Running a small business can give you the independence and creative license you have always wanted for your career. When everything goes according to plan, you earn a living while enjoying your passion. On the flipside, owning a small business can quickly become difficult when you are faced with unanticipated challenges or circumstances.
Don’t let your dream of owning a small business become a nightmare. Understand the common mistakes many business owners make and learn how to avoid them. Here are three common errors made by small businesses.
#1: Not Writing a Business Plan
A good business plan is more than putting ideas to paper. It reflects thorough analysis and development of a strategy for your business. It is a roadmap for managing your business through each stage of growth as well as contingency plans for problems you may encounter along the way.
To create your business plan, research best practices in your field. This may include proven strategies for branding, marketing, business development, pricing, customization, customer communication, policies and procedures, quality control, inventory management, financial management and other operational activities.
In a fast-paced, evolving business landscape, understanding how similar businesses are succeeding or struggling can help you establish a business that stands out in the marketplace. Conducting a SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis is a valuable approach to help you focus your business plan and establish reasonable goals.
More tips on writing a small business plan can be found here.
#2: Go At It Alone
Understand that you can’t be an expert on everything. And don’t place the entire weight of the business on your shoulders. Important aspects of operating a business like accounting and financial management can be daunting. Don’t go it alone. Seek professional guidance on business functions like bookkeeping and accounting from a trusted, experienced source.
Tapping into advice from a firm like Gift CPAs, for example, is invaluable whether your business is just getting off the ground or you’ve been in operation for years. Outsourcing certain aspects of your business to seasoned experts will give you freedom to do what you love while they support you with the heavy lifting.
#3: Not Hiring an Accountant for Guidance
Many small business owners underestimate the time, knowledge and skill set needed to manage their business finances. Accurate bookkeeping and business tax planning are essential to your business’ success. That’s why hiring a bookkeeper or accountant is an essential investment.
Having an experienced account by your side can help you can avoid these common small business mistakes:
- Not making quarterly tax payments, missing deadlines or not adjusting payments to reflect business changes. If your business income significantly increases or decreases during the year, you should make sure to adjust your withholding and/or estimated tax payments.
- Not collecting sales tax.Even if you set up a limited liability corporation (LLC) in a state where sales tax doesn’t apply (such as Delaware or Nevada), sales tax generally depends on where you do business, rather than where your LLC is formed. Pennsylvania has a sales tax of 6%. It is collected on most transactions like retail items, rentals, items sold for consumption and business services. Pennsylvania allows local jurisdictions to add additional sales tax. The state, a county or a municipality can also add specialty taxes such as accommodations and rental taxes, to name a few.
- Shareholders in S-Corps not taking a salary. The IRS requires S corporations to pay their active shareholders a reasonable employment-taxed salary.
- Incorrect W-4 withholdings. When completing a W-4, be sure to account for your spouse’s income, or else you could face major withholding issues. If too little is withheld, you may face interest and penalties.
Want more tips? Contact Gift CPAs!
The Gift CPAs team is here to help you as you manage and grow your business. Our specialty is helping small businesses thrive. We serve as consultants and can help you avoid common mistakes.
To meet with a Gift CPAs professional and get personalized advice about your business’ finances, or to learn about our other services, contact us to make an appointment. We look forward to meeting you virtually or at one of our five locations in Harrisburg, Mechanicsburg, Myerstown, Ephrata or Lancaster!