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.
"How to Run Your Small Business Like a Large Company" by Dave Baldwin
We've all seen them, those entrepreneurs with the seeming ability to work magic. We’ve all heard the legends about the founders of multimillion-dollar empires who started with a $1,000 loan in a basement. These stories seem far removed from reality, especially for business owners who grind away at building their dreams, only to hit brick wall after brick wall years or decades into building a small business. We hear this question from time to time: how do the successful ones do it? What’s their secret? What is everyone else missing?
There’s good news and bad news. Bad news first: there is no silver bullet, no “big reveal” and no shortcut. In reality, successful startups are years in the making, and there’s no substitute for persistence and discipline. The good news: most small businesses are, indeed, missing a key ingredient, and when you add that ingredient, real success begins to feel achievable, often for the first time in the life of a fledgling business.
Here’s the big secret: build your company like you’re going to sell it.
If you don’t want to sell your business, that’s fine. Aside from the fact that you will have to retire at some point, there is an imperative and critical need to prepare every small business for the possibility of eventual sale, regardless of your exit strategy. There is a fundamental shift in the mindset and daily habits of an entrepreneur who is building a business to sell -- as contrasted with the business owner with the goal of surviving and paying the bills. This key distinction is the single difference between businesses that grow and businesses that stay small.
What if I don’t have the money?
Spending money you don’t have is not necessary to build and grow a healthy business. Some types of businesses require significant startup funding, such as real estate developers and technology companies, but a budding entrepreneur with no startup cash can bootstrap a new company from scratch. To set up your company for long-term success, three roles are needed from the outset: human resources, legal and accounting. You can think of these as “seats” to fill in your organization chart.
These are not “someday” considerations to start thinking about when a company is “‘big enough to afford that.” They are needed immediately - if you are serious about building a great company.
Human Resources
No small business can afford an HR director, but neither can a small business afford to hire the wrong people -- or hire the right people incorrectly. In the beginning, the owner wears all of the hats, but as soon as revenue starts to flow, a sense of being overwhelmed can quickly set in. This is the first area where small businesses miss the mark, by hiring whomever they can find quickly and cheaply. Maybe it’s the next-door neighbor’s kid, or a nephew who just graduated from college and is working a fast-food job. The results predictably range from “tolerable” to “disaster.” Outsourced human resources services are available for every stage of a growing business, and it’s never too early to start thinking about this.
Legal
You might be great at what you do, but if you can’t scale it, your business will never get off the ground.
IP development is the cornerstone of building a scalable business. Every big company became big because they built something proprietary. That begins with your processes and formulas, everything unique about the way your company does what it does. Without IP, a business isn’t a business. It’s a self-employed individual working a collection of part-time jobs. Every business needs an attorney to legally protect the lifeblood of their enterprise. Not to mention the number of legal risks that can put a small company out of business in one fell swoop if necessary legal protection is missing.
Business attorneys used to be cost-prohibitive for small businesses, but not any more. Over the last decade, legal services have sprung up, catering to the needs of startup businesses with lean budgets. And we’re not talking about Legal Zoom here. You need the expertise of an attorney to ask the questions you don’t know to ask.
Accounting
At the risk of sounding shamelessly self-promoting, you can’t build a business without an accounting system, and there’s a lot more to it than buying a Quickbooks subscription and connecting your bank accounts. Businesses that stay small usually think about bookkeeping once a year, when taxes are due. But accounting is about much more than just taxes. It’s about having a clear picture of your current business reality. You can’t make good decisions based on vague data, feelings or guesswork. Sadly, that’s exactly what a lot of business owners do, whether they admit it or not.
There are three distinct types of accounting: tax accounting, financial accounting, and operational or managerial accounting.
Tax Accounting
Tax accounting is what most are familiar with: planning for taxes, minimizing tax liability, staying compliant with tax laws, and ensuring there are no ugly surprises at the end of the year. Financial accounting is reporting data to outside entities, such as prospective investors or lenders who need to gauge the viability of your business. Current investors typically require quarterly reports to keep a pulse on the health of a business. In these cases, you want to show a limited view of your financials. Operational or managerial accounting is critical for the day-to-day management of a business. It consists of many different components, and here is a bird’s eye view of a few areas common to every type of business.
Key Performance Indicators (KPIs), when they are designed correctly, provide an objective real-time view of how well a business is performing and can also serve as leading signals of trouble brewing. For instance, if sales increase by 20% from one quarter to the next, but payroll expenses by increase by 50% during that same period, that might indicate that efficiency has dropped or that the business has over-hired. But there’s a further complication: how does one measure sales revenue? That question is more complicated than it might seem, and it relates to an important concept called “revenue recognition.”
Revenue Recognition
Revenue recognition is an important concept for a business owner to understand. A business is said to ”recognize” revenue at certain times. For instance, a business might “recognize” revenue when it makes a sale and sends the invoice (accrual accounting), or it might “recognize” revenue when it collects the actual payment (cash accounting). Taxes can be filed using either method, but a business has to pick one and stick with it. For management purposes, however, accounting software packages can produce reports using either method, and both views are useful for different types of decisions.
Further complicating matters, many businesses do not have useful ways of looking at their expenses. For instance, if you operate a service-based business, do you know how much it costs you to deliver a service? Is that cost broken down into labor and materials costs? If you purchase supplies that are shared between different jobs, do you have an accurate view of how much is used from one job to the next? (Hint: if your answer is “I have a good feel for it,” then we as accountants would take that as a “no.”) Expenses are “recognized” just like revenue. Cash- and accrual-basis reports are often both necessary to view a full picture of where your business is making money (or losing money).
We’ve really just scratched the surface here, but the basic idea is that you can (and MUST) learn all of these areas of management if you want to build a business that grows and thrives. If it sounds like a lot of work, that’s because it is! But the concepts in this article are examples of the areas where successful business owners educate themselves continually.
No matter how brilliant you are in your craft, no matter how delicious a cupcake you can bake, you cannot build an enduring business unless you become literate and competent in the core disciplines of business management. There is no substitute, no other option and no shortcut.
Sound like too much? It’s really not that bad; we promise. Give us a call if you’d like to hop on the phone and discuss what this means for your business (or business idea).
Dave Baldwin is an integral part of The Bookkeeper staff experienced in marketing and management consulting. His own entrepreneurial journey was spurred on by a desire to help introverted entrepreneurs succeed in business.