sparkler in front of american flag

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

american flagThe 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.

statue of libertyThe 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.


5 Things Business Owners Don't Realize They Need

We've all heard, "You don't know what you don't know."  This is particularly true in business, where it can be easy to develop tunnel vision and focus on your own expertise at the expense of the company.

Accepting the premise that you don't know what you don't know, we can extrapolate that you can't get what you don't realize you need.  Everyone knows they need sales avenues, customers, etc.  But there are other business essentials which, though not as well-known, are utterly necessary.  Here are five things businesses need (which you might not have thought of yet).

1. General Liability Insurance

It's no wonder that no one likes to think about getting insurance for their business.  Buying personal insurance, for your house, car, or health is enough of a hassle.  Getting quotes and comparing premiums and benefits for your business?  That's just piling on.

However, general liability insurance for your business is an absolute essential.  You can hope to never need it (I'm sure you're never planning to get sued) but, in the eventuality that you do, you will be grateful for it.  Depending on the nature of your business, Commercial Property Insurance might be a recommendation, as well.

2.  Workers' Compensation Coverage

Even more insurance!  Laws vary by state but, in North Carolina, you are required to carry Workers' Comp if you have three or more employees, or if you have at least one employee and your business works with radiation.  (If your business works with radiation, you'll definitely want those general liability and commercial property insurance policies, as well.)

Many employers try to avoid purchasing workers' compensation policies, but it is not a wise choice.  Not carrying coverage opens you up to charges of fraud, huge fines and, in some cases, even jail time.

Now let's move away from insurance and segue into something else that can protect you from being sued by employees or the government...

3.  A Good Payroll Provider

Unless your business is large enough for an in-house full-scale accounting department (in which case, we're flattered you're reading our blog), you need to be outsourcing your payroll.  Running payroll manually is intensely time-consuming, and very risky.  If you do not have a payroll expert on your staff, you are taking a big gamble with your tax withholdings and filings.  According to the IRS, 40% or small businesses pay an average of $845 per year for late or incorrect filings or payments.  (That's over a third of small businesses.)

Furthermore, outsourced payroll services have become ridiculously inexpensive and painless.  We at The Bookkeeper are huge fans of Gusto Payroll, and frequently recommend them to clients.  Their customer service is excellent, the interface is user-friendly (even for avowed Luddites), and packages start at less than $40 a month.  And Gusto is one of many simple, affordable payroll solutions.

Please, do not take on the headache and risk of penalities associated with payroll, without researching your provider options first.

And while we're on the subject of taxes...

4.  Sales & Use Tax

Who has to file sales and use tax?  According to the North Carolina Department of Revenue, "Every person engaged in the business of selling tangible personal property at retail, selling certain digital property at retail, renting or leasing taxable tangible personal property in this State, operating a laundry, dry cleaning plant or similar business, or operating a hotel, motel or similar business in this State must register with the Department and obtain a Certificate of Registration. This includes a person who sells tangible personal property and certain digital property, or provides a taxable service at a specialty market, flea market, fair, festival, sporting event, or another event or function."

Needless to say, there are many, many people who should be paying sales tax who aren't.  So if you are selling a tangible good, even if it's just from a booth at the fairgrounds on Saturdays, you should be filing sales and use tax.  And if you do not know to do so, contact someone who does.  If you are caught not paying sales tax, you may be assessed penaltyand interest.  The risk is simply not worth it.

Now that we've bummed everyone else by talking about insurance and taxes for four entries, let's move on to what's surely going to be the most controversial item on this list...

5.  A Website

In 2016, in order to maintain credibility, your business needs a website.  (No, a Facebook page doesn't count, though it's better than no web presence at all.)  A website (preferably with a unique, personally-owned URL, and not through a "freebie" site-building service) shows your customers and potential customers that you a legitimate, solid company.  Your website is the first place people will go to look for information about your business.  Not having any sort of web presence at all can read as very suspicious.

Furthermore, you are doing yourself a huge marketing disservice by not having a website.  Web marketing provides the absolute most "bang for your buck" out of any form of advertising.  Even if you have a successful business without a website, you could be reaching so many more potential customers and be more available to current customers.

Are there any other little-known business essentials you would add to this list?  Let us know, and we'll amend accordingly.


5 Signs You're Ready to Hire an Accountant

 As much as it pains us to admit it, not every small business needs an accountant.  In the early days of a start-up, when there are not a lot of entries to be made and cash flow is still in a vulnerable state, it's not unwise for owners to take on the bookkeeping duties themselves and save some money.

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:

  1. Would you hire you?
  2. Would you write you a letter of recommendation?
  3. 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.


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:

  1. 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.
  2. 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.