29 September 2009

If it were easy...

This is going to be short and sweet.

If it were easy, everyone would do it. As a business owner or potential business owner the first thing you need to tell yourself is that it is not going to be easy.

Everyone sees the glamourous side of being an entrepreneur but I want to give you a reality check. It is not easy because if it were, everyone would be the boss. Being the boss is all about making the tough decisions, sacrificing your time and resources and most importantly being in it for the long haul. You will not see immediate success, you will need a lot of planning and it may take years for the reality of your business to reach your vision but you have to stay the course and keep telling yourself – if it were easy, everyone would be doing what I am doing. Because it is not easy, I am stepping out on faith, relying on my plan and committed to doing the work to achieve success I have always dreamed of.

31 July 2009

Time for Business

In small towns across the country, something very interesting has been happening with businesses. In my town particularly, the businesses close at noon on Wednesday. I have been trying to figure out where everyone goes after noon on Wednesday.

Since I am conducting a seminar or meeting with clients, I wonder if there are secret meetings going on around town that I am missing. This phenomenon has taken some getting used to because I'm not the type of girl to wear a watch or closely track the days of the week. My internal alarm clock goes off on Fridays signaling the beginning of the weekend and Mondays letting me to get up just a bit earlier. However, I'm still having trouble setting my Wednesday clock to remind me to get my errands run before noon. I'm also struggling a bit with businesses not being open on Saturday.

Now this is really odd...there is a retail shop that is only open on the 1st and 3rd Friday and Saturday of each month. I can not imagine what their inventory turnover ratio looks like because they only have about 48 out of 365 days to sell their merchandise and they are relying on people to 1) remember the dates that they are open and 2) to have a need during those times. That seems like a huge gamble. Imagine them being open at least five days per week and hiring someone to manage the establishment during that time, if they are unavailable. I can not image that the costs would outweigh the potential revenue. If so why have the business at all?

At one point while operating my own business, I considered opening an office. I consulted with some people that I trusted and my dad brought to my attention the consequences of maintaining an office location. I enjoy traveling and having time off, however with an office space I would have to be open when people want to do business with me not when I want to be at work. There is a serious difference in these methodologies of operating.

Being open when people want to do business with you is like downtown shops being open on the weekends. If you rely primarily on locals for business then you have to be available when they are available which is generally when they get off work – evenings and weekends. You may not want to stay open late every night but you should consider staying open late one night per week for those working shoppers that can't make it to your location during banker's hours.

Also, you have to consider what closing shop at noon on Saturday is doing for your small business. Not everyone is early to rise and shop on the weekends. If you don't want to man the fort, consider employing some of our talented youth to assist you. Although we all enjoy time off, you also need to mind your business and think about when your ideal customer is most likely to come looking for your product.

For example, if you have a breakfast shop but you hate getting up early, you can't open later and assume that your customers are going to change their schedule to fit yours. They won't. They will go to the competition which is more than likely going to be a large corporation with extended hours. Sometimes we set ourselves up to fail against the larger companies. Many people want to shop with local businesses but you have to make sure that your hours, service and product are competitive.

Think about what a difference it will make in your sales and customer service if your business hours were focused around your target market instead of your personal schedule. I know it may suck, but there can be some trade off. If you notice that no one shops in your store before noon, then considering opening later so that you can stay open later. You may have the best product in town but if you are not open to show if off...no one will ever know.

18 July 2009

Your (Business) Dream Team

Every small business owner needs a team to help them achieve success. It is the common belief of many business owners that they can do it all. This belief is most commonly held because they think that it is cheaper for them to do it all rather than employ a team of professionals to help.

This method of starting or running a business may be cheaper in the short term but I guarantee it will cause some problems in the long run. Let me share a couple of issues that I have found while working with my clients:
  • A business obtained a tax identification number as an LLC but never filed articles of incorporation with their county and state which means that they were not a corporation.
  • A business owner with a large amount of liability choose a sole proprietor legal structure which left them open to excess taxes as well as unnecessary personal liability for the business.
  • A business wanting to attain a business loan was unable to do so because they had no kept accurate financial records for the past three years.

There are so many more examples that I can cite, however I am going to share the five people that you MUST have on your team.

  1. A business consultant: Yes, this may seem like a shameless plug for my services but having a business consultant to guide you through starting and running your business will save you so much legwork. We are able to provide a wealth of information and resources while helping you to think through decisions. If you can not afford to hire a business consultant, there are not for profits like Women Business Centers, SCORE and Small Business Development Centers that provide low cost or no cost sessions to assist you. No matter which stage you are in your business, a business consultant is an invaluable resource.
  2. A certified public accountant (CPA): You may be used to doing your taxes yourself and I am sure that you have done a wonderful job, if you are not in arrears. However, you need to consult with a CPA when you begin considering starting a business and quarterly once the business is established. Using a software program like Quick Books will allow you to manage your day to day accounts, revenues and expenses. It will also allow you to print reports to take to your CPA for review. Many CPA's will bill per hour so being prepared will save you time which will save you money. Also, the more knowledgeable you are about your business finances, the less likely you will be taken advantage of. Warning: don't let the fear of being taken advantage of stop you from working with a CPA.
  3. A business attorney: Find someone who specializes in working with businesses and preferably your type of business. If you are starting an entertainment company then you need an entertainment lawyer. If you will be patenting a product then you need someone who works with patents. Don't assume because they are an attorney that they will be able to help with your needs. You need an attorney to review legal documents, advise on your business legal structure, and assist with succession planning. You should never sign a legal document without having your attorney review it. If the document was not designed to produce a favorable outcome for you, you are not entitled to bail on the agreement because you didn't understand what you were signing. Knowledge is power. Also, if you need to have a legal document created. Search online for the basic document and have your attorney review it and make it compliant for your business. Attorneys also charge per hour and you would be amazed at how many hours it can take them to create a document versus reviewing it.
  4. Banker/financial advisor: Many banks have financial advisers on staff while some people choose to have a financial advisor not employed by their bank. Regardless which option you choose, you need a banker and a financial advisor. It is imperative that you have a good relationship with your banker. You should inquire whether they provide SBA financing, in case you need a SBA loan now or in the future. You should also be aware of the business banking services that they provide so that you can make sure your money is working as hard as you are. Your financial advisor can help you create a benefit package for yourself and/or for your employees. Not all benefit packages require employer contributions. A financial advisor can help you plan for the future of your business and it's finances.
  5. Marketing/ public relations: This is one of the most overlooked team members because everyone assumes that they can do it themselves. However, the success of your business is largely dependant on the image of your business. You can have a great product or service but if no one knows about it then you are not going to be in business very long. So, the money you may be saving will not go as far as it would if you invested it in promoting your business which would result in more clients which would result in more revenue. Funny how that works. You have to spend money to make money. A marketing professional can help you design professional collateral (business cards, logos, brochures, newspaper and magazine ads, etc) as well as help you create strategies to get publicity for your business (press releases, events, etc). I will not shop with businesses that will not invest in their image. I find it pointless to make an investment in your business, if you are not committed to doing the same.

You need these people on your team! Stop fighting it and start searching. Don't hire the first person that you meet with, no matter how impressed you are with them. Interview at least three professionals for each position, compare their rates and what you will receive in return. If you still are not satisfied, keep looking. These are not people that you want to replace each year. They are positions that want to be a staple of your company for years. They will have access to confidential information about your company and will be the people that you will rely on to guide the growth of your company. As you grow, you may even want to consider bringing everyone together once a year to ensure that everyone is on the same page with the advice that you are being given.

30 May 2009

Check This...

I remember when I opened my first checking account. Everyone stressed the importance of balancing my checkbook. I heard it at the bank when they gave me the check register and showed me how to enter the date, then the name of the transaction and then how much was going in or coming out. Finally, I was instructed to use my math skills to add and subtract those amounts. A negative number was a sign of trouble. The lesson was further stressed by mother with every deposit to the account (I was only 16 at the time and she was making all of the deposits).

The reason I bring this up is because I have heard and noticed a lot of people having trouble balancing their checkbooks. It's not, well not always, because they can't add or subtract but because of all of the different types of transactions that we use our accounts for. Back then your only options to get money out of your account was to write a check or go to the bank. Even wire transfers were a complex process.

Today, we have automatic drafts, ATMs, debit transactions, on line bill pay and check writing. Unfortunately, those check registers have not kept up the times. Some people have duplicate checks but I find it hard to believe that you will only have one additional transaction to record between checks. The traditional check registers are usually kept with your check book but not with your debit card which causes some people to forget to record those debit transactions.

So what do you do? I have two systems that you can try. Hopefully, one will fit your situation or it may become a combination of the two. Either way, you have to find a system that works because banks don't mind covering an overdraft payment when they know they can charge more than $30 each time you make a 'mistake.'

Option 1: Keep a journal of your spending. I write down everything that I spend in a small notebook and code the transactions – whether it's cash, check, ATM or automatic draft. This helps to see where all of my money is going and not just the money in my account. At the end of the month, I sometimes face a rude awakening like one month I was going to gas station to buy coffee almost every morning for about $1.08 per day. Doing that everyday for a month was more than $20. I could have made my own coffee, bought that French vanilla creamer that I love, a package of paper cups and box of sweet and low for less than that.

Option 2: Keep a separate checking account for your bills and one for your personal spending which usually occurs with a debit card. If you know how much you spend on bills each month, you can set up an account with that much money each month and only use that account to write checks for household expenses. The second account can be the fun money. This is also helpful for people with budgeting problems because you aren't able to dip into the household money.

Your money matters and you need a solid system to help you keep track of it.

25 May 2009

Rules of the Game

Imagine playing a game with four people and each person has a different set of rules to the game. How do you know if you are winning or losing? This is the premise that many businesses are operating on because they don't have a set of rules for their employees or an employee handbook. An employee handbook is your rule book for workplace behavior, policies and procedures. Although you may assume that everyone knows the rules and are playing by the same rules, how do you really know?

Let's say you hire two employees and they start work on the same day. You have an orientation and give them the exact same rules at the exact same time. Two weeks later, one employee begins breaking one of the rules while the other is following procedure. You chastise the 'bad' employee for their behavior and they respond, “I didn't know I wasn't supposed to do that.” Without proper documentation that those rules were explained, the employer has no evidence that the employee is acting improperly – even if employee #2 is doing all of the right things.

Every employer that maintains employees should have an employee manual that spells out how they want their employee's to behave and what the employee can expect from their work environment. These guidelines should be clearly spelled out and can not show bias in any form. Your manual should include, at least, the following sections:

  • Attendance policy – when do you expect your employees to come to work, when are they allowed breaks and at what time can they leave?
  • Use of company property – will you allow employees to check personal email during down time or is personal use of computers prohibited?
  • Confidentiality - are your employees privy to confidential client information and if so what happens if they betray that confidentiality?
  • Dress code – what image do you want your employees to portray? Will you have a business casual dress code or will they be allowed to wear what they want? Will they be allowed to wear denim on Fridays or required to wear a suit and tie everyday?
  • Safety and accident rules – how will you prevent workplace accidents? Are there any rules that should be followed to decrease your liability and the probability of an accident occurring?
  • Substance abuse – what will be your policy regarding employees using illegal substance? Will you have a zero tolerance policy which means they can not use illegal substances under any circumstance thus requiring random drug testing or will you only require that they not use illegal substances while working?
  • Sexual harassment – it is imperative that your company have a sexual harassment policy that lets everyone know that this behavior will not be tolerated and that spells out disciplinary action for violating the policy.
  • Performance reviews - all employees should receive a performance review at least once per year (preferably quarterly) so that they know how you feel about their work. Each person should be judged using the same criteria which should be spelled out in advance so that they know what your expectation is for their performance.

Additionally, employees want to know what benefits they can expect from their employer. Having these benefits in writing ensures the employees that everyone is being treated fairly and equally. The following sections are the most popular guidelines for compensation and benefits:

  • Payroll – everyone wants to know when and how they will be getting paid (weekly, bi-weekly, monthly, etc). Also, will you require direct deposit or will they be able to pick up their checks at a certain location at a specific time?
  • Holidays – you should establish at the beginning of each calendar year which holidays your business will be closed for and which holidays your employee will be compensated.
  • Vacation/Sick Leave – you should decide if you will allow your employees to have paid vacations and how they will accrue sick time off. How do they earn time off – after one year, six months, etc? You must also consider policies for funeral leave, jury duty, military service and the family and medical leave.

It can be a pain to put this manual together because it requires time and effort (something many of us don't have much of) but ensuring your employees are all playing by the same rules is a smart way to mind your business and reduce your legal liability.

04 May 2009

Charge It!

As we continue to navigate through this digital revolution, more and more people are forsaking paying for items, even some bills, with cash or checks. The convenience of using debit/credit cards has made life for the consumer much smoother. However, what happens when a business does not accept debit/credit cards? Are you in jeopardy of losing customers because your business has failed to keep up with the technological revolution? Unfortunately, you are.

Your business may receive multiple calls per day from telemarketers asking if you accept credit cards, do you want to accept cards, can they set you up to accept credit cards? Although you may want to jump in to merchant processing (that's the technical name for taking consumer money through credit cards), there are a few factors that you should consider.

Accepting debit/credit cards is a process that involves you taking your customer's bank information and submitting it through a terminal which sends the information to a merchant service using digital transmission. The computer system determines if your customer has enough money to process the transaction and then sends you an approval or denial message. The company takes the money from the client's account, charges you a fee or series of fees for processing the transaction and then sends you the balance. When choosing a company to process your credit/debit payments, consider the following factors to find the best company to work with.

How will you be accepting payments? Some companies will charge a different fee based upon whether you are operating a web store (accepting payments on line), accepting payments over the phone or swiping the card in person. Accepting payments in person will generally have a lower fee because there is a reduced possibility of fraud – someone using someone else's card – since you are able to verify the existence of the card and the person using it.

How much is the set up charge? Often companies will charge a nominal fee to set up your account however if you are a shrewd business person you may be able to have this fee waived.

How much will the terminal cost? You may have the option of renting a credit terminal or paying up front for the machine. It may seem cheaper to rent but you should take the monthly cost and multiply it by the number of months in your lease agreement and compare that with the cost to pay upfront. You may be surprised at the difference in price. If a machine costs $59.95 to rent over a 48 month period or $595 to purchase, is it cheaper to pay the $595 or $2,877.60 over 4 years? However, you must also consider your budget. Can you afford to pay the entire amount upfront? If not, ask if they sell refurbished machines. These are machines that were returned to company because of a malfunction, got fixed and are now being sold at a discounted rate.

Ask about the fees. Tell them that you want to know about every fee associated with this service regardless of the likelihood of you incurring the fee. These include application fees, cancellation fees, statement fees, gateway fees, monthly service fees and monthly minimum fees. You must factor these fees into your monthly budget. For example, if you are paying $115 in fees each month and processing an average of $150 in transactions, you are actually only netting about $35. In this case, it may not be worth it for you to process credit transactions or you should find a less expensive company to work with.

There are also fees associated with processing each transaction. First there is the discounted rate which every Visa, Master card, American Express, etc charges for processing a transaction using their card. Usually this fee is a percentage which can range between 1% and 3% depending upon whether you are swiping or keying in the card data. The other is a transaction fee which is charged per authorization and can range from $0.20 to $0.50. For example, if your merchant service charges 2.44% per transaction and $0.24 per authorization and you have a charge of $33.00; you will pay $1.05 for the transaction.

The next consideration is funding. Funding is how and when your merchant service gets you your money. Some banks offer merchant services and will transfer the funds directly to your account, however, you may pay higher fees for this convenience. If you choose a third party merchant, it may take up to five business days to receive your money. Always ask when your fees will be deducted from your account and how you will funded for the payments received.

Keeping up with modern technology is essential to every business' growth, however you must be smart and mind your business. It's not always about how much you make, but how much you keep.

22 April 2009

Don't make it personal

Setting up a business banking account separate from your personal account may save you hours of productivity for other tasks. It will allow you to not only track your purchases without having to figure out if it is a personal or business expense but it will also allow you to establish a relationship with your business banker which could come in handy when your business is ready to grow and begin asking for financial assistance. There are a few points to consider when choosing the bank for your account:

  • Do you prefer a local bank or a national chain? A local bank will provide more personalized service and chances are greater that you will have direct interaction with the bank president. On the other hand, if your business requires that you travel outside of your local area, you may want to consider a chain because you will be able to get assistance in a wider area.
  • Do you want to integrate your accounting software with your account? Some banks only integrate with certain software programs. If you chose your software first then you want to make sure your bank is compatible with that program.
  • Do you want merchant services available through your bank? Some banks offer merchant services through a third party, however, using their preferred company may allow you instant access to your funds or 24 hour access. Using an outside merchant processor may be cheaper (we will go into more detail in a later article) but there may be a delay in getting the funds transferred to your account.
  • Do you want to process your payroll through the bank? You may have a different system for processing payroll but some banks offer free checking for your employees if the bank is managing your payroll which not only includes paying your employees but also paying your employee taxes.
  • How many transactions will you have each month? You must consider how frequently you will be making deposits (daily, weekly, merchant service transactions) and withdrawals (payroll, vendors, bills).

Most banks offer different levels of business banking accounts depending upon the amount of transactions that you anticipate and the amount of money you plan to leave in the account. When you are ready to open your account, most bankers will require the following documents (always call the bank first to double-check):

  • A copy of your letter from the IRS listing your EIN (employer identification number)
  • A copy of your business license
  • A deposit to fund the account
  • A driver's license (or other government issued identification)
  • A partnership agreement if you are a partnership or a copy of your articles of incorporation if you are a corporation

All parties wanting access to the account should be present when the account is open. Mind your business and keep your personal and business banking separate!