Facing Your Fears, at Your Pace
Entrepreneurs like to embrace an aura of fearlessness. However, humans possess the ability to fear because it is a useful emotion. Fear helped us avoid lightning, and sabretooth tigers, and that same instinct exists within us today, and can help us avoid modern dangers (like human predators).
The problem comes when the fear instinct attaches itself to something which cannot literally hurt us, but which may "only" carry the risk of psychological harm. (Even then, the harm is likely overstated in our minds.)
The instinct may exhibit itself as a fear of public speaking, or firing an employee, or submitting a sales proposal. These are all things that, in general, entrepreneurs need to be able to do. We need to be able to talk to strangers, or rid ourselves of problem staff, or ask clients to hire us. These things are necessary for the well-being of our business. Our fear instinct is actively working against our financial survival.
Of course, being entrepreneurs and, by nature, often people of extremes, our subculture has encouraged us to take a disproportionate response. We are told to "live fearlessly" and to "step outside our comfort zone". The narrative envisions the wallflower inventor wiping off their sweaty palms, calming their shaking voice, and pitching in front of the "Shark Tank" investors for millions of dollars.
I believe that our comfort zone exists for a reason. Often, within our comfort zone is where we work best and most efficiently, and it should be where we spend the majority of our workday: doing what we do best, and what we're comfortable with. The comfort zone is only a problem when it is restricting.
My proposal then is that, instead of leaving our comfort zone, we expand it.
Visualize your comfort zone not as a chalk-lined circle which you can easily step out of via sheer will, but as a protective bubble. If you gently push the walls of that bubble, you can stretch it in any direction which you choose, while still remaining safely inside.
For practical purposes, this means, for example, starting with a Toastmasters Club visit before you agree to speak in front of a large auditorium. If you've never had the displeasure of leading a termination meeting with a non-performing staff member, start with leading employee performance reviews. Practice your sales proposal on a friend before you present it to a prospective client.
Don't feel pressured to be "fearless"; just start making yourself more comfortable with small steps. You'll still reach your goal, but will avoid the pain and risks which your fear exists to protect you from.
I guess this is growing up.
I always find the end of May a bittersweet period, with its focus on graduations and plans for the fleeting summer. It's a time of celebrating the crossing of an arbitrary boundary we have created between "child" and "grown-up". And, with The Bookkeeper having just celebrated our sixth year in March, I've been thinking a lot about what growing up means for a company.
What I've found is that, much like how many adults will confess to still really not feeling like grown-ups, I think it's hard to pin down exactly what being "grown up" means for a company. However, there are a few things I keep coming back to.
1. You know who you are.
For most teens, a major source of anxiety is whether or not people like them. Often they are either chasing popularity, or trying to conspicuously prove they don't want it. Many new business owners start the same way. In the interest of making connections and gaining customers, they try to be everything to everyone. But comfort and maturity comes with knowing the work you like doing, what you do well, and focusing on being the best you can at that.
2. You choose who you surround yourself with.
When you're younger, your friendships, though dear, form generally through default. Your best friends are the kids in your class or neighborhood, or with whom you play on a team or share some activity. When you first start a company and enter the social world of small business, you run into the same people over-and-over at networking functions, morning meetings, etc. Over time, you identify which of those people with whom you feel a real connection, and develop some great friendships. But at the beginning, you'll make a lot of coffee appointments with people who don't have your best interests at heart. Sometimes you'll even know that going into the meeting, but you'll feel too "new" to shoot anyone down. As you grow up, you learn to recognize the people with whom you want to spend your precious time, and you won't feel hesitant to prioritize your calendar accordingly.
3. You're unashamed to let your childish side show.
Young people go through a period where they are ashamed to play and then, at some point in adulthood (if they're lucky), they rediscover the joy in acting like a kid. In your business, it's important to keep that playful joy and remember why you love working for yourself. (We didn't escape corporate to create corporate.) This doesn't mean being reckless or irresponsible; it just means letting go enough to embrace the fun that comes with being a business owner. This can be something as simple as realizing it's a beautiful day and you've got no afternoon meetings, so you leave the office to hit a few miles of trail (me). Or, it can be something as big as taking your entire team and all their families to the beach for a weekend (Craig). The point is that, without falling into the trap of anything as contrived as "team-building", you find ways to enjoy the work, and the flexibility the work gives you.
Of course, just like a graduating high school senior who thinks they're grown, I might have no idea what I'm talking about. When The Bookkeeper is 10 years old, or 20 years old, or, should I live to see it, 50 years old, I might look back and laugh at my own youthful naivete. All I can do for now is look forward to what I'll know then.
Living a Lie: The mistakes that make entrepreneurs go broke
"You have to spend money to make money."
"Maintain the image of success."
"Fake it 'til you make it."
There is an ideal of the successful entrepreneur as a jet-setting globetrotter, someone living high on their quickly-amassed profits earned through their brilliant business insight. We want the overnight success and rock star-status of Richard Branson. (Comparatively, Larry Ellison, who has over eight times the net worth of Branson, took a less meteoric path to wealth, and is relatively unheard of.)
The unfortunate side effect of our idolization of instant-millionaire entrepreneurs is that many have come to associate that glamorized lifestyle with proof of product value. In other words, "If I look and act successful, people will assume I know what I'm doing and hire me for my services!"
Here are the four most common ways entrepreneurs blow money on an image.
"I've gotta get my name out there."
Advertising is great. Advertising is essential. By all means, advertise! However...
Don't blow your budget on advertising. While seeing your company on a billboard or hearing your name on the radio is a great feeling, don't throw your money away on that illusion of the "big-time" without knowing for sure that you are going to get a good return on your investment. This is a mistake we have seen time and time again.
I once personally witnessed a (now closed) local small business flush away thousands of dollars on a radio ad which they were convinced would result in a flood of customers to their large weekend sale. They scheduled additional staff, opened early, and...no one showed. The ad was ineffective. In their frustration and desire to not have their money wasted, they played the ad on loop inside the store (i.e., the place where customers weren't), succeeding only in driving their employees crazy.
For the majority of small businesses, big-budget ad campaigns are not worth it in the early days. A local tv spot might make you feel like a celebrity (for better or for worse, given the quality of most local tv ads), but it cannot match the per-dollar effectiveness of a decent website, solid social media engagement, and positive word-of-mouth.
"I have to have a nice place to meet clients/customers."
The information age has transformed the world, and the way we do business in it. Meeting clients over coffee or lunch is a perfectly valid option, as is selling products online without a physical storefront. However, many entrepreneurs still seem to feel as if their business is less legitimate without a physical location.
Rent on offices and storefronts is a significant monthly expense, and that does not include furnishings, utilities, etc. Having a separate workplace to travel to on a daily basis has mental benefits in improving productivity, but it is not a cost to be considered lightly, nor is it a business essential nowadays. A gorgeous office with a big mahogany desk is a nice long-term goal, but it is not worth putting your company in the red.
"Yeah, I think I've got a place in the business for you."
We have written before on the dangers of expanding too early. However, this becomes doubly dangerous when owners begin creating positions for the sake of hiring friends and family. Middle management, and other positions which are not directly involved in revenue generation, are rarely necessary in a young company. It is good to be surrounded by people you like and trust, but, until your business has enough sustained profitability, employing people for positions you really can't support is like inviting people onto a raft with a hole in it. Everyone just starts sinking more quickly.
"The company's buying dinner tonight."
This is the big one and, really, the issue from which all the others stem. It appears that, since the invention of commerce, owners have fallen prey to the temptation to treat the company as a personal piggy bank, not realizing that they are essentially robbing themselves. Personal expenses being run through the company tanks profits, and can become risky from a tax perspective. (Inaccurately deducting too many things as "business expenses" sends up a red flag to the IRS.)
In some cases, a failed understanding of accounting reports results in owners bankrupting their own companies. For example, Owner's Draw does not show up on a Profit & Loss report. So, when an owner views the Profit & Loss report, they might see that the company is very profitable, and think everything is fine. Meanwhile, their overspending is bleeding the business's Retained Earnings dry. When an unexpected setback occurs, they suddenly realize they're out of money and the company goes belly up.
So what should you do?
Though stories of those who got rich quick are fun, it has to be accepted that, for the majority of us, success will be a longer journey. Just as we individuals must live within our means, so much our businesses function within their budgets. Slow and steady wins the race, a penny saved is a penny earned, etc.
"He worked hard and was patient, and eventually earned wealth and a comfortable lifestyle," might not be the most exciting story, but it beats that tired tale of the guy who tried to have it all right away and lost everything.
Stop Eating Frogs
Mark Twain famously said, “Eat a live frog first thing in the morning and nothing worse will happen to you the rest of the day.” In recent years this has become a particularly popular sentiment amongst entrepreneurs, used as a reminder to not procrastinate in completing disliked chores. Small business owners typically have to manage so many different aspects of their company, it's inevitable that there will be some tasks they dread.
For many, their "frog" is accounting.
But, here's the secret...for some people, frog is a delicacy.
We may be in the minority, but, at The Bookkeeper, accounting and finance aren't just something that pays the bills. We actually find a lot of it fun.
Here are a few of our services which, though business owners typically find distasteful, we really enjoy.
Developing Business ProceduresYou know the only thing more fun than reading a collections procedure manual? Writing a collections procedure manual. It combines several of the things we love, like research, technical writing, and custom-tailoring business practices to an individual company. What's not to love?
Of course, we've heard some people refer to research as "boring" or technical writing as "tedious". But we feel the same way about SEO optimization and, apparently, some people enjoy that.
Budgeting
Budgeting seems to have a negative connotation for a lot of people. A budget is seen as something constraining. But we think budgeting is awesome. You get to look at all your revenues and expenses, and figure out where you can save or earn more money. Who doesn't like having more money? A budget lets you make plans and take steps to achieve your goals. Not knowing your budget is like driving blindfolded. Maybe exciting for some, but too risky for us.
Debt Repayment Plans
A lot of people who are in a great deal of debt don't like to think about how much debt they're in. Of course, ignoring a problem doesn't make it go away.
For business owners overwhelmed by debt, figuring out a way to repay it all is too big a frog to eat. Much easier to just make the minimum payments and try not to think too hard about those rising balances. Fortunately, we love writing debt repayment plans.
Like so many problem, debt seems a lot bigger when you're in the middle of it. That's why we enjoy taking an objective, mathematical look at the problem, and coming up with a tangible, step-by-step solution to eliminating it. And it is so exciting to show someone how they can, often without even spending additional money, be debt-free and have savings built up in, frequently, as little as five years.
Profitability Analysis & Pricing Strategies
Some people may be put off from some aspects of accounting because of the math involved, particularly when it comes to things like calculating gross profit margins. We at The Bookkeeper are huge fans of math, perhaps because of its consistency and objectivity or, perhaps, as the great philosopher Cady Heron stated, "Because it's the same in every country." (Yes, both Mark Twain and "Mean Girls" quotes in one article. Small business accounting can be very culturally relevant.)
Math is especially useful when it comes to looking at which products or services provide higher revenues or greater returns, and where prices can be raised to improve profitability. Using a little bit of math and research to make more money, without having to sell more or perform more work? That's fun.
These are just a few of the services we provide for our clients, not just because our clients find them difficult or loathe doing them, but because we actually do find them interesting. Where the client sees a live frog, we see a perfectly seared filet mignon.
If there's some chore in your business which you simply despise completing on a daily basis, whether it's finance-related or something else, consider whether it's worth it to you to pay someone else to eat that frog.
You're in business for yourself, so why do something you hate?
5 Signs You're Ready to Hire an Accountant
Of course, assuming all goes well, most businesses reach a place where they do need to hire an accountant. The trick lies in knowing when you have gotten to that point.
We have identified five simple signs that your business is at that point. If you see yourself anywhere in the following list, it might be time for you to start searching for an accountant.
1. When you're presenting your business. This is an easy one. Everybody knows that you need pristine books whenever you're opening your business to inspection. Whether you are applying for a loan, interviewing a potential partner, or looking to sell, you want to showcase your business in the best possible light. Preparing your financial statements for close investigation entails a lot more than running a few reports. If accounting is not your area of expertise, this is really a time when you want to "leave it to the professionals".
2. Before you're in over your head. Like most other varieties of disaster, bookkeeping disasters are much easier to prevent than they are to fix.* If you're falling behind on your reconciliations, or guessing at balancing entries, you're probably already in worse shape than you realize. Don't kid yourself that you're going to figure it out as you go along, or do some extra studying in your spare time. You're a business owner - "spare time" is a myth. (You do still require sleep and social interaction, after all.)
*This is not to say we aren't willing to work with you to fix disasters after they happen; we just greatly prefer identifying problems before they become disasters.
3. When something seems..."off". There's an old joke (you may have heard it) that, "The definition of an accountant is, 'Someone who solves problems you didn't know you had in ways you don't understand.'" This somewhat feeds into entry #2 in that, by the time a bookkeeping layperson realizes something is wrong, it's probably very wrong.
If your cash flows don't seem to be accurately reflecting your revenue, or if your expenses are running unexpectedly high, it's good to get a second set of (highly-trained) eyes on your books, to identifying current and potential problems. In addition to the fact that identifying and correcting problems is core to an accountant's job description, it's also good to have an outsider who can take an objective look at your financials and identify issues you may have overlooked.
4. When it's taking time away from other things. Maybe you just need to hire a bookkeeper because your business is doing so well that your attention is required elsewhere. If accounting is not your forte, and doing it yourself is sucking time and energy away from areas of your business which better suit your skillset, outsource it. There is no logic in toiling away at something you dread when you could focus on growing your business. When your business needs you marketing, or training employees, or meeting with clients, and you can't because you're mucking through bookkeeping, hire an accountant.
5. When you're sick of it. Chances are, you didn't start your own business to work hard doing something you hate. If you loathe doing your bookkeeping, you are going to have a very hard time doing a good job at it. Distaste for a task compels the doer to procrastinate, or rush through it. In accounting, this can very quickly lead to huge errors (particularly if it's already not a subject of familiarity for you). If keeping your own books is making you miserable, then delegate it. After all, you're the boss for a reason.
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.