This year marks my 5th anniversary of once again striking out as an entrepreneur. Recently I’ve written a lot about many of the great lessons I’ve learned along the way – how to write a book, becoming a successful consultant, and deciding whether a non-profit is right for you. Today however I want to share a different type of lesson, the painful kind based on my biggest entrepreneur mistake.
Before I lay out what happened let me tell you a bit about my journey. I’ve been living the entrepreneur life for quite a while. Since graduating from college nearly 27 years ago I’ve spent more than a dozen years exclusively making a living as an entrepreneur. Even during the 15 years I’ve worked for others I often had a side hustle, rarely content with only one income stream.
Robert Kiyosaki’s book Cash Flow Quadrant set me on this path in my 20’s. Understanding more about the myriad of ways to earn a living established for me a lifelong goal of having multiple revenue streams. Through the years I’ve managed that by owning rental properties, building an online retail business, developing multiple successful consulting companies, and writing a book. All have generated revenue, as well as given me great insight on successfully navigating the entrepreneur path.
So imagine my surprise when in 2016 I found myself in deep trouble over the most basic thing – taxes.
I get a little sick to the stomach just thinking about it, but i believe there are blessings in sharing lessons, so here goes.
In 2014 I moved from Dallas to New York City. This was a total leap of faith for me, and personally quite a transition. I struggled to find my new normal as every aspect of my day-to-day life changed. Professionally however, it was easier as both my consulting company and lifestyle brand were completely portable. It was pretty much business as usual, with my support team and structure staying the same.
I’ve shared much of my story in my first publication, Loving on Me! Lessons Learned on the Journey from Mess to Message. The book chronicles my journey from a crushing life-interrupted moment to life abundantly, ending with me experiencing my most financially successful year to date while also enjoying an incredibly fulfilling life.
It was an awesome season, but shortly after things changed. About six months after the book ends I made a trip back to Texas to meet with my team. As I sat across from the accountant I could sense he was stalling, not wanting to share what he had discovered. When he started going through the numbers, I quickly understood why. In moving from Texas to New York my tax situation had changed drastically, but unfortunately our process had not. I could barely comprehend the words coming out of his mouth as he explained that I owed over $70k in taxes.
What the hell?!? How is that possible, and more importantly, why was he just now telling me?
Y’all, I felt like I had run head first into a glass wall. I had never owed this much in my life. In fact, for most of my life I hadn’t even made $70k a year, let alone owed that much in taxes. In the span of just a few months I’d gone from making the most money I’d ever made to owing more than was in my bank account – by a long shot!
In the days that followed it went from bad to worse. A few weeks later I woke up to find all the money gone from my bank account. Turns out, the forms were filed incorrectly causing both the federal and state government to draft my account for the entire amount owed – another mistake on the accountant’s part. Thank God for my relationship with my local Chase bank who helped me reject the draft and put what money I had back in my account so I could live. They also waved their fees, but of course the IRS and state government did not. It took months to unravel the mess.
For a small business, tax problems can be the death knell. Throughout America we see businesses shuttered, celebrities going to jail, and homes seized because our affairs are not in order with the IRS. Even in my case, the state of New York threatened to suspend my driver’s license if I didn’t pay up. It’s scary to have someone breathing down your neck over money.
Needless to say I have no intention of repeating this same blunder, and I don’t want you to either. Here are three things I did wrong and what you can do to avoid my entrepreneur mistakes:
- I didn’t do my due diligence. I’ll admit, this is not my strong suit. Once I decide to take a leap of faith, I go for it and believe that the net will appear. I trust the whispers of the Spirit, so I don’t want to hear a whole lot that may make me question my decision. On the other hand, my approach often causes me to overlook the obvious – like increased taxes. Since my tax catastrophe I take a slightly different approach. I lead with faith, and plan with discernment, asking the Spirit to illuminate areas that may require special attention during my transition.
- I kept the wrong players on my team. I had an inkling this was the case the year before when the accountant made a small error on the New York return. But because we had worked together for years, I treated it as an anomaly. What I should have done was probed a bit more on his areas of expertise. Had I done so I likely wouldn’t have had this experience. I’ve learned that “what got us here won’t get us there.” Sometimes we outgrow our support system. We need an upgrade, and having the right team is critical for our long-term success.
- I spent too little time on the “business” of running a business. Administration is not my strong suit. It takes all the discipline I can muster to sit down and do stuff like expense reports, billing, and inventory. So it’s no wonder estimated tax payments never crossed my mind. I know that sounds absolutely ridiculous, but as an entrepreneur I’ve created a life full of the things I love – teaching, encouraging, coaching and writing. That’s where I enjoy spending my time and energy. But at the same time, I’m now also committed to being a better business woman. I remind myself often that making money is only the first step. Good stewardship is what leads to success and financial freedom.
It’s been about 15 months since I’ve started paying down my debt and fighting my way back to break-even. It hasn’t been fun, but this lesson has born great fruit.
First, it forced me to find a great financial team. They’re right here in New York, reasonably priced, and keep me on track now and for the future. Second, I set aside four days a month to focus on finance and administration. Even though I’ve found great partners I’ve learned my lesson about abdicating total responsibility to someone else. Once a quarter I check in to ensure I’m not only generating revenue, but also as a business we’re employing sound financial strategy.
I hope sharing my entrepreneur mistake has inspired you to think about your team and structure. Do you have the right support system? Are you being a good steward? Let’s make sure we’re not only good at what we do, but how we do it.
If you want to share your entrepreneur mistakes, and what you learned from them, drop us a note in the comments. Let’s learn and grow together!
Hugs, Love, and Much Success to YOU! ♥