Wednesday, December 23, 2015

Handling changes

It is hard to believe that 2015 is almost over!  There is no snow here in Wisconsin and the temperatures are very mild for December which makes the disbelief even stronger.  It has been a year of changes for E&S Entrepreneur Advisors and for my family.

My husband was offered a promotion in March and accepting it meant moving 100 miles south of home and family.  It was a great opportunity for him so he accepted the offer and we got our house ready for sale (I don't recommend living in the same house for 27 years without doing some periodic weeding out of belongings!) and found a home to buy in the Waukesha area.  We moved two months later and settled into a new life.  I commute back to the Fox Valley twice a month to work with clients who need to see me in person.  I get to see friends and family as well which is nice, but the drive is tedious.  The unseasonable weather this fall has made it easier so far.

Moving has not only created the need for me to travel more, it also required Beth and I to rethink our processes.  I was responsible for the banking and bill paying for our business and moving meant either changing our bank and mailing address or changing who was responsible.  We elected to stay at our bank and Beth has assumed more of the administrative tasks.  We did opt to offer online invoice paying to our clients which has reduced the number of trips Beth has to make to the bank and the clients love the convenience.  The service charges we have to pay to offer this service have been offset by the convenience for Beth and for our clients.

The move has also changed my work schedule.  I was able to be quite flexible in the dates I offered my clients for appointments.  With my need to travel, I am no longer able to offer this flexibility which has been hard for me.  I liked being able to run over to a client's business if they were having a problem.  I can still do a lot of problem solving via phone or email, but I miss the opportunity to see clients in person.

Changes can be hard to handle, but with planning and flexibility it doesn't have to be difficult.

Tuesday, December 1, 2015

Thinking of starting a business in 2016?

Are you thinking of flexing your entrepreneurial muscles next year and starting a new business?  Here are the types of businesses you want to avoid according to The Hartford's Bizahead website:

  1. Office Supply 
  2. Frozen yogurt/ice cream shop
  3. Gift store
  4. Video rental
  5. Bookstore
  6. Taxi/limo service
  7. Social sites/search engines
  8. Travel agency
  9. Internet cafe
  10. Restaurant
The hottest industries to launch a business in:
  1. Food e-commerce
  2. Legal marijuana
  3. Agriculture software
  4. Relaxation beverages
  5. Public sector technology
  6. Yoga/pilates
  7. Fantasy sports services
  8. Software publishers
  9. Investigating and security services
Chose wisely if you are going to start a small business.  You need to have sufficient expertise as well as working capital and determination!

Monday, November 23, 2015

Slow down so you don't fall for scams

There seems to be more small business scams out there than ever.  I am a QuickBooks ProAdvisor and every day I get an email inquiring about my services as do many other ProAdvisors.  The scammers get our email address off the Intuit ProAdvisor site and send a request for services.  Many of the requests are barely literate which is a clue that they aren't legitimate.  Some ProAdvisors have responded to the requests and they get an email response with a PDF attached which they are supposed to open to get the details for the requested services.  I don't any who have opened the attached PDF, but I am sure nothing good will come for it.

Another scheme is asking for you to verify your credit card or your email for your QuickBooks or other web based services you utilize.  A clue there is that while the logo and details in the email look legitimate, the email address is not.  Legitimate businesses would never initiate a verification via email.

A business I work with recently had a close call when the accountant received an email from the owner asking him to make a wire transfer of close to $100,000 to pay for some capital expenditures.  The email address looked legitimate but the accountant wisely checked via phone as he was unaware of any planned expenditures.

The key in all of this is to read through any requests for information carefully and to take a moment to think if the request is reasonable and expected.  Always call to verify that the request is legitimate before you respond and use a phone number you look up, not one provided in the questionable email.

Tuesday, November 17, 2015

It's the middle of November-are you ready for the end of the year?

Thanksgiving is rapidly approaching which is hard to believe.  It seems like it was just summer and yet we are over half way through November.  This is a good time to get organized for the end of the year as we will be saying that next!

What do you need to do for the end of the year?  Many small business owners must make estimated tax payments due to their ownership structure. If you haven't had your tax accountant review your financials, now is the time to do so. If your income has gone up significantly, you may need to make a large final deposit by January 15th in order to avoid penalties for under payment.  You avoid penalties by making sure you owe less than $1000 in tax after subtracting withholdings and credits or by paying at least 90% of the tax for the current year, or 100% of the tax shown on the prior year's return, whichever is smaller.  You can also discuss ways to reduce your tax burden.  Tax accountants often suggest purchasing equipment or paying certain bills ahead, but make sure you are considering all your cash flow needs before you do so.

If you have employees, you will want to verify their current mailing addresses so you system is up-to-date before W2s are prepared.  Make sure you look for any fringe benefits which need to be reported on the W2s.  This includes moving expense reimbursements, educational reimbursements, health and life insurance and transportation subsidies.  If the employees have a company car, you will need to know what their personal usage was as this is another fringe benefit which must be taxed. You should also look at which vendors will need 1099s and make sure you have their addresses and W9s in hand.

If you have inventory, now is the time to schedule your physical inventory count.  Make sure you have sufficient staffing and think about ordering food to make it more fun for everyone.

It is also a good time to start preparing your budget for 2016.  What are your goals for the year? What were your major accomplishments this year? What changes need to be made?  Setting aside a day for strategic planning is a good way to get this done.

Take a look at your website and make sure all the links still operate and whether it still properly reflects your brand.  If social media is an important part of your marketing efforts, create a calendar for the next year.

Few entrepreneurs like tax planning and organizing, but doing so will help keep your small business moving forward,

Tuesday, October 27, 2015

What departments do you wish your small business had?

If you worked for a large corporation and you had a legal question, you could contact the legal department and get the answer.  The same would be true of accounting questions or human resources.  Small businesses do not have the luxury of departments such as these although there are more and more outsourced options available to fill these needs.

As a small business owner, what department do you most wish you had?  I really wish we had an IT department.  I am not very tech savvy and it would be so nice to have someone to call when my Chrome starts acting weird or I can't get a program to load properly.  There are lots of computer and IT small businesses out there, but I have yet to find one who is really helpful with software related issues.

We provide outsourced accounting, bookkeeping, payroll, sales tax and CFO services and we know of firms who provide outsourced human resources services.  Legal services are always easy to locate although we recommend you look for an attorney with business experience.  There are plenty of tax accountants available to assist small business owners and we suggest you make sure the provider you select has experience with the type of business you are running.  Not all businesses are alike and if you are running a farm, you want a tax accountant who understands taxes for agriculture.  Marketing is another area which causes difficulties for small business owners.  Finding a firm who understands and operates within your budget is important.

There are ways to get the department you need for your small business but make sure to do your research and pick the right provider.

Thursday, October 22, 2015

How can a small business owner sleep better?

There are many things that keep a small business owner awake at night: their family, their bank account, their employees and their business.  How can they rest easier?

Finding business/life balance is tricky.  It really can't be avoided when a business is in the start-up phase but realizing there is an end to the imbalance can help.  Once the business is stable and cash flowing on its own, hiring employees and outsourcing tasks can ease the owner's burdens and free up time for family.

Getting the business to the point that the bank account is no longer a worry requires a solid business plan, regular reading of the financials and making changes as needed and keeping clients or customers happy so they keep coming back and bringing their friends with them.

Keeping employees off your mind requires hiring the right people, training them properly and rewarding them appropriately.  Sites like zapposinsights or the Disney Institute can give a small business owner ideas on how to develop an employee training strategy and a business culture which will eliminate some of the worries of being an employer.  Having the right people helping with payroll processing, payroll tax filings and human resource issues is also good for reducing employee related worries.

Most small business owners treat their business like a family member so they will always worry about it.  Doing some regular risk management planning and surrounding themselves with trusted advisors like an accountant, banker, insurance agent and lawyer can help reduce their concerns.

Knowing that you have people who have your back can help anyone sleep better!

Thursday, October 8, 2015

Protecting your assets-sometimes the little things are dangerous.

We talk about risk management and safeguarding your assets from time to time on this blog and we try to stay as current as we can on the subject.  I set through a webinar today on internal controls and one thing that struck me in the technology section was the risk of carrying around information on a flash or thumb drive.  This is a common practice and one we use regularly.  I learned today how to encrypt such a device.  It is easy to do and the link here will give you the details.

Monday, September 21, 2015

How to handle marketing and advertising for your small business

Unless you are a marketing or advertising expert, one of the most difficult and expensive issues for a small business owner is how to handle those tasks.  This is a crucial issue for a start up and one a potential business owner must figure out before opening a new business.

No matter how great your product(s) or service(s) are, your business won't be successful if people don't know you exist which is why marketing and advertising is so important for a start up.  If your new business is service based and your overhead and personal needs are minimal, then you may be able to get away with organic growth and word-of-mouth advertising.  For everyone else, you need to have a solid marketing plan which should involve some expert advice.

The marketing plan is part of most business plans and the more detailed, the better.  Who is your target market?  How will you find them?  How will they find you?  Will you have a storefront?  Does the location fit your target market?  Do you need a ecommerce website?  Who will develop it for you?  What kind of promotional materials do you need?  Have you developed a comprehensive brand?  These are all questions a start up needs to answer and hiring an expert to guide you is recommended so you don't make mistakes.

Once you have your plan developed, you will want to track the results.  You should be asking every customer/client/prospect how they found you and track this information on a spreadsheet or database or CRM program so you know what is working and what is not.  Marketing and advertising will always require some trial and errors but tracking results will eliminate a repeat of the errors.

Starting up a new business is usually expensive and many entrepreneurs try to reduce costs by doing it themselves.  Skimping on advertising and marketing can be a mistake unless you have the working capital and time to grow your new business slowly.  Get some bids from your marketing consultants and make sure you have a good fit with whoever you select.

Like most of our previous posts regarding how to successfully launch a small business, the key to successful advertising and marketing is planning and tracking.  A successful entrepreneur plans carefully, tracks the numbers, data, metrics and adapts accordingly.  Even though many people dislike this part of running a small business, it is a key to success.

Friday, September 4, 2015

Should you hire friends and family to work in your small business?

Many small business people turn to friends and family to fill their employment openings.  This is usually a bad idea.  Many people find it difficult to act as boss to friends and family and many friends and family find it difficult to act as employee to someone they are friendly with.  This often ends a friendship and puts strains on a family relationship.

The main difficulties people experience with hiring friends and family is separating the personal relationship with the professional.  Your sister may not look at you and see her boss, she sees the big sister who always bossed her around. Your friend is used to being an equal and you may find it difficult to act as boss.  If you have other employees, a friend or family member may undermine your authority.

If you do decide to hire friends and family, consider the skills you need for the position you are filling and select the person with the best fit.  Using a family member who offers free labor is not a good idea if they lack the skills needed to be successful.  Putting together a job description with skills required for the position is a great way to determine if your friend or family member has the necessary skills.  Having a written contract and using a three month trial employment period is a good way to make the relationship formal.  Have everyone fill out the normal new hire forms, whether they are friends, family or a regular employee.  Understand that if you have other employees and you offer them paid holidays or sick leave or paid vacations, then you must offer this to friends and family as well.  You must not offer your friend or family members more than what you are offering regular employees either.

There are tax benefits to employing family members.  If the business is a sole proprietorship or a partnership where both partners are spouses, then children, spouses or parents are not subject to FUTA (federal unemployment tax).  Children under the age of 18 are not subject to FICA taxes (social security and medicare).  All are still subject to income tax withholding.  On a federal level, children of small business owners are not subject to as many limitations as to the number of hours and days they can work.  You should check with your state regulations as they may differ.

Consider all the pros and cons carefully before hiring a family member or friend to work for your small business.  While you may think they will have greater loyalty to you and our business than a stranger would, the personal relationships may complicate the work relationship to an extent it is crippling.

Wednesday, August 26, 2015

How to become a successful employer?

So you have launched your small business and have grown to the point that you need employees.  How do you go from being a solo entrepreneur to a successful employer?

The first thing you need to do is figure out what the job looks like.  What tasks will the employee be responsible for?  What skills are needed to accomplish the tasks?  Is the position going to be full-time or part-time?  Hourly wage or salary?  Writing a job description is a task few entrepreneurs enjoy, but it really is helpful.

Next, educate yourself on employment laws.  You don't need to be an expert, but you do need to understand the basics and you do need an expert to help you navigate all the complexities.  The IRS has a good site to learn the basics.  Publication 15 (Circular E) is a good place to start.

We recommend using a payroll processor or hiring an expert to get your payroll system set up properly.  Training on how to file and pay payroll taxes is a must if you are going to process and file payroll taxes yourself.  The federal government takes payroll taxes very seriously (seemingly more so than income taxes) so it is important to take this job seriously.  Many small business owners fail to understand that taxes withheld from an employee's check are his/her money and not submitting the taxes to the appropriate authority is considered theft.  It is often best to leave the whole processing of payroll and filing of taxes up to the experts and this frees up an entrepreneur's time for revenue generating tasks.  There are many big processors like Paychex and SurePay as well as small local providers.  Some provide portals where the business can enter hours and then the processor handles the rest. While many small business owners are loathe to spend money on outside services, this in an area where you don't want to make mistakes as they can be costly to the point of sinking a business.

Another issue to be dealt with as an employer are the tasks a human resources department deals with for larger companies.  There are many service providers who can handle this for a small business on an outsourced basis and we do recommend having someone like this as a resource.  There are many things you legally cannot ask a job applicant and many business owners are not aware of these questions and limitations.  Understanding laws surrounding the hiring process, maternity leave, family illness, drug testing, and termination routines can prevent actions which can result in painful lawsuits for a small business owner.

Once you have found the right employee, you will want to take the time to properly train him/her.  Again, it is helpful to put together an organized, thoughtful training program.  Well trained employees make fewer mistakes and are happier than those thrown into a job.  Having regular performance reviews may sound tedious, but they give both the employer and employee the chance to connect and problem solve.

How do you become a successful employer?  Do your homework, hire an expert to get you started strong and take the time to find, train and retain the right employee.

Wednesday, August 19, 2015

How to get a bank loan for your start up

If you have answered the previous questions in a way that supports your ambition to open a small business, the next thing you need to think about is how you will finance the start up.  A bank loan is the traditional source of funding so let's talk about what you will need to do to get the loan.
First you will need to create a business plan.  Banks will always require a full business plan for a start up and creating one takes a good chunk of time, even for professionals.  We generally expect a plan to take 40-60 hours to complete and a novice can expect it to take much longer.
Next you will need to supply the bank with information about your personal finances.  For most small business start ups, the owner is as important as the business plan so if you have a poor credit history/rating and little personal equity or cash, then a bank loan is not the way to go.  The bank will ask you to complete a personal financial statement which will detail all your assets and debts and sources of income.  They may ask for documents, like bank statements. to verify this information.  They will also ask for three years of personal tax returns to verify your income and they may ask for a current pay stub.  
Pull together the resumes of all pertinent owners and employees. The bank will want to see that you have amassed the proper skills to run the business successfully.
Have a folder with all your legal documents: articles of incorporation, business licenses and registrations you may need, operating agreements, franchise agreements, commercial leases and any other relevant contracts.
You will need to be able to explain to the lender what you will be using the loan proceeds for and how the business will repay the loan.  Have a detailed list of  any assets you expect to purchase including price and anticipated supplier.  
Be prepared to explain who will be handling all the important tasks in the business. 
It can be very helpful to hire an expert to put together the business plan, but the owner(s) need to comfortable with the details and assumptions in the plan so they can answer the questions put forth by the lenders. 

Getting a bank loan is one of the most stressful parts of starting a business, but if you pull together all the expected information and prepare for the meeting with the lenders, you can succeed.

Monday, August 10, 2015

How can you insure the success of your business expansion?

When you started your small business, you probably handled most of the tasks.  You interacted with customers/clients, took care of the accounting, dealt with the marketing, made the trips to the bank and office supply store and maybe even cleaned the place.  Your business has now grown to the point where you have staff to handle many of these jobs and you are considering expanding.  What do you need to do to insure the success of this expansion?
The first thing you need to do is to make sure your business model is really fine tuned before you expand so make note of the mistakes you made with your initial opening. No matter how much you plan, there will be mistakes so use them to your advantage by learning from them.  Were you overstaffed?  Understaffed?  Did you schedule your grand opening too soon?  Did you not advertise your grand opening enough?  Talk to your staff and customers and take their thoughts and ideas into consideration. Make note of everything that went right as well and use this information to plot your expansion.
The next thing you need to do is to write an business plan for the expansion.  Most likely if your initial start up was a success, you had a business plan to drive the company launch. This expansion plan will be easier as you will have real numbers to use.
One major thing to consider when expanding is management.  When you have one location, you, the owner, can monitor everything very closely.  You will not have this luxury when you open a second location.  You can't be at two places at the same time so you will want adequate staff to maintain control.  This may require more money for payroll.  If your plan includes further expansion, this will become even more of an issue.  We have seen numerous cases where a successful business opened a second location and continued to be successful but then opened multiple additional locations and failed.  Make sure your plan shows adequate cash flow to allow for a qualified manager at each additional location. In addition to determining the cost of additional staffing, you will also need to consider the additional debt service your expansion make incur.
You will want to consider the location of your expansion.  Depending on the type of business you are running,  you don't want to new location to steal sales from your original location.  Consider whether the culture is different in your proposed new location.  What works in one community may not in another so do your research.
Supply chain is another issue to deal with when planning an expansion.  Do your existing suppliers have sufficient capacity to handle your additional purchase needs?
Another issue is whether to start from scratch or acquire an existing business when expanding.  There can be cost savings in the latter as well as built in management possibilities.
Finally, think about your energy level and whether you can adequately manage your expanded business.  The short term start-up period will be hectic, but the overall time commitment must be considered as well.
You may find economies of scale from an expansion which will abate some these additional costs, but you won't know this without crunching the numbers and completing the plan. Take your time, do your research and consider all the elements before expanding your business and you will insure your success.

Wednesday, August 5, 2015

How do I finance my start up?

We are on question eight of our list of questions you should ask and answer before starting a business!  This week we are dealing with how to finance your start up.  The traditional way is with a bank loan.  You will need a business plan to apply for a bank loan and you need to know what your personal credit score is.  Since the business is new, the bank will be concerned about your personal resources as a backup for paying back the business loans.  Do some research and pick a bank which can tap into SBA guarantees as they can take on riskier loans.
Another source of funding is friends and family.  It can be difficult to ask for their help, but using crowdfunding sites can make it easier.
You can also use peer-to-peer funding by using sites such as or Look into local non-profit group such as Community Development Corps.  They often will provide loans up to $150K with very reasonable rates and terms.  The SBA also oversees micro-lending programs which are also run by local non-profits.  Micro loans can be used for working capital which is very helpful for many start ups.
If you are willing to give up part of your ownership, you can consider equity investors.  Sites like Grow Venture Community, Microventures and Angel List can connect your with interested investors.
For certain types of businesses, look into factoring in which you sell your accounts receivable to a business in return for cash upfront.  This is helpful if you must offer extended terms to your customers.  A similar device is Purchase Order or Merchant Cash Advance financing in which you sell your future sales revenue (PO) for cash upfront.  Both factoring and PO financing concern themselves with the credit history/rating of your customers rather than your business.
Finally, many small business owners rely on credit cards to fund their start ups.  Be very careful with this method as you can quickly move into sky high interest rates which usually guarantee failure.  Also be cautious with self-funding.  If you use up all your personal resources, banks are unlikely to fill in the gap should you need additional capital.  They prefer to lend the initial funds and have you fill in the gap with your own money.

That is just a brief primer on how to fund a new business. Let us know if  you have had any positive experiences with any of these methods.

Wednesday, July 22, 2015

How to handle bookkeeping and accounting for a new business

We have been addressing the various questions an entrepreneur needs to answer before starting a new business.  This week we get to one of my favorites, how to handle bookkeeping and accounting! I know that most people do not enjoy these tasks, but the invention of accounting software programs has made it much easier for the non-accountants in the world.

QuickBooks is the most popular program out there, but Sage, FreshBooks, Xero and Wave are just a few of the alternatives.  Some can be used on an iPad or mobile phone which is nice for the entrepreneur on the go.  I recommend doing some research as to the functionality of each program to decide which is best for your business.  Some do not work well for inventory or certain types of businesses like restaurants.  Consider whether a desktop version is what you need or if cloud-based is a better choice for you.

Once you have selected the correct program, hire an expert to get you set up and trained.  I cannot tell you how often we are hired to clean up some a QuickBooks file.  We usually find that the problems are not due to sloppiness or a lack of intelligence by the user, but rather a lack of understanding of accounting.  The programs are created to reduce the need for an understanding of debits and credits, but some issues, like inventory and payroll, do require more knowledge at least during set up.  Set up and training is always cheaper than clean up!  You also may need expert advice on the best way to enter the data into your accounting program.  If you have a POS which will track the details of your sales and inventory, you may not need all the detail in your accounting program.  You will need the dollars entered so having an expert guide you through the process will insure that the information is correct but not redundant.  This is very important when time and dollars are limited during the start up phase.

Finally, make sure to select your accounting program and get it set up and running before you open your business.  Many entrepreneurs leave the accounting until a later stage in the start up process because there are so many things to do when opening a business.  This is a mistake as you will not be able to track how your start up is doing if you aren't doing the accounting from day one.  Too many owners find they have wasted money on packaging or office supplies or other unimportant expenses because they were not able to keep a close eye on the totals via the accounting process.

Should you try to save money and do the accounting yourself or should you outsource the task or hire a bookkeeper or accountant to do it?  Be honest with yourself: if you are not going to keep up with it yourself then find someone else to do it.  It really is an important part of running a successful business so starting strong and staying on top of it is crucial.

Thursday, July 9, 2015

Should I have a partner for my small business?

Beth and I are fortunate to have a really great partnership so in my experience, having a partner makes owning a small business much easier.  We have been able to split duties easily and what scares me doesn't scare her and what makes her nervous doesn't bother me.  We have seen other partnerships which have not been successful.

Being a solo entrepreneur can be stressful as all the decisions must be made by the single owner. The positive is that there is no need to compromise: the solo entrepreneur gets to decide exactly how the business should be run.

Take your time to get to know a potential partner.  Have detailed conversations about your business philosophies: how to handle employees, problem customers, borrowing money, raising prices, etc.  Determine how you are going to handle disagreements, especially if you have equal ownership.

One of the most important things you can do to insure a successful partnership is to put together a detailed operating agreement.  We have talked in early articles about the kinds of things you should include in an operating agreement and the best way to put one together.  See  How to create a successful partnership

If you have owned the business by yourself it can be difficult to share the decision making with a partner.  The business is like your child and it can be difficult to let go of full control. Make sure you test out your ability to do so before you sign any legal documents and form any partnerships.

Having a partner can give you additional funds at start up and during tines of expansion.  It gives you additional thoughts on how to solve problems and more hands to get the work done.  Just make sure you pick the right partner so the business and the partnership is a success and not a nightmare.

Wednesday, June 24, 2015

Legal issues to consider when starting a business

We have been discussing questions a potential business owner should ask and answer before starting a business.  This week we will tackle legal issues.

Most small business owners are operating on a tight start-up budget and do not like to pay for accounting or legal help, but hiring a good accountant and a good attorney can be crucial to the success of the business.  Here are a just a few situations which using an attorney is advisable:

  1. Determining and implementing the proper business structure.  Should you be an LLC or an S-Corp or a C-Corp?  If you have partners, have you put together an operating agreement?  Do you need a buy-sell agreement?  
  2. Do you have Intellectual Property?  Do you need a trademark, copyright or patent?
  3. Do you have employees?  Do you need employment contracts, non-disclosure agreements, non-compete agreements?
  4. Do you have independent contractors?  Do you need contracts for them (including non-disclosure)?
  5. Do you need contracts for your customers?
  6. If you have a storefront, are there zoning issues you need to consider before signing a lease or purchasing the property?
  7. If you are leasing property or equipment, do you understand all the elements in the lease?
  8. Do you know what licenses and business registrations your type of business/industry requires?
This is just a short list of issues that an attorney can assist a small business owner with.  We have seen several instances where a business failed because the partners didn't have a detailed operating agreement and the lack of one effected their ability to run the business successfully.  We have seen people sign leases without understanding what triple net meant (which greatly underestimated the cost of the lease) or the actual length of the lease (required renewal periods).  Finding a lawyer specializing in business law can insure that your business is set up properly from the start and that you understand everything you are signing before you sign the document.

Next week we will discuss whether you need a partner in your business start-up and things to consider when choosing a partner.

Monday, June 15, 2015

How much money do I need to start a business?

We have been working our way through a list of 14 questions an entrepreneur should ask before starting a business.  Today, we are tackling how much money you will need to start your business.

If you read last week's article, you know that you will need to create a business plan for your start-up and the creation of this plan will answer this week's question: how much money do I need?  Most business plans produce a monthly Profit & Loss for year one and two and an annual P&L for year three.  These pro-forma statements, as they are called, are basically budgets for starting your business.  The more effort you put into researching what things will cost, the more accurate the budget or pro-forma P&L will be.

How do you get the information you need?  Go through the process you would take to actually purchases the things you will need for your business:
1. Price out rent if you need a physical space.
2. Call insurance agents to see what types of insurance you will need and what it will cost (and what the timing will be: all upfront or is there a payment plan?).
3. Put together a list of all furnishings, fixtures and equipment you will need and shop around to see what this will cost.
4. Figure out what you need for telephones/communication devices and price that out/
5. Determine what kind of website you will need and find the right developer for that process.
6. Contact your state to determine what kind of licenses or permits you may need and what the cost will be.
7.  If you will have employees, contact an appropriate service provider to help you determine what the cost will be to process payroll and handle payroll taxes.  Do not attempt to handle payroll on your own if you have never been an employer before.
8. "Shop" for office supplies so you know ahead of time what all the paper, toner, pens, envelopes, business cards, notepads, etc. will cost.  This adds up much faster than most people realize!
9. Meet with an advertising expert if you will need assistance with advertising and marketing help to develop the budget for this portion of the business.

If you are manufacturing a product, you will need to go through another process to determine the costs to produce your items so you can price them appropriately.  You will also need to put together a sales forecast so you can determine how fast the money will be coming in from sales compared to how fast it will be going out for the items listed above!

Remember to take into consideration any terms you may have to offer customers.  If you aren't going to collect payment at the time of sale or service, you will need more working capital for cash flow.

A final caveat:  it always takes longer to get to breakeven than entrepreneurs anticipate so make sure you do a worse case scenario when creating your business plan so you have enough working capital to get to that key point in your start-up.

How much money do you need to start a business?  It varies widely-service based businesses need much less than product based.  Taking the time to create a detailed and accurate business plan will answer this question and give you a better chance at success.

Tuesday, June 9, 2015

Do I need a business plan?

We have been talking about the questions a potential entrepreneur needs to ask and answer before starting a business.  Last week we discussed the keys to success for any business.  This week we will be talking about the need for creating a business plan before starting a new endeavor.

Do you need a business plan?  Yes.  That is the only correct answer.  How elaborate a plan is the only question needing an answer.  If you are going to a bank or a venture capitalist or crowd funding, then you will most likely need a full blown business plan.  If you are self funding, then you won't need a full plan, but you still need the pro-forma statements and the marketing plan.  I can't tell you how often small businesses fail because the revenue comes in much slower than anticipated and they lack adequate working capital to make it to the break even point.

A detailed and specific marketing plan is needed to help determine exactly how you expect customers/clients to find your new business.  Your target customer needs to be identified and the proper method of reaching them determined.  You may need some expert assistance in determining this and creating a business plan will help you realize this.

The pro-forma financial statements are key to insuring that you know how much money you will need for your start-up.  We recommend creating one version which is your best estimate of what will happen, another which is the worse case scenario (revenue comes in at half the pace you expect) and another which is best case (revenue comes in much faster than anticipated).  The best case scenario can become a worse case if you haven't planned for it and lack the working capital to fulfill orders.

Do I need a business plan for my start-up?  Absolutely.  Can I create it myself?  Perhaps-there are numerous software programs which you can use to do so.  We are fortunate in our area to have a class offered which walks potential small business owners through the process of writing a business plan.  We often are contacted by participants of this class who have written most of the plan and just need assistance getting the financials finished.

Next week, we will delve into how to determine how much money you need to start-up a business.

Wednesday, June 3, 2015

Keys to succeeding as a small business.

We are talking about the questions a potential small business owner should ask and answer before launching a new enterprise.  Last week we tackled what skills a person needs to be a successful small business owner.  This week we will talk about what the keys are to succeeding in a small business.

The first thing any business needs, large or small, is leadership.  The person in charge, whether the CEO of a Fortune 100 corporation or the owner of a Mom and Pop diner needs to be able to lead the business effectively.  That doesn't mean the leader doesn't seek advice from others, it just means the buck stops with him/her.

If the business has more than one owner, the next key to success is to properly manage the partnership.  We have talked in previous articles about the need to put together a comprehensive and detailed operating agreement.  Having a lawyer review the operating agreement is also very important to make sure the language will hold up in court.

The third key to success is the underlying concept of the business itself: what problem does the new business solve?  Is the concept full thought out and properly described so customers/clients understand what problems you can solve for them?

After verifying that the concept is sound, a successful enterprise will have a good business plan which includes a detailed and specific marketing plan.  Having a good product or service will do the owner no good if there isn't adequate working capital to make it through the start-up phase or if the marketing isn't sufficient to allow customers to find you.

Another important element to consider is risk management.  This is more important for a small business than a large, I would argue.  Who will run your business if you become ill or injured?  We have written articles previously about how to set up a proper emergency plan for your small business and this should ideally be done before the doors even open and then refined as the business grows and changes.

So what are the keys to succeeding as a small business?  Having an effective leader, managing the partnership properly, founding the business on a sound concept, creating a detailed business plan which includes a well thought out marketing plan and making sure you are prepared for any emergency.

Next week, we will talk about the business plan.

Monday, May 18, 2015

Questions to ask before starting a business

Last week we listed a series of  14 questions an entrepreneur should ask and answer before starting a new business.  This week we will tackle the first and most important question: do you have what it takes to be a business owner?

1. Can you make decisions in a decisive and timely manner?
2. Can you take responsibility for the mistakes and bad decisions which every business owner makes?
3. Will you be doing something you are passionate and knowledgeable about?
4. Are you and organized person?  There is no getting around the paperwork and bookkeeping for a small business owner!
5. Do you finish what you start?
6. Do you have family, friends and mentors to support you?
7. Can you handle new things, unfamiliar things, scary things?
8. Can you take advice? Are you open to new ideas, others' ideas?

The typical small business owner wears most, if not all. the hats during the start up phase, but he/she cannot go it alone.  Every successful entrepreneur has a support system and taps into it for advice and strength.  The small business owners who succeed are the ones that have a plan, follow it, adapt it as needed, ask for help as needed and recognize their mistakes, learn from those mistakes and moves on from them. They are knowledgeable about core elements of the business, find and listen to experts in the areas they are unfamiliar with. The ones who fail jump into business without a plan, don't listen to the experts, blame everyone else for their problems and don't learn from their mistakes.

What other characteristics do you think a successful small business owner needs?

Wednesday, May 13, 2015

Questions to ask before starting a business

Here is a list of questions every entrepreneur should ask before starting a business:

1. Do I have what it takes to be a successful small business owner?
2. What are the keys to succeeding in business?
3. Do I need a business plan?
4. How much money do I need?
5. What legal issues should I worry about?
6. Should I have a partner?
7. How should I handle the bookkeeping and accounting?
8. How do I finance my start-up?
9. What do I need to get a bank loan?
10. How do I become a successful employer?
11. Should I hire friends and family to work for me?
12. How do I handle marketing and advertising?
13. Do I need an accountant?
14. Do I need a lawyer?

We will tackle each question over the next 14 weeks which should keep us busy!  Stay tuned and let us know if you have any other questions we should add to the list.

Wednesday, May 6, 2015

How to lose a client by not telling the whole story

My husband and I just purchased a new home and the process of getting the loan ended up being a nightmare.  We talked to the lender on the phone initially as the new home is two hours away from our existing home.  We walked him through our income, assets and liabilities and he told us this was a "no-brainer" which we knew.  We are conservative people and while our income and assets have grown, our debt has shrunk.  He said he would make this even easier as my husband's salary was sufficient to get the loan, so they wouldn't need to use my income.   Since I am self-employed as one of the owners of E&S Entrepreneur Advisors, LLC, a great deal more paperwork would be required to verify my income.

This all sounded great.  We got an initial checklist of items the lender would need to process the loan and it was the usual things: two years tax returns, copies of bank statements, copies of pay stubs for my husband, copies of investment summaries and details on our current home mortgage.  We were able to supply all this and that part was painless.  A week later, we got another list from the loan processor.  It had several items which were duplicates of the information we had already supplied as well as requests for explanations for some of the transactions on our bank statements.  We didn't find that to be difficult as they were just reimbursement checks my husband gets for this business travel and the monthly check I get from E&S Entrepreneur Advisors.

The loan processor them wanted copies of the checks for these deposits.  In the good old days, a person would just have to go to a desk drawer and pull out the bank statement for that month to get the checks.  Today, you have to go to the bank to get the check copies.  My husband stopped at the bank and got the requested check copies.  A month past and we got another list of items needed which included the current month's bank statement and investment summary.  We sent those off and then received another email asking for explanations for the deposits in the current checking statement which were again travel expense reimbursements and my business check.  Once again, they wanted check copies.  They also wanted a copy of my partner's K1 from the last tax year.  I called the lender to inform him he would not be getting Beth's K1 since she was not part of the family and would have no ownership in our home.  The lender we were using (referred to us by the realtor) packages and sells all their mortgages and must have a very detailed internal audit staff as the amount of detail and verification they required was staggering.

I was an internal auditor for a bank holding company at one point in my career so I completely respect the need for proper paperwork and I do admire the lender's willingness to follow protocol.  What I found frustrating was his lack of understanding as to what each item was to verify and what level of detail was acceptable.  We reached a point where we were going to start the process over at a different lender, even though that meant delaying the closing, as we just didn't want to deal with the loan processing requests any further.  That finally got the lender's attention and the requests for back up stopped.  We closed on the loan today, and that process was painless as the title company was very efficient.

Why do I describe this process as a nightmare?  The lender set it up the process as one that would be easy, painless and it was anything but that.  He over-promised and under performed which resulted in an unpleasant experience for everyone.  The loan processor was incompetent and appeared to just re-send the same request without striking off the items we had provided.  Had the lender set us up to expect that they would need a lot of back up information and we would need to send check copies and other paperwork, we would have been annoyed, but not surprised.

Be realistic with your customers about the process and the paperwork involved.  Sometimes a process is tedious and it cannot be avoided, but if you let a customer know ahead of time the work involved and the reason behind it, they will be prepared.  It is like a well trained hostess at a restaurant: tell a diner that it will take 40 minutes to get a table even if you think it will take 30.  They will be happy when you seat them early.  If it does take longer than you expected, you will still seat them when you promised and they will be fine with that!

Monday, April 20, 2015

How to save your small business

Risk management isn't just for the big guys. It is even more important for the small business owner so take notes.

The first thing the small business owner has to think about is who can run the company if something happens to the owner?  Pick carefully and make sure they understand what they are getting into!  The next thing to do is put together a binder or excel spreadsheet or some kind of list so the substitute owner has the tools to run the business.  Who are the company's key contacts: bankers, credit card processors, suppliers, customers, lawyer, accountant......  What are their phone numbers and email addresses?  Make sure all these contacts know who you substitute is. It is probably a good idea to have your attorney put together some kind of authorization form so the substitute can act in your stead.

Next, make sure they have all your account information: log ins, user names, passwords, account numbers, etc.  Obviously this information needs to be protected so your identity doesn't get stolen.  Locked in a safe (substitute needs the key or combo) or written in a password protected document (substitute needs the password).

Next, make a list of all the tasks you take care of and when.  Keep a running log every day for a month of what you do and when so the substitute has a timeline to follow. If you have employees, make sure they are aware of your backup plans so they can be of assistance to your substitute.

Finally, have your substitute spend a day or two working with you so they have some hands on experience.  Have him/her read through your instructions to make sure they understand them.

Save your small business: plan for your illness or accident!

Monday, March 23, 2015

What do you need to succeed?

What does an entrepreneur need to succeed?  Determination and perseverance are very important.  A good business owner also needs to be able to admit when he is wrong or when she needs help.  Many entrepreneurs are daring and bold, but they also need to know when to follow the rules.  The government frowns on those who don't follow payroll laws or file their sales taxes on time.  They will even send you to jail if you don't pay your payroll taxes as required.  While being bold is generally a good personality trait for a business owner, the successful ones also value good planning and strategic thinking.  They surround themselves with good advisors and skilled employees if employees are needed.

Do you have what it takes to be a successful entrepreneur?  It takes more than just a great product or service idea.  It takes organization and some money for the start up.  Taking the time to develop a solid business plan and making sure you have adequate funding along with the daring will insure success.

Thursday, March 5, 2015

Communication skills

Beth posted an interesting article on her Facebook page recently about how to be a better listener.  This is a skill many of us need to hone and I wish this was mandatory for all those serving in a political office!

The article advises people to make one simple change when engaged in a conversation: focus on what is being said and not on what your response will be. This is a simple concept, but it is harder than it sounds.  Think about how often some of us have to restrain ourselves from jumping in before the speaker even finishes their thought!

The writer of the article advises people to learn to summarize what was just said before launching into a response.  Summarizing what was heard shows the speaker that you were really listening and gives the speaker a chance to clarify in case there was a misunderstanding. How often do you find that you weren't disagreeing with someone, you were just not communicating clearly!

Here is a link to the article:

The world will become a better place if we all become better listeners!

Tuesday, February 10, 2015

Good Communication is the key to a successful relationship

We operate best when we have good communication with our clients. We run into problems when the communication breaks down.  An example: a client decided to change from QuickBooks desktop to QuickBooks Online.  He signed up for the Online program and created his company and started entering information.  He didn't use the Import Desktop Data in QBO which would have brought in all the information already in the desktop QuickBooks.  He didn't ask me how to enter the inventory items manually and used Journal entries to do so.

So what is the end result: the books are wrong and he is going to have to pay me to clean them up.  This could have been avoided if the client had asked for my help before he launched into the transition. I admire people who are fearless in the face of new tasks and challenges, but I wish they would take a little time to ask for expert advice if it is available.

Another example: a client decided he didn't want to pay unemployment insurance for his employee, who happened to be a family member, so he told me he was going to make the employee a partner in the business.  He hadn't completed the paperwork to make this happen, which gave me time to give him some thoughts to consider: was the new partner going to have to buy in (existing owner had put quite a bit of money into the startup), how were they going to split the profits, how were they going to make decisions (the plan was to be equal partners).  After considering all this, they decided it was better to pay the unemployment insurance since the family member didn't have any money to purchase a portion of the business and the original owner really didn't want to share the decision making.

Third example: a group of business people were planning on opening a company together which would act as an umbrella for their individual enterprises.  We advised them to work through the steps of putting together an operating agreement to make sure they were all of the same mind as to the specifics of running the business.  It turns out, they all had very different ideas about what the business should look like and how it should be run.  They decided it was best to remain separate companies and we were able to save them a lot of headaches and legal costs.

If you have a relationship with an expert, take advantage of the expertise and ask for information first: look before you leap!

Wednesday, February 4, 2015

Sorry, things have been too busy around here!

No blogs in January for us as we were up to our knees in W2s, 1099s, sales tax filings, payroll tax filings and general closing of books for 2014.  It was a successful month for us but hectic and it required all of our management skills to get everything done.

How do we make sure forty-one business' get their books closed, paperwork filed and taxes paid on time with only three people?  We have a very detailed spreadsheet with each task listed and a specific person assigned to complete it.  We color code the tasks as they are started and then completed and add notes as needed.  This keeps us sane and provides backup should one of us fall ill and the others required to step in.

It also creates a timeline for planning the next time around.  We can go back and see what we had to do in the past, who handled it and what problems did we encounter.  As we consider whether we have the capacity to accept new clients, it is very nice to be able to look back at our busiest month of the year and determine if there is room for growth.

The end of January is always hectic and this year was no exception.  It was very satisfying to go through the spreadsheet on Friday afternoon and see that everything we were responsible for and in control of, was completed.