Rebellion vs. Revolution
My favorite retelling of the Revolutionary War comes from the musical “Hamilton”. In it, the titular main character bravely fights for independence, but also muses about what freedom will mean for the colonies, and how they will structure their country and face their economic woes. After serving under General Washington, he goes on to become the first Secretary of the Treasury and to put into place systems and structures which are still integral parts of our government today.
I believe that this can parallel the experience many people go through when they leave employment to found their own companies. There are those who fight valiantly for independence, but fail to plan for a replacement system. There are others who are more cautious and plan so carefully that they never take that first step to leave the security of their current situation. (You could say they “throw away their shot”.) Success is found by those who can both dare to leave the harbor, but who also know where they’re sailing.
Rebellion vs. Revolution
The word “rebellion” brings to mind images of sullen teenagers, instinctively acting out against their status quo. For a disgruntled employee dreaming of business ownership, it can be chafing against inane workplace rules, or simply longing to leave the 9 to 5. However, it’s not enough to know you are displeased with your current situation; you have to have a vision of what you want to replace it with.
We’ve met plenty of people whom have a lofty dream of how they envision business ownership. (For some disastrous examples, see our article “Living a Lie: The Mistakes that Make Entrepreneurs Go Broke”.) We even had one would-be business owner tell us, “Oh, I don’t want to work. I’m going to hire other people to do the work, and then I’ll just travel or something.” Needless to say, that plan didn’t work out.
The successful businesses are those whose owners have the spirit of revolution. It’s not just that they’re unhappy with their lot, but they clearly see how it, and their own small slice of their particular industry, could be better. These are the people who desire to “build a better mousetrap” with their company, and who aren’t afraid to put in the work to do so. We have successful clients who have invented new products or medical processes, but we also have those who have succeeded by coming up with ideas for local entertainment, or who have simply found a way to be the most effective attorney, or marketer, or even HVAC person in their field. And none of them are afraid of work; in fact, the most successful all embody attitudes of continuous improvement, both in themselves and in their companies.
If this 4th of July you find yourself pondering the plunge toward business ownership, examine where that desire is coming from. If you’re ready to start a revolution in your industry and in your life, build a plan for where you hope that path takes you, and a vision of what it looks like when you’ll get there.
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?
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.
How the Service Industry Prepares You for Entrepreneurship
Per the Department of Labor's Bureau of Labor Statistics, service industry jobs in America outnumber manufacturing jobs almost 10-to-1. In 2012, retail and hospitality employees numbered 28.6 million, with that number projected to grow to 31 million (a 10.7% increase) by 2022. Currently, almost 1-in-10 Americans work a service-based job.
With so many Americans in the service industry, it stands to reason that many of the entrepreneurs of the future are the retail and hospitality workers of today. All of us at The Bookkeeper have at one point in our lives bussed tables or ran a cash register. That's how we know there are several professional skills you develop in the service industry that better prepare you for life as an entrepreneur.
Service industry employees work with a sense of urgency. Few businesses are more fast-paced than a restaurant. Everyone, from the front-of-house to the kitchen, knows that tasks have to be completed immediately. The slightest delay in taking orders or prepping an entree can result in backlogs, unhappy customers, and decreased revenues. If you get anything resembling "down-time", you hustle to complete side work and other prep that can help you when you get busy again.
How can you make it work in entrepreneurship? Former service industry employees know how to keep busy. You do jobs as they come in, without putting off the more difficult or frustrating tasks. You are great at maximizing your free time, answering emails or promoting your business on social media in between meetings and assignments. Clients are often impressed at how quickly you complete projects and respond to their needs.
Working with urgency makes you better at prioritization. Three days before Christmas, the store is packed, the registers are backed up, three customers are waiting for help finding items, another customer is on phone line 1 while your district manager is waiting on line 2. What do you do first?
For someone who has never worked retail, this is the sort of nightmare scenario which makes the service industry seem all the more undesirable. For those of us who have been in this sort of situation, this hypothetical has an easy answer: Help the customers in the store first, then the customer on the phone, get back to the DM when you can. There's no way to please everyone right then, so deal with the immediate areas of need first.
How can you make it work in entrepreneurship? You learn what fires need to be put out immediately and which ones can smoke a little while longer. You have an innate knack for putting your to-do list in the perfect order so you can do all you need to while keeping everyone as happy as possible.
You develop customer service skills and a thick skin simultaneously. It is no secret that employees in the service industry are often treated terribly by customers. Service industry workers are frequently (sometimes daily) required to withstand being verbally berated, not only without retaliating, but smiling throughout and heartily apologizing afterward (regardless of whether they personally have done anything wrong). Over time, you get better at both anticipating customers' needs and moods (thus avoiding such tirades) and letting verbal abuse roll off your back.
How can you make it work in entrepreneurship? Many small business owners have an incident or two where they face unwarranted criticism, whether it be an unfair Yelp review or bad word-of-mouth from a client fired for non-payment. Though the initial desire may be to fire back at whoever is spreading lies and gossip about you, this rarely works out well. (See the Amy's Baking Company fiasco.)
The better (though less initially satisfying) option is to prove your disparagers wrong with your continued professionalism and exceptional customer service. By refusing to let others drag you down into the muck, you keep your company's reputation so sterling that no mud slung can stick to it.
You become prepared for anything. Anyone who has worked in the service industry for even a few months has at least one crazy story, something virtually unbelievable. I have several, but my favorite remains the customer who became disgruntled when she spilled her alcoholic beverage.
This was not in a restaurant. It was in a dog grooming salon.
She spilled her drink because she was carrying it in a regular, open-topped glass. Loose in her purse.
Again, this was an adult woman, and not a toddler. Concepts like "liquid" and "gravity" should not have been a mystery to her, yet she was shocked and infuriated (at me) that her mojito had tipped over and was soaking through the bottom of her very expensive shoulder bag.
How can you make it work in entrepreneurship? Once you have had the experience of fetching towels to help a woman clean rum out of the bottom of a Dolce & Gabbana bag, and have apologized because she didn't believe the towels looked clean enough, few things can throw you off your game anymore. Deadlines being moved up or employee sick days just become minor hiccups, instead of major obstacles, and you develop an air of unflappability that instills confidence in clients. Remaining composed in the face of extraordinary circumstances is a hallmark of a great entrepreneur, and surviving the service industry lets you enter the game with that skill already equipped.
How to watch the NCAA tournament when you're supposed to be working.
The NCAA tournament starts this week and, with it, millions of workers desiring a way to watch the daytime games. Since most businesses frown on calling out sick with March Madness, many employees have gotten creative in devising schemes for watching the first few rounds of the tournament.
Today we're going to examine some of the best and worst ways to watch the games when you're supposed to be working.
C
all out sick. Your boss knows you're not sick. This almost never works. The only way to have a shot at this one is to start planning in advance. A few coughs and sneezes at work the Friday before, come in Monday looking tired and haggard, sucking on cough drops and clutching tissues and, by Tuesday, be acting so miserable that everyone starts suggesting you just go home. "Tough it out" on Tuesday, come in like a zombie Wednesday morning, and beg off sick to go home at lunch. Since everyone will have seen that you're "sick" over the course of nearly a week, it will be far more believable when you need to take Thursday and Friday off.
The major downside here is that you are relegated to watching the games at home, lest anyone sees you watching the games with buddies at a sports bar while you're supposed to be recuperating. (Though should you see your co-workers skipping work to watch basketball, mutual blackmail might be a possibility.)
"Team-building" event. I actually pulled this off once at an old job. My co-workers and I were all big ACC fans, and we really didn't want to miss any of the games. The boss was new and not much of a basketball fan.
I convinced the new boss that a tournament viewing party would be a great way to bring everyone together and help hi
m get to know the employees. The way I convinced him was by getting him to think it was his idea. Again, this is an option that requires a great deal of prior planning. However, an office party has the benefit of great food (everyone brings potluck), comfortable accomodations (the nice conference room chairs) and superior viewing (the game streamed to the big projector).
Also, if you pull this off, you will be a hero to your co-workers.
Be the boss. Yet another one that can't be arranged on short notice (unless you feel like dramatically quitting your job). However, if you are an entrepreneur or small business owner, congratulations! You don't need to ask anyone's permission to watch basketball. Give yourself the afternoon off, and go catch Xavier vs. Ole Miss. You've earned it.
Write a blog article loosely relating the NCAA tournament to business. You're not slacking off and watching basketball. You are doing serious research to help your company socially connect to customers in a real and relevant way through targeted marketing.
Now, if you'll excuse me, I need to go "research" whether Notre Dame is still leading Northeastern.
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.
Maintaining Work/Life Balance (When You Work From Home)
With the increase of mobile technology and the high cost of office rentals, it is increasingly common for small business owners to work from home. And since they’re their own bosses, those entrepreneurs can get left out of the discussion of how to achieve work-life balance. After all, how do you “get away from work” when work is where you live? In this article, we’ll discuss some steps that can be taken to maintain work-life balance when working from home.
1. Have a separate space.
If possible, keep one room in your home dedicated exclusively to work. Don’t do work anywhere else in the house, and don’t do leisure in that room. It’s too easy to take a break from playing a game or watching a show to “answer a few work emails real quick”. (Likewise, it’s too easy to check on Facebook mid-conference call.) If you make a space just for working, it helps you to fully commit to what you are supposed to be doing at the time, whether that is working or relaxing.
On top of the mental and emotional benefits of having a dedicated workspace, there is a financial benefit. A home office deduction can be a huge boon at tax time and, per the IRS, is defined as, “Exclusive and regular use as the main place in which you conduct your business...”
Of course, not everyone will have the option of having an entirely separate room for a home office. If that’s the case for you, try to find a way to differentiate your “workspace” from your “living space”. Make sure that, when you’re working, your area is free of distractions. If you normally listen to Top 40, turn the radio to classical. You can even have a picture or two you set up on your desk, as though you were working at an office away from home. Just find a way, personal to you, to clarify in your mind that you’re currently “at work”.
2. Have set work hours…
Now, this isn’t to say that you’re required to work a standard 9-5. Many of us go into business for ourselves for the freedom and flexibility that comes along with being your own boss. However, not having a particular time set specifically aside for work tasks can also make it easy to procrastinate. Find a regular time, maybe daily or once a week, when you look at your schedule and map out exactly when you’re going to work on specific work tasks. And stick to it.
3. …And set leisure hours.
Again, this doesn’t mean you ignore a work emergency because you refuse to do business after 6. However, it is imperative that you find times when you focus your energies on something besides work (even if it’s just to focus on a tv show you really enjoy). Living and breathing work 24/7 is a good way to burn yourself out, and to forget what you enjoyed about your business in the first place.
4. Have someone keeping you accountable.
Everything in life is easier with a partner. Even if you are the sole employee of your company, you should have a friend or mentor who can give you the kick in the butt you need when you’re lacking motivation. (Of course, the various benefits of having a mentor are a different article for a different day.) Likewise, in your personal life, you need a friend who can make plans with you to have fun and relax, and who won’t let you off the hook if you try to bail for work reasons. Find a friend who will hold you to dinner plans, and who will confiscate your cellphone if necessary. (No work calls or emails at the table!)
Most of all, remember that, when you own your own business, you are in charge. It’s doubtful that anyone starts a business with the dream of working 60+ hours a week and never having a night out again. Remember what you’re working for, and go easy on yourself every once in a while. Work to live; don’t live to work.