1. Developing Your Business Plan Appropriately
Arguably the hardest part of
starting any new business venture is raising capital. However, while this
process may take a significant period of time, it is not overly time pressure
sensitive. Before you even start your business operations, you are going to
need to develop an in depth business plan that outlines exactly what you will
need to do to get your business off the ground. Most importantly, when you are
developing your business plan – you are going to determine whether or not you
have an economically viable venture on your hands. Many businesses fail due to
the fact that they should never have been businesses in the first place. For
instance, if you live in a small town with a small population then there is no
need to try to open a large scale department store. The first pieces of advice
that we can offer to you is that you need to honestly look at your business,
almost from a scientific perspective, to make sure that your business will be
able to start to turn a profit in the first two years of operation. As it
relates to time management, you should spend at least a month (or about two
full working weeks) dedicated to writing a business plan that has complete
industry research and a reasonable financial projection.
2. When Raising Capital, Do What is Best for You
Given that it is difficult
to raise capital, it is important that you always do what is best for you
depending on the type of capital that you are seeking. Many people make the
mistake at taking the first offer that comes to them when it comes to getting
the capital they need. It is important to remember that if one person is
willing to invest in your business then other people will most likely be
willing to do the same. Many new business owners jump at any offer for capital
that they receive thinking that they will never find another funding source for
their business. Nothing could be further from the truth. Additionally, if you
are seeking a loan – it should be noted that there are thousands of banks and
funding sources that will be willing to look at your business venture in order
to make a lending or investment decision. With the advent of the internet and
crowd funding, you will find that you will be able to find the capital that you
need. In regards to time, you should expect that the capital raising process
will take three months to a year depending on the type of capital that you are
seeking. It is far easier to get a bank loan than it is to source capital from
a number of private investors.
3. When You Are Trying to Get a Bank Loan – Be Extremely Prepared
When you are raising capital
for your new business venture, remember that investors are looking for a return
on their investment while banks are looking to earn interest payments from you
each and every month that the loan exists. Banks make highly scientific
decisions as to whether or not you and your business can repay the loan without
defaulting. Prior to approaching a bank for a business loan, you are going to
want to have a properly prepared business plan, a list of all of your assets, a
list of all of your debts, and two to three years of tax returns. This is a
must if you are seeking a Small Business Administration Loan. Your bank may
require additional information from you as they review your application. As
such, having all of your ducks in a row is imperative if you are going through
this process.
4. Your Credit Needs to Be In Good Shape At All Times
As it relates to raising
capital, your credit can be your most valuable asset outside of your plan to
start an economically viable business. If you are seeking capital from private
investors then your credit is not as much of an issue. Of course, the downside
is that you are going to need to sell a portion of your business to a third
party in order to get the capital you need. When you obtain a business loan,
you still own 100% of the business. These days, the minimum credit score you
need is 650 (using the FICO scale). However, in reality, your credit score
should be in the 700 range in order to get the best terms possible. If you have
some outstanding credit issues that need to be fixed, you should have those
issues fixed by a licensed credit counselor that can effectively and quickly
remedy the situations with your personal credit. Remember, you will need to
personally guarantee any new business loan that you are taking out and that is
why your credit score is so important for this process.
5. If You are Working With Investors Then Make Sure You Have a Proper Terms Sheet
If you are seeking a
business loan then the process is pretty straight forward. You submit a
business plan, tax returns, and lots of other paper work and then you either
get the money you need or you don’t. When it comes to investors, the terms are
never straight forward. Some investors want a substantial amount of control as
it relates to your business while others want to be more hands off. Some
investors want to take dividends while others would rather see the profits
reinvested into the business. As such, when you are working with a private
funding source it is imperative that you have a properly formatted terms sheet
that shows exactly what the investor will be providing, and how much control
they will have over how the business operates on a day to day basis. Your
attorney and your investor’s attorney should be involved in each step of the
process. This will ensure that any misunderstanding or legal issue is kept to
an absolute minimum.
6. If Possible, Try Not to Use Capital from Friends and Family
This is always a difficult
situation. If you have a great idea for a new business or new product then you
may want to approach your friends and family for a loan or investment into your
business. If other ways of raising capital are available to you then you
shouldn’t. Friends/family and money rarely mix well. If your business does not
end up working out as planned (and your friends and family lose money) then you
may have resentment from them. On the flip side, if your business is extremely
successful then you may have issues as well. First, if you were loaned the
money then your friends and family may feel left out as you are now running a
successful business on money that they lent to you (a loan does not entitle the
lender to profits…just a loan repayment). This can result in jealousy. Two,
if they did provide you with investment (meaning that they own a certain
percentage of your business) then they may want to become an active part of
your business. This happens more often than you would think. As such, unless
this is really your only option for raising capital, then you should try not to
use their money to start or expand your business venture.
7. Finding The Best Location For Your Business and Just Having to Deal with the Landlord
This is one of the trickiest
and aggravating aspects of starting a new businesses. If you are operating in
an online capacity then you do not need to worry too much about your location
as you can work from anywhere. However, if you are starting a new business like
a restaurant or retail store then it is absolutely imperative that you find the
best location possible. Even if the location is more expensive than you
budgeted for, you should make sure that your business gets the most visibility
possible. You can expect that it will
take one to three months to find a suitable location for your business. One of
the issues regarding this matter, as it applies to time management, is that
much of your negotiations will be at the whim of the landlord. As such, you can
expect that you will be called during both working and non-working hours to
handle these matters. This is just one aspect of starting a new business that
is out of your control as it relates to time management.
8. Do Not Get Overly Anxious About Leaving Your Job
Now that you have spent a
tremendous amount of time developing your business plan, sourcing capital, and
finding your location – now it is time to leave your day job. For many new
entrepreneurs, this is the most difficult aspect of launching a new venture. At
your job you most likely had a salary, benefits, and a retirement program (all
of these things if you are lucky in today’s job environment). The most
important thing to remember when you are about to start your business is that
you have done all of the necessary leg work to show that you will ultimately
have a profitable business venture on your hands within one to two years.
However, these one to two year periods can be extremely anxiety provoking. This
is even more true if you have a spouse and a family that is depending on the
success of your business. The best advice as it relates to this matter is to
keep a scientific mindset when you are about to launch your business. You’ve
put in the groundwork, now it is time to get this business running. This should
be your primary focus.
9. Be Prepared To Work Like Hell For One to Four Years
The first one to four years
of a new business venture are absolute hell. Between knowing that you have put
a tremendous amount of time and effort into your business (not to mention
money), you are going to need to work extremely hard to make sure that
everything runs smoothly. During this time, you will be developing a number of
protocols and procedures that will ensure that your business will become
profitable quickly. You will be constantly looking at your monthly profit and
loss statements while making sure that every employee is doing their job
correctly. For me, it took four years of 80 hour work weeks before I actually
felt comfortable running my business on a day to day basis. From there, I was
able to better structure my work days and understand how to properly prioritize
everything. I strongly recommend that you use a day planner to map out each
hour of the day. When you are running a business, there are always going to be
surprises, but when your day is structured – it becomes easier to deal with
unexpected matters appropriately without losing your mind.
10. Learning How to Say No
When you are starting a new
business venture, it is extremely hard to say no to customers or clients. This
is because you are desperate for the business. In your mind, you are thinking
that one bad customer experience or one bad customer review will bankrupt you.
However, this is not the case. While customer service is the most important
aspect of your business, you are going to need to say no to clients/customers
that want to take advantage of you. For me, 98% of my clients are great and
reasonable people. The other 2% cause about 80% of my business ownership
stress. In many cases, these people are extremely unreasonable. While early on
you will make the mistake of doing whatever these people ask of you – over time
you will develop a extremely keen sense of what clients will become a problem.
These clients or customers will eat away at your time.
11. Trust Your Employees
For many business owners,
this is the toughest part of the job. The truth is that no one cares about your
business as much as you do. They get paid first, you get paid last, and yet you
care the most about what happens on a day to day basis. When you are starting a
new business or expanding a venture, you should hire people that are extremely
trustworthy. In time, you are going to have these people run your business when
you are away, and by not micromanaging these people you will find that they
like their jobs. Once someone has a complete understanding of what needs to be
done and how to resolve small problems as they arise – they will feel a certain
sense of ownership over their work. As such, once your employee(s) have reached
this stage then there is no need to continually monitor them unless you expect
that they are up to something suspicious.
12. Don’t Be Paranoid
While this may sound
strange, it is important that you not become paranoid when it comes to your
employees. This is one of the things that I have noticed among some business
owners. The truth is that many people simply want a day job that they can rely
on and get paid for on a biweekly basis. I once had a client that made every
one of their employees sign a non-disclosure agreement and non-complete cause
(no matter what the job was) as soon as they were hired. I’m not even certain
that those contracts were legal. However, he was only running a small
consignment store (not a high end technology firm), and he was convinced that
employees were there so that they could get an understanding how his business
worked in order to start a competing business for themselves. While these
events do happen from time to time, they are extremely rare. Unless you are
running a business that uses highly proprietary information or trade secrets –
try not to become overly paranoid about your employees’ intentions. They want a
stable job that they enjoy.
13. Incentivize Your Employees
People like getting their
paychecks every two weeks and a nice bonus at the end of the year. However, if
you truly want to run a strong business then it is in your best interest to
provide them with financial incentives when the business does well. This will
not only increase productivity, but you will have a much happier staff. The
incentives do not have to be large, but if you develop a proper structure for
providing financial incentives – you will find that amazing things will happen.
Most importantly, your employees will feel that they have an ownership stake in
the business. While this may be as simple as a profit sharing program, by
implementing this type of program you are aligning your interests with those of
your employees. They will want to work harder for the business, and in turn you
will most likely have a much more successful business venture in the long run.
14. Frequently Meet With Your CPA
If you are a small business,
you most likely do not have a chief financial officer on staff. When you launch
you new business venture, you will be amazed at the number of regulations and
laws – as it relates to taxes – that you will need to comply with on a day to
day basis. Personnel taxes, sales and use taxes, and business income taxes are
extremely complicated. As such, you should find a CPA that you can work with on
an ongoing basis, and in a sense you should treat them as if they are a partner
in your business. They will be able to provide with an invaluable amount of
information and assistance as it relates to running your business on a day to
day basis.
15.Use a Payroll Company
Although it is somewhat expensive to have a
payroll company – you will save yourself a tremendous amount of hassle as it
relates to having a third party produce your paychecks and file all necessary
local, state, and federal filings when you have employees. The paperwork that
is associated with hiring and maintaining an employee base is massive. With my
small business, I generate upwards of a 1000 pages a year in documentation
regarding employee timesheets, payrolls, paycheck stubs, and other documents
that can drive a person mad if they do not have a business that is dedicated to
maintaining this aspect of a business. If a business owner was to do this on
their own – it would easily eat up 25% of their work day. The expense is worth
it.
16. Remember that Being an Entrepreneur is a Profession
When you decide to become a
business owner, you have decided to enter into a profession. You are no
different than a lawyer, doctor, or accountant. Although anyone can run a
business, the best advice is that you treat what you are doing in your business
venture as if it was a professional practice. You are professionally engaged in
the business of turning a profit. As such, you should have the proper
understanding of all facets of running a company before you decide to go into
business for yourself. Although many aspects of running a business are
intuitive, many are not. As such, you should become an expert on matters
pertaining to accounting, marketing, and business management before you start
your new business venture.
17. Learn About Accounting
Everyday, I speak to people
that want to run their own business and have a business plan developed. Among
my clients, there are often times when individuals have no understanding of how
to properly read a profit and loss statement, cash flow analysis, or balance
sheet. Prior to starting a business, you should become an expert on basic
financial statements. When I see businesses fail, more often than not, the
owner was not at all attuned to how financial statements work. In the long run,
you will save yourself a great deal of headache when it comes to running your business, on a day to day basis, if you
have a strong understanding of financial statements. Again, you are becoming a
professional business owner – regardless of your industry – and you need to
have a full understanding of how well your business is doing from both a profit
and loss statement overview to how you are doing as it relates to your cash
balances. This is especially true if you business sends out invoices for work
that has already been completed and you now need to collect on outstanding
invoices.
18. Keep Your Accounts Receivable to a Minimum
Wouldn’t it be great to
order something that you needed and then never pay for it? Although this may
sound like a ridiculous question, it is very common among businesses. For
instance, what if you are a contractor and your provide someone with a new deck
that they need? You send them the invoice, and the never pay. This happens far
more often than you would think. In these instances, you have already paid your
staff and for materials needed to complete a job and now the person who wanted
the work didn’t pay you. In some cases, you may need to take the person to
court. As such, when you are starting a new business – you need to keep your
accounts receivables to a minimum (the people that owe you money). It is not
unreasonable to ask for certain aspects of any job to be paid upfront.
Additionally, if you are a product based business – it is not unreasonable to
ask for the entire amount of the order to be paid upfront before you send
merchandise. You wouldn’t walk into a store and tell them that you will pay
them 30 days later, and nor should your clients. Only after years of trust
should you provide your clients with credit.
19. Retain an Attorney
In the long run, you will
need to have a individual that is very well versed in business law at your
side. Our previous tip should illustrate that greatly in that there are going
to be instances where your business did what was promised only to not have a
client pay for their goods and services. Although there is some upfront cost of
retaining an attorney for your business – the benefits are tremendous.
Foremost, they will be able to draft legally appropriate letters to non-paying
customers while also providing you with advice as to how to handle certain
legal matters. Even for small businesses, you may get a lawsuit. As such, your
attorney (along with your CPA) is one of your best business partners. They will
provide you with forward looking advice regarding how to deal with legal
matters while concurrently ensuring that a small legal matter does not get out
of hand from an expense standpoint. Additionally, you have complete
confidentiality when you speak to an attorney regarding any matter.
20. Your Best Asset is Customer Service
My business survived the
worst recession since the Great Depression. The primary reason being, I think,
is that I have always strived to offer unparalleled customer service. I am
usually always available to my clients (within reasonable time frames). Unlike
large corporations, you cannot afford to lose a customer or a client. Again,
some people are unreasonable and you will learn to deal with those people (the
best methodology is to provide them with a refund). These days most of my
business comes from referrals due to the fact that over the past ten years of
being in business – I have always been a constant source of help to my clients.
As such, you should treat your clients
(as should your employees) with the utmost level of respect at all times. These
are the people that are making you a successful business owner. One of the benefits
of operating a small business is that you are able to provide a level of
customer service that is not found at large corporations.
21. Remember that Revenue Is Not Profit
Recently, I had a client
that launched a highly successful retail store. Although this is highly
unusual, the business started to take in about $75,000 per month in gross
sales. This was more money than the individual every thought imaginable. He
started to spend money like a lottery winner. What he neglected was the fact
that the business was generating substantial revenues, but no profits. His cost
of goods sold was about $50,000 per month. Quickly, he started missing
deadlines on inventory invoices and soon the business went bankrupt. He could
have had an extremely successful business on his hands, but he got caught up in
how much physical cash was coming through his door. When you own a business,
you are paid last.
22. Become a Marketing Expert
Although this is a quick
tip, it is imperative that you become an expert in marketing your business to
the general public. As we discussed earlier, no one cares about your business
as much as you do, and getting the word out there regarding what services or
products you provide is absolutely necessary to running a successful business. When
it comes to running a business, you should be absolutely shameless in your
marketing efforts. If you run a small business then you should distribute
postcards and flyers frequently. If your business operates on a larger level
then you should maintain an expansive web presence that tells people what you
can provide for them.
23. If You Run A Service Business, Provide a Set Price For Some of Your Services
Everyone wants to know that
something will cost them. Whether it is providing someone with a new roof or
doing their taxes, they want to know the expense. If you are a service business
then you should develop a program that provides a set price for a specific
service. You will be amazed at the number of customers that flock to you door
because you simply set a definitive price for your services. This is often a
fact overlooked by so many businesses. People do not like open ended billing. As
such, if you operate a client based business then have a few services that you
offer at a set price. You will many more inquiries about your service.
24. Take Advice from Others with a Grain of Salt
When I was a younger man, I
took a lot of advice from people that had degrees from fancy colleges. Although
I started one business, I decided to start a subsidiary business that would
compliment my main business. One of my business friends that had graduated from
an esteemed business college told me that starting that type of business would
hurt “my brand.” I took her advice to heart, and after sitting on my
hands for a few years with a great business idea – I decided to build the
business. It eventually became my most successful business. The individual that
had provided me with the advice eventually ended up driving her own business
into the ground. My secondary business ended up becoming my primary business,
and the best business that I have launched. Long story short, trust yourself
and be somewhat wary of people that tell you that you will “ruin your
brand.” If this is a concern for you then start a business under a different
brand name or corporation.
At the end of the day, you
are the one that owns and runs the business – you know what is best to do.
25. If Possible, Do Not Attach Your Name to Your Business
If you are a small business
owner – you should be extremely proud of your business. You worked extremely
hard, took a risk, worked like hell – and brought a business to profitability.
Unless it is absolutely necessary, I usually do not recommend that a business
owner attached their own name to their company (unless you are a professional
like a lawyer). When it comes time to sell your business (hopefully for a
substantial profit), it will make the transition easier to the new owner. In
cases where the owner has become the centerpiece of the business, it may be
difficult to sell your company because your clients/customers feel like they
are dealing with you personally and not your corporation.
26. Learning When To Give a Refund
As it relates to time
management, the worst scenarios you are going to encounter are difficult
clients. It is very hard to have completed an outstanding project for a client
only for you to hear that they hate it or it was not what they expected. It is
even more anxiety provoking when the individual is angry about the situation or
fails to give you constructive criticism. When I encounter these people (which
is rare), I find that remaining calm is imperative. Despite the fact that they
may be angry, the best thing for you to do is to ask what you can do so that
the project meets their expectations. After some additional work to try to
resolve the issue, present the work to your client. If they still aren’t happy
– offer to provide them with a full refund. Although this not ideal, it will
get that person out of your life so that you can resume working with normal
people and getting new clients. Generally speaking, 10% of your
clients/customers are going to be 90% of your problems. As such, giving a
refund puts a quick end to the problem and the angry client walks away feeling
unhappy – but not feeling like they were ripped off. I have even had clients
thank me for providing them with a full refund.
27. Hobbies Make Bad Businesses
All of us have hobbies or
things that we enjoy doing. In some cases, I see people that want to turn their
life long hobby into a business. This is generally a mistake. The love of your
hobby is something you enjoy because of its simplicity. A hobby should cost you
money, not make you money. Running a business that sells the hobby that is your
interest is entirely different. As such, you should keep that in mind if you
are thinking about turning your hobby into a source of income. However, if you
intend to keep the business small and sell your wares on a small website, Etsy,
or eBay then it might not be a bad idea to have your hobby produce a small
amount of secondary income. Again, this is totally a personal choice but more
often than not I see hobbyists unhappy when they try to turn it into a genuine
small business.
28. Use Social Media to Promote Your Business
In today’s world, you need
to be connected to your clients and customers. As such, it is imperative that
you maintain a strong presence on FaceBook, Twitter, Google+, and other popular
social networks that will spring up as time goes on. It is no longer enough
just to have a website and use search engine optimization. The best benefit of
using social media is that you will be able to connect with your existing
customer/client base while attracting people that need or want your
services/products. Additionally, without too much effort you can promote
discounts and specials that your business is offering. Again, the ability to
connect at anytime with your customers will give you a tremendous advantage
over your competitors. If you are not familiar with social media then you may
want hire a social media marketing firm to help you get this aspect of your
business off the ground.
29. Maintain a Website and Use Search Engine Optimization
If you are small business
then you need to have a properly developed website. Although this may be
somewhat of a large upfront expense for a professional website, the benefits
will be substantial. Almost everyone finds local businesses via the internet
these days. When you look for local businesses, you often find haphazardly put
together sites that look awful. As such, make the investment (usually $1,000 to
$2,000). Additionally, the same firm that puts together your website should
also help you with search engine optimization. This type of marketing seeks to
have links directed to your business’ websites. These firms will enroll in
local business directories while also producing content that is quickly found
by search engines. As such, when some one does a search for your type of local
business in your local market – you will appear on the first page (and
hopefully be the first result) or the search.
30. Don’t Look At Your Revenue Everyday
This is so much harder said
then done when you first start your business. You will be tempted to look,
everyday, at how much money came through the door. At first, you will become
extremely anxious if you have a slow day or a slow week. It is important to
remember that as a business owner – you are going to have a slow day, a slow
week, or even a slow month. If you are a highly established business then this
may be part of your normal yearly business cycle. For me, summers are the
slowest. Instead of worrying about the lack of business I have come to
understand that it is simply because people are out doing summer activities and
are not in need of my services. I use this down time to develop new service and
take a break myself from my standard 50 to 60 hour work weeks. When you are
new, you want as much business to come through that door every single day
without realizing that on some days that is just not going to happen. You
should only start to worry if start seeking declines in your established
business cycle. If you are new – realize that you will notice that certain days
of the week are typically better than others. On the days that are slower, and
do not generate as much revenue, rather than worry – focus on doing something
that promotes your business.
31. Stay on Top of Tax Filing Deadlines
If there is any part of my
business that I hate the most, it’s filing taxes and other government documents.
Sometimes I procrastinate, which only makes the process that much more nerve
racking. When it comes to any type of document that you need to file with a
government authority, it is in your best interest to say on top of it at all
times. The worst thing you can do is not file important documents that are
required by your business in a timely manner. You and your CPA should make a
chart of when each type of filing is due for each month. Some states, as it
relates to sales tax payments, require that payments are made monthly or
bi-monthly. It can get very confusing, very fast. As such, make sure you are
aware of each deadline and make your filings before they are due. As it relates
to your payroll, make sure that your chosen vendor does this for you. Again,
payroll companies are expensive to use but they will save you a world of time
in the long run.
32. Be Careful with Advertising Agencies and Marketing Firms
Advertising agencies and
marketing firms are great when it comes to developing new promotions and
advertisements for your business. However, they are very expensive. Many firms
require a retainer or a percentage of how much you intend to spend on marketing
your business to the general public. One common issue that I have found with
marketing and advertising companies is that they continually want you to
increase your budget. Sometimes this is justified, but sometimes it is not.
When you are approaching a marketing firm or advertising agency to assist you
with marketing your business, you should make sure that they use a
metrics-focused approach to determining how successful their developed
campaigns have been for your business. This includes showing you figures such
as Cost Per Thousand Impressions and Conversions to Marketing Dollars Spent
(ie…how many people became customers and how much did it cost you). If you
advertising firm is focused solely on having your new ad “go viral”
or something of that sort then you may want to find a firm that understands
that you are looking to gain the greatest reach without breaking the bank.
33. When You Close Your Doors for the Evening – Do Not Continue to Work
As we have said earlier,
when you run a business, it is easy to have it become a total obsession. You
are going to be working constantly throughout the day. In order to maintain
your sanity, you are going to want to set specific times of the day when you
are working. For instance, when I am having dinner with my family – I always
put my phone on silent. Even though I leave my office around six, I completely
stop checking emails at 9pm. This allows me to relax and unwind. If you start
checking your emails right up until the point when you go to sleep then you
will not be well rested for your next day. Getting enough sleep is often an
issue that is overlooked by most small business owners. If you are not well
rested then you will, without a doubt, begin to make mistakes. A sharp mind
operates a well run business.
Of course, from time to time there is a going to be an emergency or an issue
that just takes up more of the day than is expected. This is natural, and you
just have to deal with it from time to time. However, these days should be
limited and not how your normal day to day business operates.
34. Take Vacations When You Can
This is by far the hardest
thing that you can do as an entrepreneur. When I first started my own business,
nothing struck fear into my heart than being several hundred or several
thousand miles away from my business. Each time I would travel, at least for
the first four years I was in business, I would pack up a computer and printer
so that I could be ready for any situation that would happen. I would have my
office line forward directly to my cell phone so that if a client called – I
would be immediately available. As such, I never really felt like I was on
vacation. I was merely working from a different location. Now, ten years in, I
trust my employees to run my business in my absence. My clients know that I am
on vacation, and very rarely will they call unless it is an absolute emergency.
Additionally, the most important thing that I learned, is that my business runs
better when I am away. Each employee knows what they need to do and they do it
well. As an incentive, I pay a small bonus to my staff for keeping the place in
running order while I was gone. Also, I get the best ideas for new products or
services to offer when I am away from my company. I am not wrapped up in the
day to day operations of my business, and it gives me the opportunity to review
things with new perspective.
35. Keep Employee Meetings Short
There is nothing in this
world more boring for an employee than having to attend an employee meeting. No
one likes it, and everyone is afraid to be called upon. Some business owners
feel that they are not properly meeting with their employees if they do not
hold a daily meeting. Unless it is necessary, try to keep meetings to no more
than 20 minutes. During this time, people will remain alert and focused on what
is being said. These days, the attention span of people seems to be very
limited. After 20 minutes, employees will start thinking about other things
(mostly non-work related matters). Additionally, the longer your meetings run –
the less time your employees have to complete their assigned work. Some
business owners prefer standing or walking meetings. These typically work very
well for certain situations.
36. Never Reveal Your Competitive Advantages to Anyone
Give a man to fish, and he
will eat for a day. Teach a man to fish, and you just created a competitor for
your fishing business. For some entrepreneurs, there is a drive to mentor
others that are trying to launch a new business. While advice is important, you
do not want to reveal how your business remains successful at all times. Maybe
you use a selected vendor to keep certain costs low, or you have instituted a
protocol that keeps what is normally a time-intensive task into a short
procedure. As such, once you have been running your business for a significant
period of time – you are going to have developed strategies that minimize the
time needed to do something or something that sets your business apart from
your competitors. As such, when doling out advice to new business owners keep
anything proprietary out of the conversation.
37. Use Technology But Do Not Overuse It
My business requires that
each of my employees have access to a computer that uses high speed internet.
They need Microsoft Office and access to email programs. We have not updated
some of the programs that we use for years. The primary reason being is that we
do not need to. Now that technology has entered each part of our lives, there
are numerous advertisements that you will receive as a business owner that
pitches their software as the newest, latest, greatest cost savings program that
you will ever need. If you continue to read about each and every program that
can help you run your business – your head will start to spin. As such, for
each technology category type – keep it simple. If your employees need
computers – use the same brand. If they need cell phones – they all use the
same model. Email software – everyone gets the same. Once in a while you will
need to update what programs and computers that people use, but this should be
done all in one swoop. I had a client that continually had his employees using
new applications and programs every few weeks because he was sold on one
certain feature. The end result was absolute chaos with every employee using
different applications and wasting time figuring out how to use the new ones that
he demanded his employees use.
38. Keep and Pencil and Paper Day Planner
I have found that simply
using a day planner with a pencil is the quickest and most effective way for me
to manage my day. Each week, I write out which clients I am seeing and when,
which people I need to call and on what day, and what other matters to be dealt
with during that week. In the same planner, I keep a list of the bills that
need to be paid each week. This system has never failed me, and if I lose my
day planner then I have only lost a week of scheduling. Each time I complete a
task, I scratch it off or write a double check mark next to it. I can feel a
little hit of dopamine hit my brain when I write out that double check mark
next to a completed task. While this system isn’t for everyone, it is simple
and it has worked for business owners for hundreds of years. Again, I don’t
like being tied to applications when it comes to running my business on a day
to day basis – and it is much faster just to write something down than it is to
type into my smart phone.
At the start of each week, I
have my assistant enter the information into our database so that employees are
aware of what is going on and what needs to be done.
39. Keep Your Expenses As Small as Possible At All Times
It is incredible how quickly
a business’ budget can grow once a decent amount of revenue starts to come
through the door. While many of your costs are fixed (such as rent, salaries,
and some utilities), many of your expenses are not. If you do a lot of business
online then you may find yourself signing up for small services that cost $10
to $20 per month. While these may seem like a good idea at first, you will find
that they will start to tally up on your corporate credit card pretty quickly.
When my business was growing, I signed up for a number of services that helped
promote my website (to varying degrees of success). After reviewing my credit
card statement, I realized that I had signed up for 15 different services that
were charging my credit card anywhere from $10 to $40 per month. When you are
running a business, it is easy to forget these service providers. When you do
remember, you think to yourself that you will cancel that subscription or
service at the end of the month. However, you will forget and hundreds of
wasted dollars will go out the window.
As such, you should keep a
detailed spreadsheet of every vendor you use. This includes your landlord as
well as that service that costs your $10 per month. Believe me, these charges
will add up in the long run unless you keep a tight control on them.
40. Only Give Trusted Employees a Credit Card
Unless you absolutely trust
the person, don’t give employees a corporate credit card unless it is
absolutely necessary. The only individuals that can have access to spending my
business’ money are those that have been employed by me for at least a year and
hold a managerial level position in my business. Early on, I gave certain
employees corporate credit cards just to make my life easier. I once told an
assistant to run over to our local office supply store to get what we needed
for the next few weeks, and she came back with more than $500 worth of paper,
coffee, pens, pencils, and organizers that no one needed. If you do give lower
level workers (and I am not implying that they aren’t trustworthy or will steal
from you) then make sure that your financial institution puts a limit as to how
much can be spent on that card. Additionally, you should make lists of what
should be purchased using that card. If you aren’t comfortable at all with
giving out corporate credit cards then you should maintain a petty cash box
that requires that receipts are deposited at the end of each day for all
purchases made. You should have your bookkeeper review these receipts each time
they come in (provided they are not a staff employee).
41. Hire a Great Bookkeeper
Outside of your CPA (who
gives you tax and financial advice), your bookkeeper will be one of the most
important people in your company. In many ways they will act as the comptroller
of your business when as it relates to making sure that all receivables are
coming in and all bill payments are going out. Additionally, many bookkeepers
(especially the experienced ones) are generally very well versed on tax issues.
They can assist you, on a day to day basis, when you need to deal with certain
routine filings. Although your CPA should be the one to have all final say as
it relates to tax matters, your bookkeeper will be invaluable to you in these
matters as well. Additionally, during tax time, your bookkeeper can work
directly with your CPA to determine how certain transactions were booked. They
will also be able to assist in clearing up any confusion regarding any specific
type of transaction (such as refund). There will be confusion from time to
time, and as such having a bookkeeper is of the utmost importance. Much like
with using a payroll company – bookkeepers aren’t cheap. You should expect to
spend $20 to $30 per hour for anyone that comes into your business to do your
accounting. A person that holds this position should have at least two years of
experience as a full charge bookkeeper. When you meet with your CPA, you should
try to take your bookkeeper with you. It will make those meetings extremely
productive.
From a time management
standpoint, you will be very grateful for this person’s work with your company.
42. Avoid Books on Managerial Style
I don’t know why that every
billionaire and business magnate needs to write about their managerial style.
Typically, these books focus heavily on the success of the individual that
wrote it (or the ghost writer that did it for them). As it relates to running
any business, it is going to be solely on the owner’s shoulders as to how they
run their company on a day to day basis. Some people are micromanagers and some
people like to make upper level decisions and let the employees do the rest of
the work. You are going to need to develop a managerial style that works best
for you. Books on how to properly manage a business are difficult because every
business is different. Corporate cultures are different from small business
cultures. As such, while these books are interesting to read – try not to put
too much stock into them. I once had a client that would read one of those books
every other week and then want to reinvest his business in the image of the
author that he just read.
43. Some Days You Just Aren’t Going to Want to Be An Entrepreneur and That’s Okay
Everyone gets burned out.
Whether you have a 9 to 5 job or own a business (of any size) there are going
to be those days when you just don’t want to go into work. This is usually due
to the fact that you have been putting in long hours, are mentally exhausted,
and you are in need of a good vacation (remember our tip about taking
vacations). The short answer is that it is perfectly okay to have these days
sometimes. Running a business is not always about trying to make as much money
as possible or launch off new products and services every quarter. Some days,
when you are running a business, you should take the approach that it is a 9 to
5 job. You will clock in, run the business, deal with employees, deal with
customers/clients, and then go home and relax. For me, about two months of the
year I act this way. I certainly don’t neglect the business, but I take a bit
of breather from my usual breakneck
pace. If I didn’t do this once in a while I would have sold my business a long
time ago or worse – had my business fail because I was trying to go in too many
directions at once. Once you are established, you will have the luxury of
taking it easy from time to time.
44. Don’t Go In Too Many Directions At Once
Although this may seem
intuitive, if you are running a business then it is very easy to start to
stretch yourself thin. This is especially true if you run a company that
specializes in providing new and innovative products and services to your
customers. If you are developing a new product or service continue to do so
until it is fully developed. Even if you have a good idea for something new,
write it down and revisit it when you are finished with your current project.
If you have too many new things being developed or going on at once then the
quality of all of these projects will suffer. Not only will the quality of your
new products or services suffer, but you will develop a tremendous amount of
anxiety about needing to get a tremendous amount of work done. As we have
discussed, running a business requires a tremendous amount of work. As a
business owner, you are going to put a lot of pressure on yourself to succeed.
When you continually pile more and more things for you to do grown your
business you are going to start to feel that you aren’t successful since you
have so much unfinished work that needs to be done.
45. Dealing with the Failure of a Product or Service
Beyond a business failing
all together, nothing is more difficult than handling a failed launch of
something that you thought would be successful but ultimately wasn’t. A few
years ago, I launched a specialized website geared towards financial products.
After months of research, planning, and development I uploaded the website and
began marketing it to the public. I spent thousands of dollars on marketing.
Although almost 30,000 people came to the website – I only made 9 sales. This
was a tremendous disappointment for me. Although I was still running a
profitable business, I felt as if the entire thing had gone bust. I thought
about the failure day and night. It made me restless thinking about where I had
gone wrong or why people were interested in a service that I thought was
outstanding. The truth of the matter is that to this day – I still do not know
why it failed. I had used a similar formula for businesses in the past, and I
couldn’t figure out why it did not work out. My lesson from this matter was
that sometimes – no matter how good of an idea you have and no matter how hard
you worked on it – it just isn’t going to work out. During these times, it’s
good to reflect – but not obsess – about what went wrong. For me, I now keep a
journal for when things do not go as planned and for when things went as
planned. To date, I have started eight businesses. Three have done very well,
three have done okay, and two have failed miserably. It’s important to remember
that you can always start a new business with a new idea. The true key to being
a good entrepreneur is to know that you are going to succeed 70% of the time.
If you can remember that then you’re golden.
46. Running More Than One Business At Once
For experienced
entrepreneurs, running more than one business at once is not a problem.
However, when you have one successful business venture and then decide to open
a second one (or buy another one) – you are going to feel immediately
overwhelmed and stretched very thin. This is especially true if these business
are in different industries. You will be dealing with a different set of
customers, and each different type of business has its own unique set of
problems. It is recommended that you should be in business for at least five
years with an existing profitable business before you try to start a second
one. Commonly, for people that have developed a profitable company they think
that they can make any business profitable. Their ego starts to get the best of
them and just because they have had one success – this doesn’t mean that
everything they are going to do is going to become successful. As such, before
deciding to develop or buy a second business – you should put a tremendous
amount of thought into what you are doing. More often than not when I counsel
people on this matter they ultimately decide to try to make their existing
enterprise bigger rather than doing something completely different with a
second company.
47. Franchises Are a Great Idea
If you are worried about
starting your own business from scratch then franchising may be for you. Some business
consultants do not like the idea of franchising due to the constraints of what
you can or cannot do as a business owner – I love the idea of franchising. When
you buy into a franchise you are getting a well known brand name, a protected
territory, and marketing support. Although it is expensive due to upfront start
up costs, initial franchise license fees, and ongoing royalty payments – the
benefits can be tremendous in that much of the risk with starting a new
business venture is immediately removed.
If you are thinking about buying into a franchise system then you should
be aware that you a certain extent you may feel like you are a business manager
than a business owner. In some respects, this is true. Generally, you cannot
dictate your own marketing campaigns and you are required to adhere to
extensive contractual agreements about how the business is run. However, most
franchising businesses give you tremendous opportunities to expand via the
ownership of more locations. In fact, most franchisors prefer that existing
franchisees develop new locations rather than having to train new franchise
owners. As such, if you are wary about starting a new business then you may
want to see if franchising it right for you.
48. If You Buy a Franchise, Also Hire a Lawyer
Although we mentioned
retaining an attorney earlier, this is doubly true if you are buying into a
franchise. This is because there is a document known as the FDD (Franchise
Disclosure Document) that is hundreds of pages long and contains every detail
of how you have to run your business (sometimes its called a Uniform Franchise
Offering Circular). There is very little wiggle room for you to put your own
spin on how your franchise is run on a day to day basis.
These details are often
written in highly complex legal language. Even seemingly simple things like how
you decorate your location may be dictated in this contract. As such, your
attorney should put every detail of this agreement into simple every day
language for you so that you know exactly what you are getting yourself into.
Additionally, you are going to need to train your employees very well on all
operating facets of how customer service is handled. Often, franchising
companies will hire mystery shoppers to go into locations to use services or
buy products. These shoppers then report back to the franchisor, and if their
are issues you could risk losing your franchise license. This is something that
you should consider heavily.
49. Buying a Business Can Be a Great Way To Reduce Risk
As an alternative to
starting a business from scratch, you can buy a business that is already up and
running. This is a great way to reduce the risks associated with starting a new
business as you are buying an already profitable venture. However, you will be
paying a premium for this business. For instance, if you want to buy a local
plumbing contracting business that is making $75,000 a year in profits then you
can expect to pay $200,000 for it. This is because you are paying the person
who is selling your business for the risk they took in starting this profitable
venture. It may have only cost them $50,000 to start the business but they were
the person that did the marketing, got customers, and built a brand name for
the business. As such, when you are buying a business – the premium you are
paying for is someone else’s hard work. However, if you are well capitalized
and want to start making a profit right away then buying a business may be a
better solution for you. One of the best parts about buying a business is that
you can immediately start to grow the company once the ownership transitions to
you (which is usually a six month process).
Additionally, banks love to
loan money to people that are buying businesses. This is because they are a
proven money making business and the risk of business default (depending on how
long the business has been in operation) is substantially lower than that of a
new company.
50. If You Are Going to Buy A Business – You Are Going to Need to Do Your Homework
First, you are going to need
to find the business that want to purchase. Much like with real estate, there
are a number of websites available that lists businesses for sale. Popular
sites include BizBuySell.com and BusinessesForSale.com. These sites have
thousands of businesses that are available to be purchased and basic
information about the business. However, you are going to need to do a
tremendous amount of your own homework as it relates to a potential candidate
for a business purchase. The process will take you just as long as if you were
raising capital to start a new business on your own.
You are going to need to
review all of the tax returns and financial documentation that the owner gives
to you. Generally, you will be required to sign a non-disclosure agreement as
to any information that you receive. Additionally, you are going to want to
talk to employees, customers, and other people familiar with the company. You
should also do checks on the company’s rating with the Better Business Bureau,
and you are going to want to make sure that all online reviews are accurate.
Although it is often overlooked, you should ask the seller to provide you with
a third party independent valuation of the business before you make any offer.
As with any large
transaction, you are going to need a CPA and an attorney to assist you. Your
CPA will make sure that all information provided by the owner is correct while
the attorney will produce all of the necessary legal documents to carry out the
sale. You should make sure that the transaction is insured with Errors and
Omissions Insurance (this kicks in if the owner lied to you about something).
Finally, the owner of the
business should be willing to stay on as an employee or consultant for a few
months while you transition the business
to your ownership. Be wary of business owners that want to jump ship quickly.
51. Starting Your Business Slowly
Not every type of business
requires that you immediately quit your job and dedicate yourself fully to
starting a new business venture. Some businesses, like online e-commerce
websites, can be started from home at very little cost. There are a myriad of
ways to make money online or by starting a business very locally. For instance,
we recently had a client that wanted to open up her own dog sitting and dog
care business. Rather than quit her full time job (which paid a decent salary
and benefits), she decided to make it into a weekend business. People that
wanted to get away for the weekend dropped their dogs off at her house for two
days at most. People that wanted to take day trips dropped them off for the
afternoon. She did an outstanding job, and word spread around about how
reliable she was as it related to dog care. After she built up a roster of
about 100 customers she decided to take the plunge and rent out space where she
could run the business seven days a week. This business is now the highest
rated dog care center in my area.
As such, if it is possible –
see if you can “toe in” to starting your own company before launching
the whole thing at once.
52. Once You Hit Profitability – Consider Yourself a Success Story
The moment you hit
profitability gather up your friends and family to celebrate. You’ve done it!
You have put the work in, you took a major risk, and you have now created a
profitable business. Many businesses fail and never get to profitability. It is
important that once you hit this point – consider yourself extremely
successful. Even though you are going to want to continue to grow your revenues
and profits, you now have a profitable business venture that you can grow even
bigger by reinvesting profits, attracting investors, or by acquiring a business
loan or line of credit. Never think that you are not a successful business
owner because you aren’t running a business that is going to go public or be
sold for tens of millions of dollars. While those stories are the ones most
likely to grace the covers of business magazines, the vast majority of
profitable businesses are barely featured in a local news article.
