial Officer and Wealth Advisor. As CFO, Mike is responsible for the company’s financial function and helping guide the direction of the firm. As Wealth Advisor, he helps his clients achieve their personal and professional goals through the lens of wealth management and financial planning.

For more than 15 years, Mike has developed exceptional wealth management skills for business owners. He believes this process of best managing the family wealth starts long before any transaction event. Clients engage Mike to help maximize the value of their business early, best capture that value through the transition of the business, and then manage the wealth created following the transaction. As a business owner himself, he is acutely aware of these stages where he adds value before and after every transaction.

Prior to founding Veracity Capital, Mike invested over a decade of his time with AYCO, a Goldman Sachs Company. During this time, he built out a division responsible for meeting the needs of its institutional and private clients, which included C-level executives and entrepreneurs.

Mike earned his Bachelor of Science from California State University, Northridge, and his MBA (Hons.) from Chapman University. He also holds the CEPA (Certified Exit Planning Advisor) designation. Mike is a member of GoBundance, the high-level mastermind group for successful entrepreneurs. He is also active with Vistage Worldwide, a global CEO peer group. 

Advisory services offered through Veracity Capital, LLC, a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.