Three Lessons From Last Year
The end of the year is a time for reflection.
However, if you’re in the accounting profession, there’s little time to reflect at the actual end of the year, as January is our busiest month. So, the end of January becomes your default time for reflection.
As we approach the company’s six-year anniversary, it’s easy to look back on the things we’ve done over the last few years. From a family business operating over the kitchen table, with only a handful of clients, we’ve grown to a team of eleven full-time staff serving over 170 clients. We’ve met a lot of people and helped a lot of businesses but, more than what we’ve done, I’ve been thinking about what we’ve learned.
I could (and someday might) write a book about what I’ve learned through small business ownership, but today I wanted to talk about three lessons that have stood out to me from the past year.
Celebrate wins, but keep training in the offseason.
Finishing a big project, landing a big account, or getting kudos from a client is a great high. It’s a time to recognize staff, and give yourself a pat on the back. But it isn’t the time to stop what you’ve been doing.
When things are going well, it’s easy to get complacent. But it’s effort that breeds success, and that can’t be taken for granted. If you stop putting forth the effort, that success can depart just as easily as it came.
We’re about to complete the month of January, which is “1099 season”. It’s a very stressful period and, once we get through it, we’ll do something special to recognize the team.
But, we’re also already discussing what we can do to improve the process next year. Which brings me to my next lesson.
Never stop improving, but don’t change for the sake of change.
Over time, we’ve identified better ways to do things within the company. However, we have found that there are times when you have to accept that perfection is unattainable.
One area we have found this is particularly true is in the realm of project management automation. We’ve been able to put certain templates and systems into place to help cut down on both administrative and client hours. However, we found that we could only take that automation so far if we wanted to continue to offer highly-customized service. There might be a better solution out there that we have not found yet, but we can only dedicate so many hours to researching a better option (unless we want to limit the number of new clients we accept). Which leads me to my final point…
Everyone matters.
It’s always exciting to land a “big” new client, but some of my most-cherished client relationships are with those small, one or two-person companies. We have many clients who just come to us for a bit of training or help with their start-ups, and I’m the go-to person in the office to work with those, because I enjoy them so much.
Ironically, though this was never the intention, some of those small clients have led to big business. For example, I helped a local interior designer with cleaning up and training on her QuickBooks account. She connected me with a friend of hers in Charlotte, for whom I did some remote training. Those relationships led to referrals to other interior designers, until, suddenly, we found ourselves working with half a dozen new interior designer clients, a few of whom are very large and for whom we’re providing extensive services. And this all stemmed from helping someone who many other companies would not have given time to. (This makes me think of our first ever blog post, Nice Guys Finish First.)
Our little company is not so little anymore (and certainly not as little as when that first post was written). But we’re still learning, and still have so much to learn. I’m excited about what new lessons 2019 will bring.
Constructive Criticism: How to tell when the "haters" have a point.
To start, let's consider "American Idol". (And while we're considering, please also think of a time when you made a terrible decision.) The show "American Idol" has identified and produced many highly-talented musical acts. However, it is almost more popular for its rejects, for those people who were so delusional about their abilities that they gain a short-term measure of infamy for their embarrassing auditions.
There is a running script shared amongst these rejected contestants where they disagree vehemently with the judges and reject their critiques, assuring the camera that they will achieve their dreams regardless of what any critics (frequently mislabelled as "haters" in these diatribes) say.
It is easy for us to find amusement at the expense of these failed performers. However, how many of us have made equally bad decisions which, mercificully, were not recorded for the benefit of a nationwide audience? Thinking back to a terrible decision you have made in your own life, were there people in your life who, at the time, advised you against that decision? Did you listen, or were you dismissive of them as critics?
I'm asking about these things because, lately, I've seen some terrible business advice being shared across social media. Particularly "inspirational" quotes such as
"Don't let the voice of critics paralyze you. Believe in yourself. You can do anything you set your mind to!"
On the surface, that sounds like great advice. "Nothing ventured, nothing gained," and all that.
However, the problem comes when entrepreneurs cannot accept any criticism, and instead write off unpleasant truths as the sour grapes of "haters".
So, how can you gauge when criticism is constructive and when it is truly just jaded attempts at crushing your dreams? Ask yourself these questions...
Does this person love me? Or, do they at least like you or care about you? There is the possibility that a loved one will be more cautious than optimistic, as they don't want to see you suffer a setback. Someone who is just a casual friend or acquaintance might be more encouraging, as its more important to them that you like them.
Alternatively, what is the likelihood that this person despises you to the extent that they would actively attempt to prevent your success? If the person disparaging your plans is an actual avowed enemy, feel free to ignore their criticism (and, perhaps, avoid interacting with them socially at all).
Think back to those hopeless "American Idol" contestants. The judges don't critique them because they hate them, and many of the contestants families offer them excessive encouragement out of blind (or, in this case, deaf) love. The judges are able to be objective because of their personal indifference to the individual.
Does this person stand to gain or lose from my failure or success? If you are discussing a new business venture with someone who would be a direct competitor, they probably are not rooting for your success.
However, if they are a spouse or someone with whom you are financially entwined, it's possible that their criticism is coming from a place of caution. While they might share in your success, they also stand to lose along with you in the event of failure.
Also beware of "friends" who are willing to build you up but not invest in you. There are people who will encourage you into risky ventures in the hopes that you will remember them in your success, but who will abandon you should you fail. While someone is patting you on the back, make sure they aren't also trying to hitch onto your coattails.
Am I paying this person and, if so, what am I paying them for? Obviously, as people in the business of providing financial guidance, we believe in the value of business coaching and related fields.
However, we do not see the value in "yes men".
There seem to be two types of people you can hire to help you with your business: The first type is how we at The Bookkeeper fancy ourselves. We want to help you succeed, but we don't think you're paying us just to give you "'Atta boys!" We want to help you set and achieve realistic goals and, if that means saying something you're not happy with, well, that's part of the service we're being paid for.
The second type of business professional (one that seems to be becoming more popular lately) is the professional encourager. They provide endless affirmation and assurance that, "If you can dream it, you can do it!"
They are paid cheerleaders.
And, as long as you know what you're getting into and that's what you want, that's fine. By all means, pay someone to tell you what a great job you're doing; it's your money.
But be aware that all of those good vibes do not guarantee your success. There have been countless business ventures that have failed despite entrepreneurs really believing in them.
Therefore, we hold to a less popular old saying: "When two people in business always agree, one of them is superfluous."
Disagreement can be healthy. We live in an imperfect world where not every idea is a good one and not every venture will succeed. Recognizing that can help you to recognize who is acting as a critic out of "hate", and who is doing it out of love.
What makes an owner?
If you're reading this, chances are you want to be a business owner, or you already are one. And, if you're the sort of person who wants to run their own business, it's probably not because you plan on working a daily grind into your 60s. You probably have a dream for your business, and for your role in it.
Maybe you see yourself hanging out nightly in the VIP section of a nightclub you opened. Or managing your wealth long-distance, answering emails on a satellite phone while you recline on a tropical beach. Perhaps your vision of success is your business doing so well that you can yacht away to somewhere without any cell phone reception at all.
Here is the problem we see time and time again...A new business owner spends so much time daydreaming about what their position should be, they don't put in the work to make their dream into a reality. The result is owners frustrated because, "I didn't start my own business to work myself this hard!", and failing businesses.
So, how does an owner achieve success? A few things to keep in mind...
You should be your most dedicated employee. No one has more stake in your business than you. So why expect anyone else to work harder for your business than you do? Employees take their cue from the boss. An owner who puts in their hours and maintains high levels of work ethic and professionalism shows the employees that the business is being taken seriously, and inspires them to follow in that same example. Unfortunately, many owners adopt a "Do as I say, not as I do" style which lowers employee morale and motivates them to do their job...when the boss is looking.
To assess your success in this area, take a step back, and think of yourself not as "the owner", but as one of your own employees. Ask yourself these three questions:
- Would you hire you?
- Would you write you a letter of recommendation?
- Would you fire you?
If what you're giving your business would be unacceptable from anyone else you hired, it may be time to reimagine your role as the owner. And...
Play to your strengths. You know a business type that makes a killing? Dental offices. So why don't I open a dental office? Because I am not a dentist. It makes no sense for me to try to start a business about which I have no knowledge, just because I'm hoping it will somehow prevail and make me a lot of money.
Unless you're simply a brilliant, Richard Branson-esque entrepreneur (in which case, Thanks for reading! Need a bookkeeper?), your business should involve a field in which you are an expert, or at least be something you have a strong passion for. Also, you should be leveraging that expertise and that passion in the most appropriate area of your business. (You are your own best employee, remember?)
For example, say you have a business detailing cars. You are a dynamite car detail-er, and, between word-of-mouth recommendations and repeat customers, business takes off. So, you hire four more people to detail cars, and you step back to do "owner things", like marketing and money management.
Only problem is, you have crippling social anxiety and couldn't add 2+2 without a calculator. So, you end up not doing the marketing because you hate it (and, truthfully, aren't that great at it) and you get your finances in a huge tangle. Meanwhile, customer satisfaction slips because those car detail-ers you hired can't match the level of service you're provided in the past. And in your rush to get to what you envision is the role of the "owner", you've hired too many additional people, anyway.
So, how should you play it? First, stop thinking about what an owner is "supposed" to do and just do what you're supposed to do. Keep detailing cars yourself (take on one or two people you can train) and hire somebody else to do the marketing and the books. If detailing cars is what you know and what you're good at, why take your best employee (again, you) off of that to do something else?
And, sure, maybe you don't want to detail cars forever. Maybe you really want to reach that place where you're just relaxing on the yacht. That's why you have to...
Have patience. So many businesses fail when they attempt to expand too quickly. (We recently compared this to buying hotels too soon in Monopoly.) Likewise, we see a lot of businesses run into trouble when the owner decides they'd rather work like Don Draper than Peggy Olson. (If you're not familiar with "Mad Men", then just substitute anyone who doesn't work very hard versus anyone who does.)
If there's something your business needs which isn't being done, and you refuse to do it yourself because, "I don't do that; I'm the owner," you're not likely to find long-term success. You can't just rely on your employees' hard work; you have to contribute your own.
Client Profile: Haley Gray of "Extension of You"
The Bookkeeper client Haley Gray is Chief Extension Officer at Extension of You Home Care, an in-home companion care and transportation provider based in the Triangle. Haley has received her MBA from Duke University and published her first book, Choosing a Caregiver: Expect the Best and Know How to Ask for It, last year. The book is a best-seller in four categories on Amazon.
You originally went to NC State for Computer Science and Spanish literature. What drew you to elder care?
My dad, my parents...the whole experience with my parents. I saw a lot being done right but also a lot of things that could be improved. I saw a lot of senior homecare businesses which were not doing right by their patients. For example, we had one caregiver who worked with my dad for two years from 5:30 AM to 5:30 PM, who never once saw a caregiver during a work shift. I saw my dad who had dementia being asked to sign a paper timecard. He had no idea what he was signing. I talked to friends who also reported similar stories. To me, that is not acceptable- you shouldn’t be asking someone to sign a document that they don’t understand, yet it happens every day.
To improve upon the standard level of care, what we (Extension of You) do differently is things like using telephony for time cards, random, unannounced visits when our caregivers are on duty, and providing ongoing training for our caregivers. We also do nationwide background searches, paid time-off, 401Ks, financial education, and we pay above market standards while maintaining a profit. Our caregivers earn a living wage, which helps us keep them longer.
You mentioned your employees receive financial education. What motivated you to go back for your MBA when you did?
It had been a long-term goal of mine. I was going to go back in 2002, but got pregnant with my third child. So I decided to wait until I was done having children. I went back when my youngest was about to enter 4-days-a-week preschool and my oldest was about to enter high school, which allowed me to finish my MBA before my oldest graduated high school.
Financial education of my employees, and giving them opportunities is important to me, because I’ve seen the huge benefits of a little bit of education.
Was writing a book a long-term goal as well?
That came more recently. I'd thought about it in the back of my head, but never thought I'd really do it. Once I got into my blogging it began to feel more like a real possibility. I ended up writing it last year in 5 months, start-to-finish, so it was a whirlwind.
With four children, do you see any of them following in your footsteps?
I have no idea. They all have very different interests, so I will be curious to see what they do. But anything they do will be earned, not given. I expect them to forge their own paths.
What
is your favorite thing you do on a day-to-day basis in your work?
My favorite thing on a day-to-day basis is getting out and meeting people. The buckets into which I divide my time are sales and marketing, dealing with business challenges, and managing people. But my favorite is getting out and seeing people, improving their lives, and helping them out at a difficult time. I also really enjoy seeing my companies grow and, as a manager, "nudging" people to grow. And, really, growth can be measured in different ways. I like looking at all the different metrics to see all the ways we're growing. I’m a nurturing soul, so it comes out in taking care of our clients, but also in taking care of employees.
The Financial Reasons Small Businesses Fail
Almost every entrepreneur has heard the statistic: 80% of small businesses fail. There are many reasons this happens, and can include everything from market slumps to lazy owners. To enumerate every way a business can go under would be an endless, impossible task.
However, there are a few financial characteristics frequently found in struggling businesses. Here are the most common financial reasons small businesses fail.
There's no plan. It's not uncommon to meet new small business owners who have a brilliant product idea, a well-developed marketing plan, a slick website, and not one thought given to their budget. We've already written on the tough financial questions to answer before starting your own business, but the importance of a solid financial bedrock cannot be overemphasized. A well-researched budget and fixed goals is the key to surviving that crucial first year in which most businesses go under. Great customer service and spot-on marketing are not enough to balance out shaky financials.
Speaking of customer service...
Poor credit management and pricing strategies are bad for everyone. No one craves popularity like an entrepreneur and, when your business's success is entwined with how well-liked you are, the urge to avoid offending anyone becomes even stronger. In the early days of a business, when there are only a few customers, there is a common impulse to let clients slide on late payments, or to offer frequent "friends and family" discounts. It's easy to justify this with the logic with the idea that you need to establish customer loyalty, and you can tighten the reins a bit when you have a solid customer base. There are a few reasons this doesn't work:
- Clients who don't pay on time aren't going to appreciate the slack you've given them in the past; they are going to resent the restrictions you enforce in the future.
- Likewise, your patrons who are just coming to you for the lowest price will quickly go elsewhere when your rates rise.
Lenient accounts receivable and cheap pricing might gain you a quick boost in early sales, but they are not a sustainable model. Delivering a product you can be proud of, at a price that is worth your hard work and can keep your business afloat (and actually requiring customers pay you that fair price) ensures that your customers the pleasure of patronizing your business for years to come. Because you have to remember...
Cash is king. Yes, it's a cliche, but that doesn't make it any less true. A great business model matters little if you run out of money before you can implement it. Managing cash flow is key to not just the health but the continued existence of your business. Here are a few of the most common cash pitfalls small businesses face:
1.) Insufficient capital. In all likelihood, your business will not be immediately profitable. So not only do you need enough cash to get your business started, but you need enough to allow yourself to operate at a loss for a while.
2.) Not having a large enough cash cushion. Think "Princess & the Pea" levels of padding. Regardless of how well you plan, the economy is unpredictable. Look to history for examples. No one expected the Boston Molasses flood which, in addition to the damage caused and lives lost, resulted in a nearly $11M settlement (in today's money) for the responsible company.
3.) Over-investing in fixed assets. It's great to plan for the long-term but, if you don't plan for the short-term as well, your business will not get a long-term. Sacrificing too much of your cash for something like manufacturing equipment (even if you're getting a great deal) can hurt you, as that is not a liquid asset and will be of no help to you in the event of an emergency (i.e. your factory flooding a major metropolis with 2.3M gallons of molasses). Think of it like a game of Monopoly; if you start building hotels too soon and suddenly need cash, you're stuck selling all your buildings back to the bank for half-price, and you know bankruptcy is right around the corner. Only, in real business, instead of losing yet another game to your annoying brother-in-law, you've lost your entire livelihood.
Expanding your business is the ultimate goal, but maintaining cash flow gives you the solid foundation you need to build upon.
80% of new businesses fail, but that means 20% succeed. To be that 1 out of 5, have a plan, know your value, and remain patient. Better to start small and grow something big than to start too big and dwindle away.
Marketing to Customers (Who Aren't You)
Growing your business is an exciting challenge. It's a time when you're ready to take on new customers, and you feel like you're ready for that "next step".
Of course, if you've been only working with a few close clients or through word-of-mouth, you may find it difficult marketing and networking with people outside your social circle. That's understandable; it's easier and more comfortable working with people with whom you have a lot in common.
However, diversity amongst customers is necessary to really expand your business, and is a great way to avoid having all your "eggs in one basket". But even mega corporations fall victim to major mistakes when it comes to marketing to a diverse audience. Here are some "do"s and "don't"s for reaching customers who are nothing like you.
Do your research.
There is an enduring (if slightly ridiculous) urban legend about General Motors expanding into international sales. The legend goes that attempts to market the Chevy Nova in South American countries met with failure because no va in Spanish means "doesn't go".
According to popular web aggregator of urban legends Snopes.com, this tale is a myth. And, upon further inspection, that makes sense. After all, even in the '70s, surely GM would have had someone fluent enough in Spanish to alert higher-ups about the possible translation issue? Besides, even if the Nova legend were true, we savvy businesspeople of the 21st century surely know better now.
Enter, Twitter. Though most Americans have a passing colloquial knowledge of Spanish now, in the digital era, technology has created a communications gap that spans generations instead of nationalities.
Now, there have too been too many Twitter scandals to ennumerate, but a recent marketing disaster illustrates just how bad it can be when a company tries to hitch onto a trend they haven't fully researched. When the #whyIstayed hashtag began trending, with former victims of domestic violence listing the reasons why they didn't immediately leave abusive partners, pizza company Digiorno tweeted, "#whyIstayed You had pizza."
Of course, Digiorno did not mean to make light of domestic abuse, and immediately issued an apology with the explanation that they hadn't read what the hashtag was about before posting. So failure to perform roughly 30 seconds of research resulted in a marketing disaster.
Don't be needlessly specific in your marketing.
Companies often seem to think they need to change their message in order to reach a new audience. Here they enter a minefield of marketing hazards, frequently falling prey to tropes and stereotypes, alienating the people whom they'd wished to include.
We have Bic to thank for the most hilarious trainwreck in unnecessarily-pointed marketing. When Bic came out with a line of "For Her" pens, they were flooded with sarcastic Amazon reviews. Customers rightly (and very snarkily) questioned why men and women would require distinct writing utensils. Bic's attempt at marketing toward a specific audience had unintentionally come across as condescending and ridiculous.
Whoever the customers you're trying to reach are, your company hasn't changed. So instead of changing the message about the benefits and values of your brand, change your marketing channels. Advertise in different channels, or across different platforms. If you use physical signage or flyers, try different locations. Just whatever you do...
Do be genuine.
Think back to your favorite high school teacher. You're probably thinking of someone who inspired you; someone who took an honest interest in your goals and success.
Now think back to that high school teacher who wanted desperately to be liked by their students. Who tried too hard to be cool by talking and acting like a teenage and, as a result, was respected by no one.
So frequently when companies try to market outside of their comfort zone, they follow the cringe-inducing pattern of the second example, awkwardly squeezing into ill-fitting jargon and trends. I will never forget a local tv ad, infamous in our area, for its inclusion of a senior citizen quoting, "Whoop, there it is!"
The ad was for a furniture retailer, and I doubt they attracted any new young customers through that awkward reference to an outdated rap song. They would have been better served by providing something relevant and of value, for instance, payment plans for customers without established credit.
When you look at it closely, marketing to a diverse set of customers really isn't that different from how you market to anyone. By keeping the focus on your brand and the value you provide, you can maintain integrity and avoid any awkward pitfalls.
Success Stories: The Client Who Wanted to Quit
We were once approached by someone with a small project. He was just interested in us "prettying up" his financials in preparation of selling his company. He was concerned that his business was not paying him the money he wanted to make, and had just received a new job offer for $60,000.
When pressed about it, he admitted that he wasn't terribly thrilled about this new job opportunity, but felt that he had to take it as, in his perspective, his only income from his current business was a $45,000 draw.
But when The Bookkeeper looked at his financials, we saw:
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Family's health insurance - $9,600
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Automotive payment - $9,120
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Auto, gas, insurance & repairs - $8,450
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Meals - $10,200
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Vacations - $7,700
When added to his draw, this amounted to a total monetary benefit $90,070.
This equates to $116,500 in total equivalent taxable income, instead of the $45,000 the client perceived.
When we met back with the client and illustrated to him how much he was actually making, he turned down the job offer, kept his business, and remained his own boss.