Best Practices: Employees Part II

This week we will go into greater detail on some of the laws and rules you need to be aware of before you become an employer.  As we noted last week, the Department of Labor and the State of Wisconsin have websites with all the information you need as an employer. 

Some things to look for on these websites:  The information you need to maintain in employment files for each of your employees, the posters you need to have displayed somewhere in your business, the rules about unemployment insurance (both state and federal) and the rules for filing and paying payroll taxes.

A key piece of information regarding payroll taxes: The Federal Government takes payroll taxes very seriously and failure to remit taxes withheld from employee paychecks is considered theft.  Falling behind on remiting payroll taxes has severe consequences.  Paying 1-5 days late can result in a 2% penalty, 6-15 days late brings a 5% penalty and 16+ days means 10% penalty.  Depending on the amount the business was to remit, this can be a significant amount of money.  The government can also proceed with civil proceedings such as filing liens against your property until the taxes are paid in full and criminal proceeding can and do occur and can result in imprisonment. 

The Federal Government is also allowed to go after personal assets if a business fails to remit payroll taxes even if the business is an LLC.  This is how seriously they take payroll taxes!

Again, the message to take away from this article is to do your homework before you become an employer.  There are many different payroll tax providers who will assist in setting up your payroll process or teaching you to maintain the system.  Unless you have experience with payroll, it is advisable to use one these experts to get you off on the right foot as an employer.

Best practices-employees

We thought it might be helpful to run a series called Best Practices.  We are often asked what the best way is to handle various business tasks so we have a lot a material available.  We will start with one of the trickiest areas of owning and running a business: employees.

The best advice we have regarding employees is to do all your homework first!  Decide what tasks you will be delegating to an employee and what skill set the employee will need to accomplish these tasks.  Next, create a detailed job description for the position.  We often see frustration on the part of owners and employees when there isn't a good fit.  Consider the core values or your mission statement when thinking about the skill set your employee will need.  If you need the employee to be able to sell, then make sure they understand this, are comfortable with this and have the personality and experience to achieve this. 

Once you know what the position will look like and what skills you will need, you need to be ready to hire an employee.  If you have never had an employee before, there are a lot of rules and regulations you need to be aware of before you start.  Brush up on the types of questions you can legally ask and which ones you cannot ask.  The US Department of Labor has a good site to get you started: http://www.dol.gov/compliance/guide/   You will also want to check with your state to see what additional laws you need to comply with.  The State of Wisconsin has a good website for employers:  http://ww2.wisconsin.gov/state/employment/app?RESPONSE=/jsp/assistance_emp.jsp You will need to get set up with the Federal and state government's to have employees and get the proper identification numbers and payroll filing sites set-up.  You will also probably need Worker's Compensation Insurance so check with your insurance agent. 

When you have the job description complete and you understand all the rules you need to follow to be an employer, now you can set out to advertise for the position.  For many entry level or part-time positions, advertisements on craigslist or local registry may be sufficient.  For positions requiring more education and experience, you may want to consider using an employment agency to do the initial screening for you.  Make sure you understand what the costs are upfront so you can decide if it is a good use of your money. 

The summary for this article:  the best practice for being an employers is to do your research and homework first to make sure you understand everything you have to do and to insure that you hire the best person for the job. 

Why do small businesses fail?

Even though the economy is starting to turn around, we still see too many small businesses closing their doors.  Why?

• The business didn't take the time to understand what set it apart from it's competitors or didn't articulate that to the market clearly enough.
• The business wasn't set up for success.  A well developed business plan wasn't created which listed all the start up expenses and assets required and located the funding for these expenditures.
• The business didn't know what it's break even point was and didn't systematically determine it's pricing.
• The owner wasn't prepared for how hard a small business owner has to work and the sacrifices that need to be made during the start up years.
• The owner lacked the people skills to effectively deal with employees, customers and vendors.
• The business didn't have proper financial information to make decisions and change strategies.  Good financial statements are NOT just for your tax preparer to use.  They help you understand what is or is not working in your business.
• The owner had insufficient or irrelevant experience to run their own business.  Many people who have always been an employee have no idea what it takes to be a business owner.  The owner of a small business has to know about labor laws and tax codes and licensing requirements and record keeping rules........

It breaks our hearts every time we see a business with a good product or that offers good service fail because it didn't have the proper infrastructure or organization.  We have often thought business owners should be required to take a class so they do understand all the rules and regulations they need to follow and all the other things they need to understand. 

Giving Thanks leads to Small Business Success

In this week of Thanksgiving, I want to take a few minutes to reflect on Giving Thanks in the context of running a small business. I recently acquired two new motivational posters to hang in my office along with my business Vision Statement. These are visual reminders about the reason that I am in the business I am. Both of the motivational posters have a line in them regarding being thankful. 

In a customer focused business model, who are the people that you should be conscious about thanking?

Thank your customers. Thanking your customers not only shows your appreciation but makes you approachable so that you can build a relationship with your customers which will keep them coming back. This relationship also allows you to ask for feedback in order to keep your company focused on your customers’ needs.

Thank your vendors and subcontracted service providers. Let them know that you appreciate the role they play in providing the services and products which allows you to run a successful business. Cultivating strong vendor relationships creates a win/win situation and allows you to provide better service to your customers.

Thank your employees. Let your employees know that they are an integral part of your team. Allow them the opportunity to shine and contribute to your business success. 

Thank your business acquaintances.  Drop a note of thanks for providing a referral or for sending a good article which you were able to apply to your business. The best way to encourage the continuation of behavior that you appreciate is to genuinely provide some positive reinforcement. A thank you is just that.

Thank your partners. They are the ones in the daily grind with you and they are often the last ones thanked for their efforts.

Thank your family and friends. Every successful entrepreneur has people in their lives who patiently endure long hours and endless conversations about work and who pick up the slack in our personal lives. Be sure to thank them for the effort.

Is there anyone else that you would include in this list? Give Thanks!

The Dangers Small Businesses Face When Hiring Employees

Employees are essential to the success of most small businesses and yet they are also one of the greatest sources of difficulties for small business owners. I wish the was some law requiring business owners to get proper training before they hire employees because there are so many things to know and so many problems can arise if you don’t handle employment issues correctly.


The IRS has a whole area dedicated to small business http://www.irs.gov/businesses/small/index.html and the State of Wisconsin has its own site http://dwd.wisconsin.gov/dwd/employers.htm We recommend all business owners read the information on these sites BEFORE they even begin the hiring process. There are rules about what you can ask potential hires, there are guidelines to help you determine if the worker you are thinking of using is a subcontractor or an employee. The majority of situations will result in an employee, not a contractor and business owners will save themselves a great deal of trouble if they make this determination ahead of time. Even part time, occasional or temporary help usually fits the description of employee. Your accountant, attorney, marketing advisor are all contractors for your small business. The people answering your phone, sorting your mail, staffing your events are almost always going to be categorized as employees by the IRS.

There are rules about what employment related signs you must post at your business, paperwork your employees must file out and you must retain and file with the appropriate agencies (federal and state). There are schedules to meet as far as filing and paying payroll taxes which if you fail to follow will create large penalties and interest for your business and possibly for the owner personally.

There are many choices for processing payroll: online vendors such as Paychex, local payroll processors, and local accounting firms. Business owners should do their research and determine if it makes more sense for them to outsource this task or learn to do it themselves. Whatever the decision, education and training are essential to insure that all the rules are followed and all the schedules met.

Don’t lose money because you did not do your homework ahead of your hiring!

Thoughts on Management and Parenting

Last week marked the bittersweet event of dropping off my (Beth's) oldest child at college. While slightly sad that I am no longer essential, I am proud to see how confidently she is managing this transition. I have been preparing her for this independence for years, gradually giving her more and more responsibility in the home: allowing her to decorate her bedroom as she saw fit (within my parameters of course), requiring that she make her own breakfast and lunch, and making sure that she knew how to cook, clean, sew, shop, arrange appointments, be organized, and most importantly, make decisions. Now is the time to let her try out her skills on her own and accept the mistakes along with the victories. My thinking is that if she was struggling and needing me too much at this moment, then I haven't done my job well as a parent.

This is not very different than the role that a good manager plays in the business setting. A good manager sets the tone, the direction, and the expectations and then allows her employees to assume more and more responsibilities. The entire purpose of having employees is to multiply the amount that can be accomplished by one person alone. Employees need to be provided with clear job descriptions and good training, and then gradually a good manager has to back off and allow the employees to try things on their own, learning from their mistakes en route to the accomplishments. Delegation can be difficult. Accepting that an approach might be different from the way you would have done it but nonetheless effective can be difficult. Both extremes, micromanaging and no managing, lead to nonproductive employees. But an effective manager develops competent employees who see the vision and help to move the company forward. Are you doing your job well as a manager?

Improved Oversight Needed for New Businesses

Calling all you bankers, lawyers, accountants and other service providers who help people start their new businesses, please help us out.


We are finding far too many small businesses that have really created a mess in their first year or two of business because they didn’t understand some of the requirements of the particular business entity that they chose and other aspects of running a business. I am talking about payroll issues and accounting problems primarily.

A Sub-S corporation has different tax and payroll issues than a single member LLC and if an entrepreneur operates all year on their own and only meets with an accountant or tax preparer during tax season, there may be numerous problems with serious consequences including large penalties, fines, and interest which simply don’t need to occur. Many owners don’t understand all the rules surrounding employees and payroll and run into problems with withholdings and taxes and paperwork. Sure, it is ultimately their responsibility to know the rules, but I think we sometimes assume that the new business owner is more tuned in to the financial part of their business than many actually are. So much money and heartache could be saved if we perhaps worked a little harder to make sure that a new business owner has a plan for meeting the required tasks and that we follow up diligently during their first year in business to make sure that they are doing things correctly.

We would love to see some way of catching a business owner as the company is being established and providing a checklist to make sure they are starting strong and correct. It would be great if a personal banker helping a new business open a checking account asked the owner if they had all their employee and accounting issues properly handled. The same holds for attorneys helping set up LLCs and other business entities. So how can we all work together to give these small businesses a fighting chance to succeed?

Your thoughts? Comments?

Recommended Reading for Entrepreneurs

As a change of pace, we are listing some of our favorite on-line magazines, blogs, and websites that contain useful content for small business owners. We also recommend the Wall Street Journal, your local newspaper, and a trade magazine for your industry so that you can stay on top of emerging trends.

1. Entrepreneur Magazine  http://www.entrepreneur.com/
2. Entrepremeur for Women Magazine http://www.womenentrepreneur.com/
3. Inc. Magazine http://www.inc.com/
4. Business Week for Small Business Magazine www.businessweek.com/small-business
5. My Venture Pad Blog http://www.myventurepad.com/
6. The Customer Collective Blog http://www.thecustomercollective.com/
7. IRS for Small Business www.irs.gov/businesses/small/index.html
8. SBA http://www.sba.gov/
9. CPA Letter Daily  cpa@smartbrief.com
10. The Business and Financial section of the New York Times http://www.nytimes.com/pages/business/index.html


Do you have any you would like to add and share?

Tips for Effectively Managing Employees

Entrepreneurs often find themselves thrown into the new roles of Employer and Manager, often for the first time in their lives. Bogged down by the other pressing tasks involved in running a business, many entrepreneurs do not give the role of Manager the proper focus that it requires. The reality is that poor management can destroy your business. Today I offer you a mini crash course on what I believe are the most important tips for being a good manager.

When I graduated from college and entered corporate America I asked my brother for some advice and this was his response: “Treat everyone, from the lowest man on the totem pole to the CEO, with respect. You never know who is going to be your boss some day.” I took that advice to heart and found that it served me well in my early days in the plants and then later as I became a manager.

On a practical note, what does it mean to respect your employees? It means understanding that your employees are individuals and taking the time to get to know them on a personal level, letting them know that they are important as human beings. It means that you understand that your employees are people with a variety of learning styles. As a good manager, it is your job to learn how to identify those learning styles and adapt your message to meet those styles. It means that you understand that your employees are thinking people capable of adding great value to your organization if you allow them the freedom to do so. It means the simple things, like showing up and working side by side with them when there is a problem, speaking politely with your employees even if you have an issue to resolve, being willing to pitch in and do the very jobs that you are asking your employees to do when times get tough, and following the same rules that you ask them to follow. If you don’t want your employees to leave early, for example, then don’t leave early yourself. Showing respect to your employees is the fastest route to gaining your employees respect as their leader.

In addition to respecting your employees, clear and complete communication with your employees is a must. By this I mean face to face communication giving your employees a chance to ask for clarification, as well as consistent reiteration with written communication. Communication requires a two-way exchange of information. Murphy’s law states that “if anything can be misunderstood, it will be misunderstood.” Clearly communicating your mission, objectives, and how it affects your employees is an important step in motivating your employees.

Finally, my favorite book on management is a book by Roger E. Allen, Winnie-the-Pooh on Management, given to me by my mother when I was promoted to my first managerial job. Despite all of the management seminars that I have attended and management books that I have read, I still go back to this book for the basics:

“A good leader will always try to make the project that she wants worked on seem to be exciting…That is really part of motivating individuals. Everyone will try to do a better job when they feel that the project is exciting and significant. By being part of something that is important, individuals will feel that they are important—everyone likes to feel that way.”

“Encourage and praise those who are working with (you)…living up to the good opinion that someone we respect has of us is a strong reason to do a good job.”

“(A good leader) treats individuals as individuals…He gives credit to others…An effective leader’s goal is to make his people look good.”
“(Give your employee) an important task to do—many managers delegate only unimportant or minor tasks, which is unfair to those they manage…(Don’t) tell him how to do it… let him decide how to accomplish the task …giving subordinates a chance to learn and develop their own skills and abilities… A manager has to learn that when she delegates, those she delegates to may make mistakes…By making mistakes you learn how to do things right, and you are not afraid to try new things. Delegation…allows managers to multiply their efforts.”

After all, multiplying our efforts is the whole reason for hiring employees to begin with.

Please share your tips on being a good manager in your small business.