Here are the 10 most common personal money management errors that entrepreneurs and small business owners make.

  1. Behaviour Repetition

Most successful business owners take risks. Some of those risks pay off, while others don’t. Often the difference between a successful business owner and an unsuccessful one is the number of risks that pay off. Not really true. There’s a lot more to success than just risks paying off. There could be a lot of luck involved, poor strategy or planning etc. The point here is that the attributes that are often required to build assets are different to those required to protect assets. And people who have built assets often have personality types that make them want to control and influence situations.

In many people this risk taking behaviour becomes habitual. In fact for some business owners a willingness to take risks is a core part of their personality. They are happy to take a punt, even when they know the odds are against them, in order to achieve success and wealth.

A problem arises whenever this instinctive risk taking behaviour that created wealth is applied to the protection of wealth. This can lead to dramatic negative changes in fortune.

The solution is caution, prudence and taking advice on how best to spread financial risk.

It is not uncommon for people who have sold successful businesses to lose large amounts of their wealth when they retire. The skills required to accumulate wealth are very different to the skills required to protect that wealth and it seems incredibly difficult for people with strong personalities to recognise this. They just don’t get that avoiding bad decisions rather than making good ones has become the number one priority.

Wealth accumulators are used to taking control and ‘making it happen’. They’re use to ‘fixing’ things if they’re not working. They have generally controlled their revenue and made sure that it increases each year.

So being more passive, letting the markets do their thing and accepting diversification and volatility are very strange for them. When an investment isn’t ‘working’ they need to see some action and somebody need to ‘fix it’. All of these behaviour patterns are detrimental to wealth preservation.

At the same time, many are aging and feeling their own mortality and they are starting to feel vulnerable.

  1. When the Means Becomes the End

Most people who run businesses make huge sacrifices in the pursuit of success, including sacrifices that involve personal relationships. They work long hours and are consumed with making it to their ultimate goal. This could be achieving financial independence, building a profitable business, or something else.

The problem arises when the day-to-day tasks of running the business become the only tangible objective of the business owner’s life. When there is no end, all that is left is the means. This can leave a business owner or entrepreneur feeling unfulfilled and undervalued, even when they have amassed large fortunes. I don’t think you’ve understood the point. The point is that when people start businesses, there’s a reason and if they were asked why they started their busisess, they would be able to articulate it fairly well. They mat say, “to make enough money to be independent” or “to be free from the control of others” or “to prove a point” or whatever.

However, after many years and much success, it becomes extremely difficult for them to separate themselves from their businesses and their identity is ‘locked up’ in their business.

The solution is to be clear about the WHY and set specific objectives.

It is therefore important to take a step back from running a business to figure out why you are doing it. What is your objective in life, not in business? Do you want to be a better parent, friend or family member? Do you want to travel or explore? Or do you want to give back to society through your knowledge, connections or money? Understanding the answers to these questions will set you back on a path that has a proper end. Could be worded better – ‘a proper end’? This will reignite your passion and will make you feel happier and more content.

  1. Lacking Trust again, you have misunderstood the point. This heading doesn’t relate to the topic.

The point of this section is that wealthy people often want to have the best of both worlds. They want things to be kept simple but at the same time they want to have the optimal solutions. Eg save tax and protect their assets.

It’s not possible to have both simplicity and optimisation – both cost. Simplicity may mean more tax and less asset protection and optimisation may mean more fees and more complexity so better record keeping is required.

Properly managing, protecting and growing the assets of an individual are complex tasks. It takes analysis and research in addition to skill and years of experience. This often results in solutions that are complicated and difficult for people outside of the financial industry to fully grasp.

That is why getting professional financial advice is so important. The problem is that it is hard to trust someone when you don’t fully understand the advice they are giving. That trust is essential, though, as simplicity is rarely a viable solution. You cannot protect assets and optimise tax efficiency while at the same time keeping the strategy simple.

The solution is to find a financial advisor that you can trust. You should learn as much as possible but when it gets too technical you can defer, confident that the right decisions are being made.

  1. Putting Tax Decisions Before Commercial Decisions

What is more important – saving as much tax as possible, or making as much money as possible? You obviously have to do both but there are often times when one of the two has to be prioritised. Not the point – the point is that people are often so concerned about saving tax that they ignore the commercial realities. Ie focus on making money first and then worry about tax. Nobody ever went broke making money no matter how much tax they paid. But many went broke making bad commercial decisions and paid no tax at all.All too often the decision in this circumstance is to ensure that tax savings are maximised, even if this compromises a commercial decision.could be worded better.

This is part of the nature of many business owners and entrepreneurs – they want to save as much money as possible. But making tax-saving decisions despite their impact on commercial decisions is the wrong approach. This generally constitutes bad decision making, but it can also result in difficulties with the tax authorities.

Therefore commercial decisions should always be given priority over tax decisions.

It’s hard to explain why I think this wording doesn’t work. Obviously everyone wants to save tax so the reader will find it strange to read “they want to save as much money as possible” as implying that there is something wrong with this.

“this generally constitutes bad decision-making” – funny way to word the point.

The big point is that it’s common for people to want to save tax, and that’s reasonable and fine. However, the mistake is for this focus to take precedence over the commercial decision and it often does.

(as an aside – I’m spending as much time trying to correct or explain as I could be just re-writing it….so it’s a bit frustrating and I hope will prove worthwhile)

  1. Decision Paralysis

Growth is essential in business. You have to grow your business to move it forward – you even have to grow your business to stand still. If you are not growing, failure beckons. Wording!

Many people attribute a lack of growth in a business to poor decision making. More often than not, however, this is not the case. Instead, most businesses fail to grow because of indecision.

This indecision is, in many respects, understandable. This is because most business owners have to deal with either conflicting opinions, or opinions that lack substance and clear business strategy. An example of this is a consultant who gives advice but offers nothing that you don’t already know, or who makes suggestions that are completely unrealistic. It is important, therefore, to get sound advice so that you can take clear decisions.

Seems very confusing. Let me try to make the points again.

Big point: many business owners reach a point where they are not sure whether they want to grow or sell. The result is that they do neither and over time there is a big negative impact on their business. The owner has to know whether they are growing or going.

  1. Making Investment Decisions Based on Educated Opinion

Seeking advice and then acting on it is part of the everyday life of a business owner. Getting advice from colleagues, friends and other business owners can help with everything from choosing the right accountancy software to developing an effective marketing strategy. You take the advice because the person giving it has direct experience, i.e. they have recently gone through the process of changing their accountancy software, or they have just finished a marketing campaign and can give you information on the impact. The big point here is “in their businesses, they are used to getting advice from external consultants like their tax accountants, business consultants etc.

When they invest, they confuse advice with selling and get confused but stock brokers and other people who are educated and sound convincing but who don’t really know and are conflicted.

Can this process translate to financial investments? Can you take advice from a consultant or colleague and use that educated opinion in your own investment strategy? Of course it is possible, but it is no guarantee of success.

When it comes to investing you have to question the relevance of any so-called expert. They might have had success in the past, they might be educated, and they might have intelligence. But do they fully understand the nuances of your business or personal financial position? Do they have the breadth of knowledge, skills and experience to give you rounded advice that looks at all the options? Protecting your wealth, after all, is not the same as buying a new piece of software. The stakes are higher, so your standards on the advice you take should be higher too.

  1. Taking Unnecessary Risks

Part of the makeup of many entrepreneurs is that they always demand more. This is often why they are successful – they demand more from themselves, their families, their staff, and their suppliers. Good is never good enough.

This approach can be successful in business but when it is used in implementing an investment strategy it can be disastrous. It leads to unnecessary risk taking which can lead to anything from small losses to financial ruin. More often than not, this is because of an excessive concentration of assets or excessive leverage. Both of these things are natural mindsets for an entrepreneur, but they should be tempered.

The world renowned investor Warren Buffett said: “Don’t risk money you need for money that you don’t.” This is counter to the way that many entrepreneurs operate, but it is an essential strategy for protecting wealth and being able to live the life you want to live. You cannot use the same skills that helped you build your wealth when you are protecting it. It requires a different approach – one that accepts a final number rather than always seeking more.

  1. Taking Short Term Decisions

Two main influences press business owners to take short term investment decisions. Firstly there is a constant stream of new products and fads offered by the financial services industry that promise rapid short-term gains. Secondly there is the desire that is inherent in many business owners to be active. Business owners and entrepreneurs are doers, so they want to do.

This short term focus in investment strategy is costly both financially and emotionally. It is energy sapping and can result in mistakes that reduce your overall wealth.

The right way to protect your current wealth is to focus on your final portfolio. This is the portfolio that you will rely on when your day-to-day business activities are behind you. Short term investments and fads rarely have a place in any strategy that is designed to protect and maximise a final portfolio.

  1. Not Setting Personal Wealth Targets

Running a business is often all-consuming. When you are a start-up it is a matter of survival. As your business becomes established you move into a phase of constantly pushing for growth. This often results in you the individual becoming indistinguishable from your business. You lose your personal identity, and the business takes over.

This results in you measuring your success by the success of your business, but this is dangerous when you are planning for the future. You should have clear lines of demarcation that separate your personal success and the success of your business.

The way to do this is to set yearly personal wealth targets. This creates the clear separation that is required, but it also helps you to focus on a goal and improve your position.

  1. Poor Succession Planning

Poor succession planning takes many forms. This includes purchasing overly restrictive buy/sell insurance that doesn’t take a proper long-term view, and it includes bad planning when handing assets down to the next generation.

This is a difficult area to deal with as many business owners feel more comfortable dealing with their employees, customers and suppliers than they do with their family members. But this poor planning results in significant numbers of wealthy families being unable to transition wealth successfully over three generations – as many as 80 percent of families fail to do this.

This is often because successive generations are used to living with wealth, but don’t know how to create it or protect it. The solution is usually twofold. The first element is to instil a culture where heirs become custodians of wealth rather than simple inheritors. The second element is to establish early relationships with trusted advisors who can help secure and protect a family’s assets during a transition period.


A common theme runs through all 10 of these mistakes that are often made by business owners and entrepreneurs. Most of the mistakes arise because the skills that help you to create wealth in business become liabilities when you are protecting that wealth. The outworking of this all too often is that a business owner continues through life doing what he or she has always done, but ends up with nothing.

Protecting wealth requires you to think differently. You need to temper the more aggressive and risk-taking tendencies that are part of your personality. You need to take advice from the right people, you need to have an end goal, and you need to take a long-term view. This is the secret to wealth protection