Anyone who owns their own business knows there are loads of financial benefits for entrepreneurs. All manner of tax write-offs, credits, and pro-rated terms for cars and home offices. All these point to a genuinely owner-friendly environment for taxation in the United States.
There’s just one problem: too many business owners use the tax code as an excuse to make bad business decisions.
Now, we’re not talking about whether you can write off 10,000 miles or 10,259 miles for business travel, we’re talking about putting the write off before the business.
In other words, are you really concerning yourself with the cash flow and profitability in your company? Are you making sound financial decisions, or are you using your business as a virtual ATM? In many ways, the media and the “financial gurus” of the world have done us a disservice by continuing to remind business owners, “Oh, you can write that off, it’s a business expense!”
This positively reinforces those same business owners to either a.) fail to consider costs or b.) to rationalize things like season tickets as a business expense.
None of this is to suggest that you can’t spend money as a business owner, but you also can’t be derelict in your financial duties. If you need to hire help, then hire the help you actually need (and that could be a nanny for your home, it could be software, it could be a marketing firm). Spend your business’ money on what you need, but spend it like it was your money!
Because it is!
For well over half a century, the failure rates of startup businesses have hovered around 80-90%, no matter what business coaches have done, what books have been written, or what the political situation has been. In all that time, the one variable that has stayed the same is the significant tax benefits that ownership is allowed to categorize as a business expense.
Now, though, is the time to ask yourself – even if you could write off the new truck as a business purchase – how much should I really spend? This isn’t about playing or staying small, mind you, it’s about recognizing that there are a lot of other items (office supplies, computers, marketing, SEO or SEM) that can be purchased by a business each month instead of a $1,000 car payment. And you don’t have to look far for an example of this. In its earlier days, Amazon employees (including Jeff Bezos) used recycled doors as desks. It wasn’t because Amazon was not profitable, but because a desk did not align with the company’s mission of relentless pursuit of customer satisfaction. Here’s my challenge to you: If you’ve found yourself drawn into the “it’s a tax write off” debate and now your cash flow is stuck, let’s review where mistakes might have been made. As a business owner, you absolutely HAVE to spend money, so let’s make sure you’re spending it where it matters instead of in unprofitable spots that won’t allow you to grow your company.