The Small Business Owners’ Biggest Mistake – And How To Avoid It

The Government of Canada’s latest data, Key Small Business Statistics, shows that small businesses are the heart and soul of the nation’s business landscape.

Last year, out of the 1.17 million employers in the country, 1.14 million were small businesses (1-99 employees). Less than one percent were large enterprises (500+ employees). With those numbers, chances are, you are either an entrepreneur or you have dreams of becoming one.

It’s easy to see the allure. Small business ownership allows hardworking Canadians to maximize their interests, hobbies and talents, while having more control over their schedule, work style and finances.

That’s an attractive proposition, especially when stories abound about daring individuals that threw caution to the wind, started up their own company, struggled for a year or two, got a big break and now enjoy a leisurely lifestyle while residual income pours in.

But wait – is that really how it works? Not at all.

Industry Canada and StartUp Canada cite that the small business survival rate actually declines over time:

  • 85% of new businesses survive year one
  • 70% of businesses survive year two
  • 51% of businesses survive through year five

It’s tempting to think that lack of capital is the main reason for the high failure rate, but the culprit is actually a lack of overall management.

Nearly half of all small businesses in Canada will ultimately fail due to lack of planning, and the vast majority of the remainder will do “okay” for the lifecycle of the business. Only a small percentage afford the owners a luxury lifestyle.

There is another side to this, too. Let’s say your small business is one of the fortunate ones that is in year five and is doing okay. Business is steady. Some months are tighter than others, but your business is chugging along and growing a little. You’re in no position to lay back and bathe in the riches you’ve earned or join the “work three hours a day remotely” crowd, but you get to get up every day and do what you love and earn enough from it to keep a roof over your head and food on the table. Is that not also a definition of success?

That brings us to the biggest mistake small business owners make:

Small business owners’ biggest mistake is failing to have a plan in place to achieve their dream, and failing to recognize when that dream has been achieved.

This article explores small business owners’ long-term expectations and short-term expectations, too: saving more money, buying insurance, joining a gym, volunteering in the community, adopting a dog, travelling – all the things they can do when the business hits a certain milestone. You’ll also learn how creating a plan that encompasses your work/life balance, personal and business finances, risk mitigation, expectations and reality, gets you from dreaming to enjoying the dream.

Are you ready to make a plan? Let’s get started.

Step 1: Define What Success Means to You

You won’t know if you are successful if you have no idea of what success is. The first thing you need to do is sit down and outline where you are, where you want to be, and what milestones in the middle indicate that you are on the right track.

Take into consideration your goals as well as the money you want to make. For example, being able to take two weeks off in year three of your business for a dream vacation is as much of a goal as hitting a sales target of $500,000.

Your idea of success should not just be focused on the big end goal but on all of the successes that happen on the way to getting there.

One of the best examples of using this mindset comes from Canadian astronaut Chris Hadfield. In his book, An Astronaut’s Guide to Life on Earth, he notes that, when he wanted to become an astronaut, the chances of that happening (due to Canada’s non-existent space program at the time) were pretty much 0 per cent. He decided to go for it anyways on the chance that Canada might build up a space program, and he resolved to enjoy every step of the journey so that, if he never arrived at his destination, he could look back on a life full of rich experiences – and if he did make it, he would be completely prepared for the opportunity.

Years later, Hadfield was strumming his guitar from the comfort of the International Space Station in his role of Commander, and he had also learned to fly fighter jets, play an instrument, speak publicly, teach, lead and have adventure after adventure. Each choice he made was in support of his dream, but it was also in support of enjoying the milestones that could possibly take him there.

Space is a lofty goal. Perhaps your goals are a little more earth-bound, but you cannot achieve success, or even recognize it, without knowing where you are going, why you want to go there and how success looks at every milestone along the way.

Step 2: The Money

Every entrepreneur wants, and needs, to make money. You need it to survive and you need it for your business to grow. Even if your end game is a thriving non-profit organization, ignoring the dollars and cents is a fast way to fail.

You cannot succeed in business without being organized, paying attention to and knowing about the money, so your plan must be accompanied by a detailed financial analysis, a budget, projections, tax forms for timely remittance of your GST/HST/income tax, etc.

How much money do you need to get your business started? Where is that money going to come from? If you plan to accrue debt to get started, what is your timeline for paying it back? How much money do you need to generate each month to stay in business? How many months of not turning a profit will you withstand before you change your plan or close the business?

The money side of things requires asking some deep questions, and you need to be honest with yourself. If your family says they won’t invest in your business, don’t expect them to. If the bank needs to see a detailed business plan, take the time to make one. You could have a really good idea, but it won’t sell to the people who are looking to finance you unless they know you have a plan in place for the money.

Step 3: Mitigate your Risks with Insurance

This step is one of the most important in your overall plan. The hard fact: you can be very successful and have a steady cash flow, a growing client list, and high demand for your product or service – and it only takes a death of one person who is key to operations, a disabling accident or a critical illnesss to wipe all that out.

Unexpected disasters are not a matter of if. They are a matter of when.  That’s where insurancees in.  When you plan for your business risks, you can mitigate them and your business can continue. If you don’t plan for those risks, they will blindside you and your business may ultimately fail.

In this step, we will break down your most pressing business risks, and the insurance you need to cover them.

Risk 1: Disability

Becoming disabled is among the biggest risks for small business owners. In the insurance world, a disability is an injury, accident or psychological issue that prevents you from physically and/or mentally doing your job. Short-term disabilities include events like recovering from a bad car accident. Long-term disabilities include mental impairment, loss of sight or limbs, etc. Depression, failure to cope with loss and psychological trauma are also considered disabilities by some underwriters.

Risk 2: Critical Illness

These days, we are living longer and recovering from serious illnesses, thanks to modern medicine. Your risk of a critical illness is higher than your risk of death. Lengthy illnesses leading to time off work can destroy your small business. Critical illness insurance provides a tax-free lump sum of cash to use however you wish (hire a manager while you convalesce, keep up with the bills, etc.). It’s the perfect solution for the risk of becoming severely ill, such as having a heart attack, cancer, stroke or ALS, while still having a long life expectancy.

Risk 3: Key Person

Your company depends on you, or on one or two main people, such as your top salesperson, your specialized industry expert or your best product producer. The loss of a key person causes serious financial risk to your business. Key person insurance covers their death or disability, providing your company with a financial benefit to keep operations going until a replacement can be hired.

Risk 4: General Health

We have a wonderful healthcare system in Canada, but the cost of dental care, prescription drugs and things like walking or neoprene casts are not generally covered. A tooth extraction, broken bone or infection that needs several rounds of medication can be very costly. Heath and dental benefits relieve the financial burden for you and your staff. Whether you are a solo entrepreneur or a small business, there are health plans to help you mitigate this risk.

Risk 5: Shareholder Buyout

So, you’ve gone into a partnership and things are going well. Suddenly, your business partner is in a terrible accident and becomes disabled or dies. What happens to their shares? Without a buy/sell agreement that spells out exactly how the shares of a deceased or disabled shareholder will be handled, you could find yourself in business with your partner’s spouse or children – and it’s not likely that they will be willing or even able to work with you in a way that continues the business.

Buy/sell agreements are a must for any partnership or corporation, and buy/sell insurance is what funds the ability to buy up your partner’s shares. Having the ability to buy the shares protects the business you have built, and it allows you the time and money to decide how it will move forward.

Risk 6: Business Overhead – (Disability)

The smartest, most accomplished business person that has accounted for all controllable factors is still at the mercy of the unexpected. Business Overhead covers the cost of fixed expenses like a building lease, utility bills, equipment & vehicle payments, employee salaries when an owner is prevented from working by an illness or disability.

The premiums for this coverage are tax deductible.

Risk 7: Retirement

This may be the biggest risk of all, as so many business owners pour everything back into growing their business. The business may be growing but if your retirement relies solely on you selling your business you could be in trouble. A well rounded plan includes a regular saving plan to ensure the compound interest is on your side. Diversification is the key and might include property, investments and cash value life insurance.

(*With the latest tax changes on income sprinkling and passive income within a corporation – Cash Value Life insurance and Individual Pension Plans (IPP’s) can be great planning tools for business owners)

Step 4: Learn, Grow & Practice Self Care

You know your business grows when you actively work on it. That means constantly improving your processes and your products. However, all of that, along with all of your financial and risk management planning, is for naught if you are not personally growing and taking care of your mental, physical and social health. Personal learning, growing and practicing self care are important components of your plan.

You Need a Mentor

You know a lot, but you don’t know it all, and you lack the experience to handle certain situations that others before you have mastered. Every great adventure or quest movie has a sage mentor gently guiding the young hero to the light – and you are no exception! Go get yourself a mentor.

For the young parent, this mentor could be your own mother or father. When your business is sapping your energy, your parents will remind you that your biggest investment – and responsibly – is to you and your family first. Likewise, a business mentor that has experience in your field is the perfect coffee-and-chat partner when that massive deal falls through, or when one of your ideas implodes. When you feel like you’ve lost it, can’t handle it or are simply out of ideas, your mentor shows you the next steps.

Active Learning & Movement

MEND (metabolic enhancement for neurodegeneration) is a program that reverses memory loss and has shown outstanding success with early dementia and Alzheimer’s patients. The cornerstones of MEND are based in medication, dietary changes, supplements, brain stimulation and exercise.  Test subjects in   early cognitive decline showed incredible improvement when adopting MEND’s practices. Exercise, active learning, being mindful of our medications and supplements? Hmmm…sounds like all the advice we need to follow now, doesn’t it?

A creative outlet (active learning), such as playing the piano, learning a new language, cooking, doing Sudoku, crafting, painting or even colouring is essential for relaxing the body and mind, and for unleashing your creativity. The art you paint today actually inspires the big idea for your business tomorrow.

Likewise, countless studies point to the benefit exercise has on all aspects of your life.  You don’t have to run a 10K every year; just get up, get moving and get active. Your brain and body function at peak performance when you exercise regularly. Failure to do this means a greater chance of failure in your business. You can’t run an empire if your body and mind are too broken down to be efficient.

You don’t need to wait for early cognitive decline to see the advantages of MEND theory. Taking those healthy steps now is an investment in a better you later. If you are so willing to put money into a stock or mutual fund so you can have a bigger return later, be just as willing to invest in your body and mind now for immediate and future benefits.


Let’s get one thing clear right now. You are NOT too busy to relax. If you are, immediately stop and reassess your priorities. The entrepreneur life is no walk on the beach (at least not until a carefully planned out retirement happens where all your investments perform as planned), and yes, long hours and stressful days are part of the process. However, once your work life eclipses your ability to exercise, spend time with your family and step away from your office from time to time, you are in big trouble. And lets face it, if you need to spend 100% of your time working… you’re probably not very good at your business.

The Japanese term karōshi translates to “overwork death.” Yes, you can work yourself to death. Karōshi deaths included heart attacks, stroke and starvation directly correlated to work stress and overwork. While karōshi is more prevalent in Japan, South Korea and China (where it is called guolaosi), it can, and it does, happen in North America.

This is preventable. You need to have balance or your health will suffer, and when that happens, everything you worked so hard for becomes meaningless. A big house, vacations, a fat bank account – you can’t enjoy those things if you are collapsing from stress and overwork. Your family, your friends, feeling well – you can’t enjoy those either if you let work take over your life at the cost of your health.

Downtime must be part of your plan. Failure to include it means planning to cut the best years of your life short. Work/life balance is hard, but it’s not impossible. Delegate, say no to things you don’t have time for, hire someone to help clean the house or office – do what it takes to get the balance you need in your life. Otherwise, what’s the point of it all?

In Business, if you Don’t Have a Plan, Your Plan is to Fail

There are those that love to live without a plan. They feel that plans cramp their spontaneous side. That is fine in some respects, but never in the world of business. The wild and crazy business idea that succeeded because the owners went all in and threw caution to the wind is the exception, not the norm. In fact, you only hear about those because they are so rare. The entrepreneur that carefully creates a business plan, a risk assessment, a life/work plan and who has mapped everything out in a flexible way to accommodate life’s ups and downs is far more likely to succeed – and to know what success actually is at each step.

You can be a small business owner and have a great life. You just have to plan for it and realize that life is happening to you right now. Your happiness and success don’t begin at some magical end goal. So, map it all out. Make a plan. Knowing where you are, where you want to be and how you are going to get there will prevent you from making the small business owners’ biggest mistake.

Shelter Bay Financial’s independent financial services brokers have years of insider knowledge on what it takes for small business owners to succeed. Using the latest technology and processes, they match insurance and financial strategies to each client’s unique needs. With outstanding personalized customer service, Shelter Bay Financial’s long-term goals are focused on you and your plan for a healthy, sustainable business and life.