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Five Biggest Mistakes of New Business Owners

Mistakes of New Business Owners

 

A new business is typically an endeavor that comes with many challenges. Businesses are usually started by people, entrepreneurs, who have come across a great idea or provide an excellent service. This venture entails many working parts and has many risks/rewards. According to the Small Business Association (SBA) Office of Advocacy’s2018 Frequently Asked Questions, eighty percent of small business will survive the first year and about half will survive beyond five years. Only about one third of businesses will survive to celebrate their ten year mark.

Taking a mathematical look at this, these numbers are quite discouraging and one must think why this is the case. In our view, there are five key things that have a tendency to get overlooked by new business owners. Those new business owners that focus on these five areas will have a higher level of long term success for their companies.

  • Not having a plan comes in at number one and is the largest contributor to company failure. Would you ever think about driving cross country to a specific destination without a roadmap or Waze by your side? I think it would be extremely difficult to hop in the car and start driving West (we are located on the East coast) without any tools to guide your trip. Essentially, starting a business without a plan is the same thing. As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.”
  • Having a great advisory team in place is paramount to the success of your business. Your advisory team should include a CPA, attorney, banker, insurance advisor and financial advisor. This would be the bare minimum I would start with on your team. As the business grows in size and success there will be a need to add additional professionals to the team. This core group will be sufficient to ensure you get off to the right start, have people in place to turn to for advice and rely on those that have been successful helping people and companies like yours.
  • You will want to have goals and metrics to benchmark your success against. These metrics may be very different from one company to the next and will change over time as well. The key is to have a direction in place to keep you on track while running the day-to-day of the business. You will want to make sure that you have SMART goals (Specific Measurable Attainable Relevant Time-Based). Using the SMART process will allow you to then break the goals down into bite size pieces to track your progress and success.
  • Being impatient in a new business can be deadly and comes in as one of our biggest mistakes. New business owners have a tendency to think and want things to happen much more quickly than they do, everything takes time. Our optimism and vision will typically allow us to envision the business moving forward far more quickly than it will in reality, and that is fine. Optimism is typically a common trait found embedded in the entrepreneur. This is a new business and it will take time and effort to get the word out there about your product or service. A new business owner will need to be patient and have the ability to wait for their success to arrive.
  • Keeping a cash safety net is key to the success of any business. There are always events that can take place while owning a business and they typically cost money. You will want to make sure that you have a sufficient emergency fund for these instances. Many new business owners find themselves with their back against the wall if a financial event takes place and they do not have a sufficient cash reserve. This may cause the owner to get a loan, borrow money from friends and family, utilize credit cards or even give away significant equity in their growing business for an insignificant amount of capital. Making sure that you have a cash reserve will be paramount to your success.

Beginning a new business is a rewarding experience and can be a life changing event. It is imperative to make sure that you are doing everything in your power to ensure your success. We have included what we believe are the top five mistakes of new business owners and this is by no means and exhaustive list. Having a handle on these items will put you in a position to be far more successful than if you had not addressed them. We encourage you to contact us if you are considering beginning a new business or are already in business, but have questions about where you may be overlooking important concerns. We would be more than happy to have a discussion to see if we can be of assistance and help you towards being one of the businesses that passes the ten year mark!

Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mid-Year Financial Check

Mid Year Financial Check

 

Almost three quarters of the year is now behind us and before you know it the holidays and New Year will be here. I am not trying to rush things, but at the same time, we want to make sure that you are prepared for what the year will bring in terms of your tax situation. It is important to take a look at your financial situation for the year thus far and make sure you are positioned properly for your 2019 tax filing. You do not want to wait until the last week of 2019 or even April to learn of potential issues you may encounter.

It would be a great idea to reach out to your financial team to discuss any financial events so far this year that were out of the norm. The financial events that have taken place may, or may not, have an impact on your tax standing, but it is easier to review, guide, plan, and protect if they are discussed well before the end of the year. Once your team is aware, of what has happened, they can advise you on your options and propose the best course of action. You are much better off planning for this on October 15th than March 15th when some of your available planning options may no longer exist

As a firm, Mitlin Financial makes it a habit to ask our clients on a regular basis, at least two times a year, if there has been anything in their financial life that would warrant us to make any changes or adjustments to their plan. You would be amazed at some of the things we have been informed of at these meetings. Everything from, “I lost my job three months ago” to “I sold my house and we are moving across the country” have come out of this simple question. You would think these would be things they would be calling us right away to discuss and review the impact on their financial standing; but, unfortunately, life gets in the way sometimes. This simple question has allowed us to review, correct, and advise our clients to the best course of action knowing this new information.

Asking this simple question during our review meeting with clients has had a positive impact on our practice and our ability to help our clients. In many cases, it has allowed us to address potential issues that may have been unintended, but life just got in the way. This will also provide you with peace of mind knowing you have addressed the issues and will not need to wait until the last minute to come up with a solution. This would also be a good time to review year-to-date capital gains and interest income from your portfolio to make sure it is in line with previous years. Should there be a significant discrepancy from the prior year, this is something that should be addressed so you are not surprised with a larger than normal tax bill. This will save you significant time when it comes to the end of the year because you will be able to have a good idea of your current standing and then plan accordingly.

The last thing I want to leave you with, as we enter the end of the year, is to be careful purchasing mutual funds in non-qualified accounts. This has been something that has really caused many clients, and their accounting professionals, a lot of grief. As mutual funds begin to announce capital gains distributions for the year-end it is important to know what the distribution is and when it will be taking place. We have seen clients purchase mutual funds in late October, November, and December and receive huge capital gains distributions, which are taxable because they purchased a fund just prior to the distribution. Imagine owning a fund for a couple of weeks and getting a $10,000 capital gains distribution. This is not a surprise that you want to have, so just be cognizant of any mutual fund purchases before the end of the year that you are making in a non-qualified account. It may be ideal for you to hold off on investing new funds or use an ETF until the distribution has been completed.

The importance of having a review with your financial team is to make sure that you both are on the same page and no surprises will come at tax time. The year-end is crazy enough for most, you might as well make things as easy and problem-free as you can. It goes back to the old adage, an ounce of prevention is worth a pound of cure. 

I would highly suggest that you hold a mid-year check-in with your financial team. This could save you hours of grief towards the end of the year or at tax time next year. Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you are not having these reviews with your current financial team. Be sure to share this article with friends, family and business acquaintances who might be experiencing this too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Minute: Building Your Financial Team

In this edition of Mitlin Minute we talk about the importance of building your financial team.  It takes a strong team of professionals to help you and your family to save, grow and protect your financial assets.  This edition will talk about a few of the key people that should be part of your team.
 
Feel free to share this with others that you think will find value in our Mitlin Minute.
 
Feel free to contact us by emailing us or calling us at (844) 4-MITLIN to discuss how we can help you by quarterbacking your team.
 
 

 
 
 
  Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Stay the Course, What Does That Mean?

Roadmap

Volatility has been consistent throughout the COVID-19 pandemic. One other constant I have heard is, stay the course. Staying the course during an event like this may very well be the right advice, but I think there is another variable that needs to be looked at to help confirm that this is the right choice. Reviewing how the volatility has affected your plan is an additional component that needs to be reviewed. The plan is paramount in deciding to stay or abandon the course.

Investors mistake making buy/sell decisions for their investments with having a plan for their financial future that will dictate how the investments should be handled. This may seem like semantics, but it is not and there are definitive differences in the way you look at your portfolio and judge when to stay or change your course.

This reminds me of a quote by John F. Kennedy, “The time to repair the roof is when the sun is shining.”. This rings true with your investments and too. Typically, volatile times do not present an ideal time to change or amend your investment strategy or financial plan, you want to address these items when the sun is shining.

You should have a plan in place for your financial future. This plan will act as a roadmap, a guiding light to help you make decisions about your financial life including your investments. Investments are simply one component of your financial plan. The plan will help you make the decisions you need to reach the goals you are aiming towards. Whether you have a plan in place or not, now is the time to look at it or get one in place. This will ultimately provide you with the assurance of staying the course or the suggestion that you should consider adjusting your overall plan

Staying the course, without knowing what the course is, is simply looking at your investments and making an educated guess on where you believe asset prices will be soon. Making decisions based simply on market prices, and not your plan, can cause you to make a bad or wrong short-term decision that can harm you in the long-term.

To effectively determine if and adjustment needs to be made to your portfolio, you want to evaluate market fluctuations in terms of your financial plan and whether your plan is on or off track. This is what will indicate if the fluctuations have caused your plan to veer off course. Making decisions simply about your investments is like driving to a far destination, getting off the highway, and taking local roads the rest of the way because there was a small traffic jam. This may help you avoid five minutes of traffic but will add hours to your trip.

In my work with clients over the last 20 plus years, I have come to realize that most people are not concerned about the change in the value of their portfolios when markets fluctuate, and they see market declines. They are nervous about what it may mean to their overall financial plan and their ability to reach their goals and dreams. Essentially it is not the loss of the money, but what the money will ultimately be able to “buy” them. To be able to evaluate the impact the market fluctuation has on their ability to reach their goals, clients would need to have a financial plan. This would provide them with a clear view of how they will be impacted in both the short and long term.

We would be happy to discuss the recent volatility and how it may be having an impact on your plan. We can also help you get a plan in place so the next time volatility arises you will be prepared. Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

What you should know about Investment Accounts, Capital Gains, Income

 What you should know about Investment Accounts Capital Gains and Income

Investing is a complicated topic that many do not fully understand and they rely on their advisors to assist them through the process of investing and becoming retirement ready. Taxes are an area that cause significant confusion and the fact that they have a tendency to change over time adds to the confusion.

Taxes on investment accounts can come in several forms and we will discuss some of the most common types along with strategies to help you over time. We touched on this topic in a recent article,Tax Planning Is A Year Round Concern, and we will expand on it here.

Income from investments can come in several forms, such as dividends and interest. The best type of income, especially for high net worth clients, is tax free income. This income will not be taxed, assuming it is tax free on both the Federal and State level. There are investments that will pay tax free income that will only be federally tax free and it is important to be aware of this, especially if you live in a State that has a high income tax bracket. The majority of interest and dividends will be taxed as ordinary income, unless they are a qualified dividend. This will typically be your highest taxed form of income generated from your investments. In these cases, unless you are in need of this income to live on or are in low tax bracket, it would make the most sense to try and place these types of assets in a qualified account. This would allow you to own the asset and not pay taxes on the income.

Capital gains are another consideration when it comes to taxes on investments. These types of gains are broken down into short term, less than twelve months, and long term, longer that twelve months. Depending on your income, the taxes owed could vary widely. The higher the tax bracket you are in, the larger the difference. Short term capital gains are taxed as ordinary income and will be taxed at your normal tax bracket. However, if you hold the asset for twelve months and a day the capital gain becomes long term providing a maximum tax of twenty percent (depending on your income tax bracket) on the Federal return, plus the State tax owed. This could amount to a significant difference in tax and you will want to make sure you are holding assets, if you can, for the long term in order to maximize your tax position. In the instance that you are looking to purchase an investment with the intention of only holding it on a short term basis, we would recommend placing this asset in a Qualified account and avoid the capital gain altogether.

We know that clients do not like to take losses, but sometimes it makes sense for you to bite the bullet. We recommend that you, along with your advisor, review your portfolio each November to evaluate gains and losses for the year. Long term and short term gains and losses will net out each year and you can develop a picture of what your capital gains will be for the year. Based upon the review, it may make a lot of sense to sell an asset at a loss and negate some of your overall capital gain. At times, we have seen clients that understand they need to do this in order to mitigate their tax liability, but at the same time are still confident the asset will work out long term. In these cases, you can double up the position thirty plus days before the end of the year and on day thirty one, in order to avoid a wash sale, sell the initial lot for the loss. This will provide you with the opportunity to capture the loss and still own the position, while participating in the upside potential of the holding.

Planning like this is an important aspect of working with the right advisory team. This type of review should take place with you, your wealth advisor and your CPA annually to make sure things are being done in your best interest. It is key to have your CPA and wealth management firm on the same page with a good working relationship. This is why we always look to build relationships with our clients’ tax advisors. Please feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know has encountered tax issues with regards to their investments, has questions about how taxes like these will affect them or simply does not feel their CPA and advisor are on the same page. We look forward to helping you, and them, make the decision that is best for all. 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

When Volatility Strikes, Whats Your Plan?

Planning Photo

Investing is not something you can simply do in a vacuum and the goals of your portfolio should be tied to an overall financial plan. Overall, markets have been on the rise for the last ten years plus, but there certainly have been some hiccups along the way including the most recent effects of the pandemic.

Looking back in history, there are always events, incidents, political unrest, and other things that would make a good case for not investing. In many cases, these events tend to cause short term fluctuations and do not last forever. Depending on where you stand in terms of time horizon, these fluctuations could present an opportunity that may not be seen again or could be a tremendous stress.

Ideally you want to begin your investment process with an overall financial plan. This will provide you with the guidance needed to see if you are on or off track when markets take a change for the worse. Realistically we do not believe our investments will always go up, but at the same time there is a level of concern when they do not. Much of the anxiety we feel when our investments decline is not the loss of the money itself, but the fact of what those funds will buy us. Meaning, will our future goals be impacted by this decline in assets? Will we need to delay or adjust our retirement? This is where the plan comes in handy to provide you with a gauge to see if the market fluctuations could impede our goals.

Making adjustments is something that needs to be addressed with your portfolio on an ongoing basis, as we are all in a constant state of change. Events that take place may require you to make a change to your investments and others may allow you to keep things the same. Evaluating the changes to the markets and their impact on your overall plan is paramount and may be the driver to making adjustments that could lead to your success or failure in reaching your goals.

You must have an open line of communication with your wealth advisor as these events take place. As we have seen over the past ten plus years, many events that have taken place have not had a major impact on the overall success of the market. There have been significant short-term fluctuations at times, for example, the last quarter of 2018, but nothing that has lasted all that long or caused too much concern until the recent pandemic. The economic event we have been currently living through is unique in the fact that it is a health event causing an economic one. Anxiety is at an unusually high level because people are not only concerned about reaching their financial goals, but maintaining their health too.

Hindsight is always 2020, no pun intended. I look back over the years that I have been an advisor and recall several instances where clients were so concerned with short term events that they made rash and costly decisions. It is always wise to heed caution during a volatile incident, but you also want to make sure that it does not force you to do something that will sacrifice your long-term performance.

Flexibility and making adjustments over time are extremely important. You should make sure that your portfolio is an accurate representation of your time horizon, risk tolerance, and financial plan. When you know that this is true, this should help you feel more comfortable when markets adjust. It is those people that have not aligned their portfolio with these factors that may be in for a surprise. In cases like this, it may make sense to make some adjustments more quickly if your comfort level has gone out of range.

Many investors in recent years have made adjustments to the amount of equities they have versus bonds, simply because they have not been able to get the yield they need or expect from the bond market. This is a prime example of making an adjustment based upon market conditions and/or events. Many of these same people will most likely return a greater percentage of their investment assets to bonds when we see interest rates on bonds return to levels we saw in years past.

Developing and maintaining a financial plan and having your investments represent these goals will dictate if and when adjustments should be made to your portfolio. It all starts with having the proper risk, asset allocation in your portfolio, and plan for your future. I would be happy to discuss your situation regarding the asset allocation, risk profile of your portfolio, and overall plan.

Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Who Do You Need On Your Team?

Your Financial Team

 

Financial success is not something you can achieve on your own and takes the right team to help you get there. As a wealth management firm, we find ourselves as the hub to our client’s financial team to make sure they are addressing all of the areas of their financial life. It is crucial to have a team and the right people in place to help you succeed.

There are key people that you should have as part of your team to assist your family. Here is an overview of the top professionals you should consider:

Wealth Manager/Financial Advisor

Make sure that your wealth manager is a fiduciary, required to act in your best interest, and not a salesperson. The right wealth manager will help you design and develop a financial plan that will allow you to review all areas of your financial circumstances. This will allow them to be the hub in order to make sure you address the areas you need to and coordinate with the other professionals you will need to consult.

Tax Advisor/CPA

You will need a good tax advisor in order to review financial decisions you make and the impact they will have on your tax situation. When making investments and business decisions it is important to know what the potential tax ramifications may be and review the positive or negative effect they may incur.

Risk Manager/Insurance Advisor

We tend to spend much of our effort on building and maintaining our financial assets and sometimes overlook the risks that may exist to our assets. It is extremely important to understand potential risks to your assets and how to mitigate those risks. Many times it is as simple as obtaining insurance coverage that will protect your assets from these risks. You certainly want a risk manager as a part of your team to review and help protect you from these inherent risks. You may ultimately decide to self-insure, but simply being aware of the potential and making an educated decision is key to your financial health.

Banking/Lending Professional

Having a banking/lending professional as part of your team is needed as well. Most people who have financial success will need a mortgage or some other banking product or assistance. It is vital to build a relationship with a bank early on, and the right relationship could make navigating the banking and lending component of your financial life much easier.

Certainly there are countless other professionals that you may need as part of your financial team. Depending on your personal financial situation there could be others needed as well, but these are the foundation. It is important that your team communicates and has a working relationship to make sure decisions are reviewed and discussed with you from a holistic view.

As a wealth management firm we find ourselves at the center of many of these conversations. We will typically coordinate with the client’s other team members to get their concerns addressed, determine a solution, and then communicate it back to the client in a concise and accurate manner. Building your financial team is not something that should be done overnight; it is too important. In order to move the process along, you must find that key member of your team to rely on and have them introduce you to others that may be a good fit for your personal situation. This is a great way to build your team with people you trust, have expertise, and you like working with.

Having financial success is not something that you will typically be able to do alone. It will take a team of professionals that are leaders in their field that work well with others in helping deliver the best outcomes for you. One member of the team will rise to a leadership role and become your go-to person to quarterback your needs. Typically with our clients, that is us. Contact Mitlin Financial at (844) 4-MITLIN x12 and schedule an appointment to discuss your financial plan and building your financial team today!

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.