By Rich Best

Unquestionably, business owners are busy people. Most spend so much time working on their business that it precludes them from giving the necessary time and attention to their own finances. As a consequence, many business owners can’t even imagine leaving their business at the time of their own choosing because they haven’t been able to amass the wealth to do so.

The unfortunate reality is that an increasing number of business owners are simply not financially prepared to retire on time. And that reality is not limited to those at or near retirement. While business owners may have a greater opportunity to earn a high income, the initial delay and expense of getting their business off the ground puts them at a distinct disadvantage in wealth accumulation. That disadvantage can be compounded over the different stages of their business life cycle.

Once in business, and as their earnings increase, business owners begin to make decisions about their financial future that will set them on an individual course largely determined by the consequences of their actions, or inactions. Mistakes made early on can become obstacles to wealth accumulation that grow increasingly insurmountable in a shrinking time horizon.

Mistake #1: Trying to go it alone

Business owners are very smart people; however, they are particularly disadvantaged when it comes to acquiring the essential financial knowledge needed to plan and manage their personal wealth. As one of our business owner clients told us, “I simply don’t have the time, temperament or training to personally navigate my financial life.” Most are so deeply immersed in the development of their careers and pursuing the expanding body of knowledge required to keep on top of their professions, they have little time to even think about their financial future, let alone plan for it.

When that occurs with any key business function within their business, smart business owners will typically hire someone to perform it. It should be no different with the critical, personal function of managing their wealth.

Most business owners work with an accountant, an insurance broker and they might even have a financial advisor – each focused in their own area of expertise, but, typically, with no coordination among them. If anything, this can make the pieces of the financial puzzle even more disjointed and confusing, much to the detriment of the business owner. As their earnings increase and they begin accumulating wealth, the number of pieces increase and the puzzle gets more complex. Ultimately, this will require a collaborative effort by a cast of financial professionals led by an independent wealth manager or financial advisor to facilitate and coordinate the process and who is ultimately responsible for ensuring that all of the pieces of the puzzle fit tightly together.

Mistake #2: Not having a serious retirement plan

The second mistake many business owners make is to assume they can wait until their prime earning years to begin making maximum contributions to their retirement plan and acquiring additional non-qualified investments. First, it’s far more costly to wait as the basic “cost of waiting” tenet tells us. Secondly, business owners in their prime earning years are also in their prime lifestyle years, making it more difficult to reduce their consumption in order to increase their savings. It’s far easier for a business owner in the early to mid-stage of his business to smooth out his consumption in order to increase savings. More importantly, business owners who begin their retirement accumulation early create the condition that enables them to commit a much smaller portion of their earnings to savings during their prime earning years. This enables them to enjoy a better life style in their late stage.

One could easily surmise that, for business owners who have yet to target a retirement date or who view it as a moving target, they probably haven’t the slightest idea how much or where to invest their money. This makes it nearly impossible to avoid many of the other big mistakes that investors make, including investing too conservatively, trying to time the markets, or chasing returns.

Mistake #3: Not having a sound investment strategy

Whether investing for retirement or any other objective, the biggest mistake many business owners make is not having a sound investment strategy in place to guide their decisions. The challenge in investing is not that it takes special skills or knowledge; it’s that it is often driven by emotions, which can be devastating for investors who lack a clear investment strategy along with the patience and discipline to follow it. It’s emotions that drive investors to buy high in times of market exuberance and sell low during market panics, and it’s why most investors still haven’t recovered from the losses they suffered from the 2008 market crash.

Without an investment strategy based in sound principles and practices, investors will more often than not succumb to the emotions of greed and fear, which cause them to act in ways that are counter to their long-term needs. Your strategy must start with a goal, a targeted objective with a specific time horizon so you can determine how much you need to invest, what rate of return is needed on your investment and how much risk you will need to take in order to achieve that rate of return.

It’s not going to get any easier

Unquestionably, business owners enjoy a greater opportunity to build wealth than non-owners. However, it comes at the cost of being able to navigate the complexities of managing a comprehensive financial plan that integrates tax efficiency strategies, risk management, investment management, retirement planning, business planning, family considerations and estate preservation.

The larger challenge for business owners is that the legal, business and financial environments are in a constant state of change. You may be able to keep up with the changes that affect your business field, but that leaves very little time to watch out for changing tax laws, or to grasp the ever-expanding universe of financial products, or the rapidly changing nature of the financial markets. These are all things that will have a direct impact on you and your family’s financial future. That can leave you in a perpetual defensive mode, vulnerable, always reacting to changes after they occur, rather than being on the offensive and proactively preparing for all contingencies. Which is more likely to get you where you want to be? An experienced and trusted financial advisor will always keep you on the offensive, well prepared for anything that comes your way.


Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank or its affiliates.