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.
Tough Financial Questions to Answer Before Starting Your Own Business
Almost everyone, at some point in their lives, entertains the idea of starting their own business. For most it's a purely speculative exercise, a fun "What if...?" daydream. But for those who start seriously contemplating entrepreneurship, there are a lot of tough questions to consider.
Now, there are hundreds of articles out there with titles like "Do you have the mind of an entrepreneur?" and "Is starting your own business right for you?" This isn't like that. There's no personality quiz here, nor checklist of character traits. This is because...
A.) Those articles frequently aren't very realistic. Personality quizzes don't work because not all businesses require the same personality. Checklists don't work because everyone thinks they are "reliable" or "able to think outside the box".
B.) We're numbers people. Numbers don't lie, and neither do we. So we're going to skip the fluff and go straight to the tough financial questions you need answered before you start your own business.
What is your break-even point?
Of course, there are lots of accounting questions regarding business entities, expenses, profit-margins, etc., but this is really the big one. How much do you need in sales before you are making money instead of losing it?
You'd be surprised at how many people we meet who do not have this question answered, though almost everything hinges on it. It really is necessary to know your break-even point because it ties your financials together and paints a clear goal. Because, isolated from each other, numbers can be deceiving. For instance, $100,000 in sales may look like a great success, until you compare it against $150,000 in expenses. Likewise, even if you keep expenses low, if your sales are lower, you are still operating at a loss. Knowing your break-even point lets you know exactly what your target is.
How l
ong can you run in the red?
In a perfect world, every business would be instantly profitable. Obviously, we don't live in a perfect world. And, in our imperfect world, most new businesses take some time to hit their stride.
Early failure is, in some ways, a natural part of a new business. When you're the new leader of a new company, it's a bit like going from playing a sport to coaching it. Even if you're a professional, the strategies that worked for you as an individual might not work on a larger scale, and you have additional responsibilities piled on you as well. Initial setbacks are to be expected.
"The most important thing for entrepreneurs is not to be put off by failure." - Sir Richard Branson (Source.)
That's not to say everything is doom and gloom, however. Many new businesses do go on to long-term success. However, new businesses owners have to be realistic and be prepared to deal with and mitigate some degree of failure early on.
This is why it is so very important to know how long your company can run at a loss. Too many new business owners, clouded by the dream of their assured success, expand too aggressively and wake up one day to find their capital is gone. Knowing in advance, "I can operate at x loss for y months," can help you set goals, know when to cut back and, in general, prepare for the unexpected. (And with a new business, the unexpected is inevitable.)
What
's your exit strategy?
In fact, according to data strategist Thomas Thurston, somewhere between 70%-80% new small businesses fail within their first 10 years. (Source.) That leaves, at best, a long-term success rate of less than a third. And, according to the SBA (Small Business Administration), 552,600 new businesses opened in 2009, but, that same year, 660,900 closed. (Source.)
Obviously, losing a business is hard, but not being prepared can make it even harder. For example, something as seemingly simple as how you register your business entity can affect whether your personal assets are at risk in the event of a closure.
Now, hang on, because we're getting to the bright side. Maybe you're going to leave your business because it's so successful. You want to cash-in, leave behind the stress of running the show, and go retire to an island. Well, you still need an exit strategy for that. How you set your business up in the early days can affect how much reward you get for the years of work and risk you invested in it.
In fact, we frequently advise our clients to always, regardless of their long-term plans, keep their books as clean as though they were planning on selling the company. As we mentioned in the previous point, life, inevitably, happens, but the unexpected is much easier to weather with pristine financials.
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.
The "First-Date Effect": Are you treating new clients like a long-term relationship, or a one-night stand?
Business partnerships, like any other relationship, can be very exciting in the beginning. You meet someone new, and the two of you click. You're on the same page, you have the same vision...You just get one another. Contracts are signed, meetings are arranged and, for a while, the two of you work happily in sync.
Then, something happens. Maybe they're your financial planner, and they stop answering your emails in a timely manner. Or your IT services provider shows up to your office dressed a bit more casually than you're comfortable with. You ask your marketing representative whether you should re-design your logo or leave it as is and they respond with, "Oh, whatever you think is probably fine."
When you first met, you fell in love with their customer service. But now? The thrill is gone, baby.
You don't like being treated like a sure thing, so you know your customers don't either. Here are some ways you can keep the spark alive with your clients so you know they'll stay loyal to your business.
Stay in communication.
Let's say you go out to dinner on a romantic date. You have a nice time, and think the other person did, too. You call them the next day and leave a voicemail thanking them and asking if they'd like to go out again sometime.
Then you wait. And wait. Three days later, you just get a text reading, "sure sounds good".
You probably wouldn't be too impressed. You definitely would feel like they were not as invested in the relationship as you. It's the same way customers feel if you don't respond to communications from them in a timely and appropriate manner. Some general rules:
1.) Respond via an appropriate medium. In other words, unless specifically indicated in the voicemail, don't respond to a phone call with a text or email. If they consider an issue important enough to warrant a phone call, and you shoot back with a casual text or email, it implies that the problem isn't as important to you as it is to them.
2.) Be timely. Don't leave someone hanging, waiting for your response. Many business etiquette guides advise responding within 24 hours to all communications. Faster is even better. If you are trading emails with a client as the two of you collaborate on a project, don't just log off at 5:00 and drop them until the next afternoon. If you have to attend to other business (even if that "business" is really just "having a personal life"), let them know that you have to run for a bit, and then resume communication with them as soon as you can the next morning.
3.) Be professional. This shouldn't have to be said but, sadly, it still does. No matter how friendly your client is, no matter how much you like each other, your communication still has to be professional. Every email doesn't have to include an attached notarized PDF copy in triplicate, but it does need to be free of spelling and grammatical errors. Taking the time to make sure your communications are professional is a sign of respect for your client.
While we are on the subject of professionalism...
Stay attractive.
One of the cliches of romantic comedies is a couple experiencing tension because of complacency in the relationship. At the beginning of the movie, when they fall in love, they go out to five-star restaurants in formal wear. The second act features them eating take-out on the couch in sweats.
When your customer service starts slipping, it is the metaphorical equivalent of you showing up to the client site, wearing sweat pants and eating pizza. (Also, please don't literally show up wearing sweat pants and eating pizza, either.) If you don't provide the same quality of service you did at the beginning, it makes your customer feel taken-for-granted, and like you misled them with false advertising.
Your business should always strive to grow and improve, and your customer service along with that. If you want to really shock your customers, surprise them by providing exceptional service, even above-and-beyond the high level they've come to expect from you.
Stay 
interested.
Nothing makes people like you more than when you make them feel attractive. Just like you try to remember your significant other's birthday or favorite dessert, your clients will be flattered if you can remember the intimate details of their business. You do not want your client to have to remind you of items discussed at prior meetings, or current issues being faced. No matter the size of the company or how much income they bring you, you want each client to feel like they are at the forefront of your mind.
There are small things you can do to make your client feel significant. This could be something as small as tweeting them a relevant news article, or as large as arranging a referral meeting to help them earn new business. By going above-and-beyond the minimum which is required of you, you can help ensure a lasting client relationship to profit you both for the long-term.