One of the most glaring financial mistakes entrepreneurs make is to focus on profits without considering what is left on the table. Many concentrate excessively on controlling expenses. Going by the wayside are such vital considerations as minimizing taxes, systematically pursuing new business, and maximizing profits by making and keeping customers/clients happy. Conceptually, many entrepreneurs view these vital considerations as standard operating procedure. Who doesn’t want to minimize taxes, get new business, and find ways to maximize profits?
The difficulty occurs in the details. A CPA who only understands basic tax law may leave a lot on the table in terms of sophisticated analysis that can really minimize taxes. Many small business owners tend to vigorously pursue new business only when shortfalls occur—which is the worst time to start the process. And maximizing profits encompasses a variety of dedicated financial and operational processes that most entrepreneurs can only dream about.
Spendthrift vs. Thrifty Spender. Key to the profitability challenge is a well-entrenched mindset that tends towards spending money when it’s available, often excessively—the essence of a spendthrift. In contrast, thrifty spenders—unlike the Scrooge image—are small business owners who concentrate first on allocating revenues to profit accounts, then using what’s left to pay expenses. If there’s not enough money, they have to cut those expenses as much as needed, even when it hurts—hence the thrifty spender description.