The Importance of Timing in Starting a Business

picasso die undoneThere are right now literally millions of people telling themselves they are going to start their own business just as soon as the time is right.

Many of them are fooling themselves, and they are never going to start a business.

The excuses they tell themselves, however, sound like valid reasons to wait. Some of the most common are the following:

  • I don’t have enough saved yet
  • I don’t have an idea for what to start
  • I am waiting until I move
  • I am waiting to finish school
  • The economy isn’t right
  • I will if this promotion doesn’t come through
  • I will after my next vacation
  • I am waiting until I find the perfect location
  • I am waiting to finish building my invention/new product
  • I don’t want to start because someone might steal the idea

So, why aren’t these good reasons to wait? Shouldn’t you have enough money, or finish school, or wait for the economy to pick up?

The answer is no. And the reason is that there are so many things that will affect the success of your business that waiting for a few pieces of the picture to be perfect will not make it any more likely to succeed in the long run. But what will definitely make it not succeed is never getting started.

If you don’t have enough saved yet, then start something small enough that you can start right now, and use the money and experience you gain from that to then do what you really want to do.

The experience you pick up from running your own business, even a tiny one, will be worth ten times the value of the actual cash. And very often, by the time people have the money to start what they thought they wanted, they have changed their minds. So waiting for the money to save up really becomes a pointless exercise.

Not having an idea for what to start is also a poor excuse in the final analysis. You don’t have to love what you start- if there isn’t a business that you would love to do, then simply pick something you wouldn’t mind doing. Once you have it started and successfully going, you can delegate the work to others and put the cash into something you may enjoy more.

There are no shortage of ideas for businesses to start, and it is easy enough to take one, improve on it or make it work for your area or specific situation, and get started.

Most of the other excuses listed are simply that- ways to put off doing something that may seem kind of scary, risky, complicated or all three. The way to overcome this is the same way you beat analysis paralysis- by reducing the risk portion down to nothing, so you are no longer concerned about failing, and you can just get started and see what happens.

If you have doubts about how to overcome any particular situation that may be causing you to wait, post it in the forum for ideas on how to get around it. But in virtually every case, the time to start a business is right now, and waiting any longer than that is just wasting time.

Don’t let your dreams fade into the sunset. Start now. The rest you can worry about later!

10 Tips for Successful Marketing with Promotional Items

Promo products for businessI sometimes get the question- can I write off all these old “blanks” that we bought to give away but never did?

Usually the question comes while the business owner is pointing to a stack of old boxes filled with T-shirts that say “Have a Great Summer-2008” or chipped and broken coffee cups with the old phone number on them or the stack of Frisbees that have “Smith & Son” on them but the son has since moved out of town…

Well, you can’t “write them off” in your bookkeeping because they were already an expense when you bought them in the first place.

But you can avoid wasting your time and money on promotional items that don’t really help you market your business.

Promotional items can be a nice way to get your name out or keep in front of clients who may want to use your services again, but that only applies if the item makes sense for your business and fits with your goal.

Many people get the same old items: pens, coffee mugs, t-shirts, mouse pads as everyone else but don’t really think through what they are trying to achieve or who they are giving these things to in the first place.

I came up with some general ideas that I use to guide myself when investing in this type of marketing.

If you have any more ideas, by all means post them in the comments section!

Here are my ten suggestions for making sure your promo item budget is well spent and provides a decent ROI for the effort:

  1. To make it memorable, try and get something that ties in with your business, or that will last for more than one use.
  2. Don’t order more than you will use in a reasonable time frame and try to avoid using a message that expires or is time sensitive so it can’t be reused or given away after a specific event.
  3. If you promote something with a partner company, you can share the cost but still get the same value.
  4. Decide on the purpose upfront- to get your name out, as a thank you, to increase sales, and then pick the item type accordingly.
  5. Don’t forget to factor shipping and design costs into your budget when figuring costs.
  6. Apparel doesn’t have to just be for give away purposes- you can outfit your employees in custom t-shirts or polo shirts to give them a more professional feel for a relatively small cash outlay, and it may help drive additional business if any of your employees work out in public.
  7. Don’t forget to include a phone number and your website along with your name on whatever you buy.
  8. Spending a little more to get something unique may be worth it if it creates a buzz and gets people talking about your item.
  9. Calendars can work well if your business inspires unique photo images, but don’t get more than you can give away since obviously calendars are worthless after the end of February or so.
  10. If you have a popular logo or slogan, you can make some extra money and generate free advertising by putting the image on t-shirts and stickers and selling or giving them away to customers likely to show them off. You’ll know this is the case if people start asking you where they can get your shirts!

SBA Loan Myths and Realities Uncovered

Myths have surrounded the SBA loan program for as long as it has been around. Now that they are back and many banks are actively funding them again, it’s time to revisit and hopefully put these to bed once and for all and to really understand what the SBA can and can’t do to help you.

Dispelling the myths is the goal of this article.

There are many ideas about what the SBA is and what it does, many of which are wrong. You need to make yourself aware of these so that you don’t go in under false pretenses or inadvertently raise unrealistic expectations.

Myth #1: The SBA is for Startups.

The most predominant myth is that the SBA is for start-ups and struggling businesses–in other words, for businesses on shaky ground. This is not the case. In practically all cases, you must demonstrate the stability and profitability of your business proposal. (The SBA specifically states it is “not actively seeking loans to businesses in existence less than one year.”)

The reason is that the SBA primarily issues loan guarantees to banks and other lenders. The SBA acts as a cosigner for the borrower–you. The SBA has its own requirements that must be met, and the lenders also require minimum qualifications before approving a loan, even with an SBA guarantee.

Because of this cosigner relationship, banks are growing ever fonder of the SBA guarantee. The stigma that used to be attached to SBA loans by the banks has disappeared.

Now, if you are a new business, this doesn’t mean you can’t get a loan. It just means that you have to be even better prepared and even more convincing that someone with an existing business has to be to get approved. But this is why many business start ups get turned down for loans, and why by using this guide you can greatly improve your chances of overcoming this hurdle.

Myth #2: It takes forever to get an SBA loan

Another myth regards the time required to go through the loan process. Many small business owners, for fear of red tape and perceived lengthy delays in obtaining approval, avoid the SBA. But if your proposal is properly submitted, actual processing will normally require three to six weeks, and a bank can usually release funds within a week after SBA approval.

It will take longer if you don’t have all your ducks in a row, if you haven’t filed recent tax returns, if you delay in getting back up information requested, etc. It can also sometimes take longer at certain times of year, but much of it is in your control, so don’t let the cause of delay be on your side.

Myth #3: The SBA itself will make loans if the bank won’t.

The SBA does make direct loans but only for very specific situations. The vast majority of SBA lending assistance takes the form of loan guarantees. The SBA will guarantee 80 to 90 percent of the lender’s loan amount in case you default. The two most common guarantees are the 7(a) Loan Program and the 504 Loan Program. Your local SBA office can direct you to lenders who participate in each.

SBA direct loans are targeted to particular categories of individuals or circumstances. They are normally difficult to qualify for, but if you meet the criteria and don’t fall into one of these denial traps, you should apply. Here are the principal reasons why the SBA will reject a loan application:

  • Funds are available elsewhere on reasonable terms.
  • Funds are to be used for speculation.
  • A portion of the business income is derived from gambling activities.
  • The loan will be used by an enterprise primarily engaged in lending or investing.
  • The loan is used to purchase real property to be held for resale or investment.
  • The loan is used to relocate your business for other than sound business purposes.
  • Some of the direct loans made by the SBA are issued to help businesses comply with environmental and safety laws and assist in cases of forced relocation. It also offers loans to minorities, and disadvantaged individuals. The terms of these direct loans always beat standard commercial loans, having lower interest rates and longer maturities.

Don’t count of getting a loan direct from the SBA though- these funds are in short supply. You should prepare to get your funding via an SBA guaranteed bank loan.

Myth #4: The SBA program is primarily/or women and minorities.

This is not true. The SBA guaranty programs are available for participation by all persons, regardless of race, color, creed, age, or ethnicity. In fact, 65% of all SBA loan guarantees were made for white males.

The agency does employ a relatively new initiative to encourage women and minority borrowers to utilize the program. These borrower categories are permitted to be pre-approved for loan guarantees before a lender has formally approved their loan requests. However, the agency does not provide any special funding allocations for these categories. Nor do women or minority participants receive any special consideration or credit-scoring that would provide agency assistance in a situation in which other borrowers would be denied.

Myth #5: Anybody can get an SBA loan.

There are limits in how big your business can be, your net worth, business profits, number of employees and industry segment, among other qualifiers. Participation with the SBA guaranty program is restricted to borrowers who qualify under certain conditions relating to the size of the small business concern and the nature of the business activity.

Borrowers seeking to benefit under the 7 (a) guaranty program are restricted by either gross revenues of $5.0 million (with some exceptions based on the industry of the borrower) or limited by 500 employees in some specific industries that are labor intensive, such as manufacturing. Questions of eligibility can be directed to the agency for clarification about specific situations.

Borrowers seeking to get assistance under the 504 Development Program are restricted by their average net income over the past three years (no more than $2.0 million annually, including affiliates) and net worth (no more than $6.0 million, including affiliates).

Businesses involved in real estate development, lending activities, gambling, and illegal activities are prohibited from receiving assistance from the loan guaranty program.

Myth #6: The government will monitor the business.

Fears of “Big Brother” cause many small businesses to hesitate about the SBA guaranty program. Participation with the SBA includes no monitoring of the borrower’s business activities, no government audits, and no inter-agency communications about the business operations.

The SBA does not have the interest, personnel, or mandate to provide any extraordinary supervision of the business unless the borrower is in default of the loan. When the borrower is in default, the SBA’s interest will be strictly focused on working with the lender to recover the loan.

Obtaining SBA assistance does not increase the borrower’s chances of being audited by the IRS or being examined by OSHA, the EPA, the Corps of Engineers, or any other government agency that regulates the operations of business and industry.

Basically, once you are approved, as long as you make your payments on time, no one will come around to bother you ever again from the SBA’s point of view.

Myth #7: The lender does not care how good or bad the business is.

This is totally false. Lenders participating with the SBA guaranty programs are responsible for making good loans. The SBA guaranty is intended to enhance a loan, not subsidize the lender to build a bad loan portfolio. An unguaranteed portion of every loan will expose the lender to the full risk of the credit, and that portion is likely to increase in the next few years as funding for this program is restricted. Collecting bad loans can be very expensive in terms of time and money.

Bottom Line

An SBA loan can be a great resource for many small businesses, but it does require some effort on your part. It is neither as easy nor as hard as some myths would have you believe. The point is, if you think you are a good candidate, investigate your options. And if it looks promising from there, apply for the loan and see what happens. It may be just the thing your business needs to reach the next level.

Why (Some) Restaurants Fail and How Any Business Can Learn From It

business mistakesOne of the most annoying things you will hear over and over when you tell people you are thinking about starting a restaurant is how often they fail. Everyone seems to be an expert on restaurant failures and everyone seems to “know” they are risky businesses to start.

But is that true? No. There is a risk in starting any business and restaurants are no different. But 9 out of 10 don’t fail in the first year. And the failures that do happen in many cases could have been prevented by better planning. You don’t see 9 out of 10 Starbucks, McDonalds or Chipotles closing a year or less after opening so obviously it doesn’t have to happen.

You may think that is different because they have more money behind them or more marketing but think about it for a minute. The marketing they have is the brand they’ve built but they also took the time to find a good location where their customers live and where there is demand for their products.

They didn’t just pick the first cheap location they could find. And they certainly continue to market all the time even though they do have good brand names. A new independent restaurant can do the same- find a good location based on planning and understanding the market they are going to serve and then aggressively market their concept.

Likewise, although the chains do have solid financial backing, why would you want to start a restaurant without adequate funding? Of course you are going to run the risk of failing if you don’t have the money to do it right. If you plan properly you can very easily establish how much the “right” amount is and not start until you have it secured.

There is no reason for restaurants to be a risky investment if you take the time to create a proper restaurant business plan and actually understand what you are getting into so you can do it right like the successful chains do for each new location they open. If you don’t take the time to plan then you will take on the level of risk you deserve for not doing the simple front end work you could have done to protect yourself from that risk in the first place.

The Myth Persists

“Nine out of 10 restaurants fail in the first year.”

As an associate professor in Ohio State University’s Hospitality Management program, H.G. Parsa had heard it many times before. But based on his 13 years of restaurant-industry experience, he still didn’t buy it.

Parsa says he spent three months trying to track down someone at American Express who could give him a source for the 90% figure quoted in the ad. As it turns out, they didn’t have one. “American Express has not been able to track down a specific data source for the statistic,” reads a written statement a spokesperson sent Parsa in response to his request.

Urban Mythbuster

Parsa wasn’t surprised. He had run several spreadsheet simulations to verify the statistic himself and found that not only is the 90% figure off base, it’s practically impossible, given industry growth rates. He decided to do his own research on failure rates, using Health Dept. records to track turnover among 2,500 restaurants in Columbus, Ohio, over a three-year period.

His research—consistent with similar studies—found that about one in four restaurants close or change ownership within their first year of business. Over three years, that number rises to three in five.

While a 60% failure rate may still sound high, that’s on par with the cross-industry average for new businesses, according to statistics from the Small Business Administration and the Bureau of Labor Statistics.

Parsa’s study garnered serious attention within the hospitality field: Within a year of the paper’s publication in the Cornell Hotel Restaurant Administration Quarterly in August, 2005, Parsa’s research had been downloaded nearly 2,000 times, a record for the trade journal. But in the culture at large, the nine-out-of-10 myth has stubbornly defied debunking.

What Any Business Can Learn from This

Obviously it isn’t just new restaurants that are subject to failure- any business can become a victim. But any business can also do the same things a restaurant owner can do to significantly decrease the risks:

  1. Carefully research the market to understand exactly who the customers are and what they want
  2. Analyze the competition and figure out what your key differentiation will be
  3. Pre-plan the marketing you will do and verify the estimated total costs and cost per customer acquired to make sure the plan is viable
  4. Do realistic and accurate cost forecasting so you have adequate funds to reach the break even point and plenty of cushion in case it takes longer than expected
  5. If you are going into a business in which you compete with franchises, request their info and get to know how they do things- they are successful for a reason and you will benefit from knowing how they work, even if you don’t follow their exact pattern
  6. If you don’t have previous industry experience, bring in someone who does at least to consult with if not to work with you until you have a base of experience yourself

That last one would have saved the bacon of many a restaurant owner I’ve known who succumbed to the failure stat. There are some businesses where you can learn on the job, but not many. If you don’t know what you are doing, then find someone who does and listen to their advice until you have the experience and the data to prove trying something else may also work.

Businesses don’t have to fail- some of it is out of your hands but most of it isn’t! Be smart with how you do things and you are bound to be successful. If not the first time, then the second or third. If you keep failing after that, it’s not the business, it’s the owner!

How to never fill out a paper form again: Gen Y business owners’ secret formula revealed!

This is a Guest Post by Michael G Pullman of FranchiseeConnect.com, 2 August 2015

payroll systemsIn my work with franchisees and small business owners I’ve found the businesses that run the smoothest have completely eliminated paper forms from their payroll process. With a good online system for requesting leave and tracking staff details you can save a good portion of your admin staff’s (or your) time – I’ve seen 80% reductions in the amount of admin time for payroll.

Ever lost a paper form?

Going paperless is a big step but there’s resources out there to help you. With an online system to replace your paper forms you also remove the risk of paper getting lost. How often do you hear a person in the office scrabbling around at their desk, frantically trying to find one piece of paper?

By putting all the forms employees need online in the one place you’ll help staff avoid that last-minute panic before pay day.

Mistakes

I worked with a business just last week who ran what should have been a bi-weekly pay run. Except – they actually ran a pay run every week! Why? They needed run the first pay run to pay the staff, then the second pay run to fix the mistakes! These mistakes came from 3 areas:

  • missing timesheets from out of office staff
  • bad handwriting
  • data entry errors

Out of office staff

Today nearly every business has staff who work out of the office or work from home. Eliminating paper timesheets and paper forms means these staff members don’t have to waste time or mental bandwidth planning how they are going to get back to the office to fill out their paper forms for the week. They can simply fill them out online and submit no matter where they are.

Messy handwriting

Another big advantage of ditching paper forms is the messy handwriting problem. If you ask any staff member who does data entry they would tell you that at least half of your employees were doctors in a past life! Doctor’s handwriting is legendary for being messy since they think and write so fast. Many times payroll staff will receive a timesheet or change of details form and have to ask the person to fill the form out again because they can’t read the details – interrupting both employees’ workflow. Moving forms online eliminates this disruption completely.

Data entry

Data entry is one of the largest time-wasters in business today. Often businesses I work with have 3 or 4 separate systems that don’t talk to each other at all, and employees need to spend hours every week doing data entry to keep these systems in sync. Now many business systems will sync with each other and we can eliminate this wasted time. I’ve seen businesses completely change the information flows by implementing systems like NetSuite.

Options to replace paper forms

There’s many options for replacing paper forms in your payroll process. Here’s 3 that I’ve come across:

  1. Google Forms – with Forms you can create any form in any format you like, and the results will be put in a Google Spreadsheet ready for input into your payroll system. You can access Google Docs if you have a Google account.
  2. While it’s expensive, a fully-loaded payroll system will give you access to online forms and workflows, and might be worth investing in if you consider the savings.
  3. A lightweight bolt-on to your accounting system like Xero’s add ons

A quick note on number 3 – a lot of the major accounting systems have ‘bolt ons’ or ‘add ons’ now which add functionality to your accounting system at a low add-on price. Often the information collected in the add-on flows to the accounting system which reduces data entry.

Put your forms online to save time and money

By placing your paper forms online you’ll save yourself time, save your employees’ time, and reduce mistakes in the payroll process. In my work with franchisees I’ve found this reduces payroll admin time by around 50%, freeing up your admin employees’ time to do higher value business tasks like analysis and reporting – giving you further insights into the business.

For more time saving tips and automations, visit FranchiseeConnect.com’s blog articles and the online radio show – Franchisee Connect Podcast.

The Cost to Start a Business

business startup costsThis is one of the most frequently asked questions in starting a new business, and one that people often get wrong by underestimating the answer.

That may not be a problem, if there is plenty of cash in reserve and sales pick up quickly, or it may be a devastating problem if there was very little reserve, the estimate was way off, or sales are much slower than expected in taking off.

Because many business owners have no experience in financial matters, however, it may seem like a difficult task to accurately figure out the cost to start a business. It doesn’t have to be, however.

It is actually quite easy to make a very accurate estimate of the costs to start and run virtually any business to the breakeven point. Most business owners don’t bother, because they either feel like they already know or they just aren’t focused on the details. And if you are starting something on the side with just a laptop, and it’s a service business, then you are probably fine not to worry.

On the other hand, if you are starting something with monthly fixed costs that you have to commit to for a reasonably long period, you better do the math or  you may find yourself in a very bad position.

I’ve had clients who started with well under $500 and others who sunk over seven figures into their businesses. The amount has a lot less to do with the success than the business itself and the related business experience of the owners themselves. My general advice- don’t start a high fixed cost business you have no experience in (hello, restaurant dreamers!).

On the flip side, try all the sub $500 investment ideas you want- eventually you will find the right mix of need and opportunity and USP and you will be on your way. If not, then maybe you weren’t cut out to be an entrepreneur, but at least you didn’t blow your life savings and go into debt to find out.

Here are the main cost considerations of starting a new business, some, none or all of which may apply, depending on the business:

Lease
This includes not only the monthly payments, from the time of taking the keys, but also a deposit that may be required, which could run anywhere from a few hundred dollars to several months worth of payments.

Leasehold Improvement
Once you have the space, you may need to make changes to the interior, including adding or removing walls, rewiring, replumbing, adding finishes, lighting, shelving, fixtures, etc. to make the space into your actual business.

Equipment and Vehicles
Depending on the business, you will need to buy or lease the necessary equipment to operate it. Don’t forget the small things, like fax machines, phone systems, computers, desk chairs, filing cabinets, etc. which nearly every type of business needs, and although no one item costs a lot, the collection will add up.

Inventory
This is includes all the products you will stock for sale on your opening day. Depending on the terms you can get with your suppliers, you may be able to finance some or all of this expense. Being a new business, however, getting good terms right from the start will be more difficult and depend on your good credit and business experience and to some extent your industry knowledge and contacts.

Staffing
You may start your business alone or with only partners, but if you need more help then you will have the cost of employees. Unless you pay them illegally, you will also have the added expense of payroll taxes, social security, etc. which adds an additional $.20 or more cents to every dollar of payroll cost.

Marketing/Advertising
You will have to spend money on whatever form of advertising you choose to do for your new business. You might be doing a mailing, put up a website, buy a sign for the front of your location, or even do radio spots, trade journal ads, Facebook ads or any of a variety of other options. Most of these expenses will be incurred before the advertising actually takes place, which means they can’t be paid out of the revenue they generate.

Insurance
There are several types you will need, depending on the size and type of your business. Generally you can pay in installments, which helps lower the startup cost.

Printing
Virtually every business requires some printing. This may be as little as business cards, or it may be much more.

Utilities and Deposits
You will need to turn on the electricity, phone, internet and any other services you need to operate. Some of these will require a deposit or hook up fee, or both, that will make the first payments double or more what a typical payment will be.

Permits/Licenses/Taxes
While not usually an excessive amount, you will need to budget some money to cover your business license, and any other permits or taxes you will be required to pay. Some states require a deposit for your sales taxes. If you incorporate or form an LLC, there may be fees and taxes associated with the formation.

Professional Services
If you use a lawyer, accountant or other professional services in getting started, there will be costs associated with their services. Most businesses can avoid these expenses, at least initially unless there is a complicated investor relationship or partnership agreement needed, although having a bookkeeper for all but the very smallest businesses is usually a very worthwhile investment.

Other Costs
All businesses have a few extra costs that are unique to their operations. By investigating your business thoroughly you should be able to uncover these and be able to accurately estimate how much they will cost your business when you get started.

Inspiring Entrepreneur Success Stories

I love to read stories of entrepreneurs starting from scratch and building great small businesses out of their guts and ideas and just a little bit of cash.

Stories like the birth of Microsoft, Amazon and Apple are good, too, but a tad harder to relate to- at least for me.

The stories I really like usually feature businesses I haven’t heard of but which make their founders plenty of money and even better are doing something positive for the niche they serve. Here are some of my favorites:

The story of Caitlin Pyle who decided to quit her job proof reading and with her husband move to Ecuador where she started a business offering to teach proofreading online instead. The first month she pulled in over $9,000 in profits and hasn’t looked back since.

The story of Natasha Lekic who left a good paying job as a book editor then spent a couple of years trying to figure out a direction, before ultimately getting back into the same industry on her own terms as a business owner rather than an employee. With less than $100 in startup costs she built a business grossing as much as $55,000 a month.

The story of Graham Cochrane, a musician who never expected to make any money but after being laid off was forced to focus on his side gig, which he turned into a more than full time income. He took his just for fun blog for music recording and ramped it up to include lessons for sale and is now pulling in between $35-$75K a month.

How about this stat, “I have now been on the road for four and a half years and have visited 71 countries.” That is from Justin Carmack who writes a popular travel blog that earns him enough money to travel the world and pursue his passions for SCUBA diving and for not having a regular 9-5 job.

You may have heard of John Lee Dumas, a fellow San Diegan, who created a huge business for himself by profiling other successful entrepreneurs on his daily podcast. He started out with just a small investment and an idea and has since grown it into a seven figure business.

Check out the story of who turned $200 into a huge public relations firm with over 70 clients and huge revenue. My favorit quote from his story hits close to home for me: “My firm was so bootstrapped in the beginning that I didn’t even want to pay for accounting software — something I lived to regret.” Yes- don’t skimp on bookkeeping! 🙂

Down to the last $500 in her bank account, this one woman business launched a clever T-shirt campaign that turned things around to bring in over $250K while she was still working from home.

 

I will keep adding to this list as I gather more of these stories. For now, have a great rest of the day!

 

 

The Secret to Beating Procrastination Starting Right Now

stop-procrastinationSometimes people get the idea that real entrepreneurs are hard chargers who never hesitate and do everything immediately. That’s not true.

There are lots of successful entrepreneurs who are just like everyone else when it comes to getting going- sometimes it is harder than others. Sometimes it is really hard.

The difference is that they have figured out strategies to get themselves going when they need to, and they aren’t held back from achieving success by a lack of drive when the time for action comes. If procrastination is holding you back, you can use the same techniques to overcome it in your own life, and achieve the same success they have reached.

There are several strategies for beating procrastination, which you can use separately or together to get yourself going. They are time segmenting, reframing, just starting, reversing priorities and good enough.

Time Segmenting

Time segmenting means taking a small chunk of time and dedicating yourself to working on whatever you need to do during this time, and then giving yourself a reward for doing that immediately after. Often procrastination is a result of the reward seeming so far away it is too hard to use as motivation. This is particularly true in starting a business, since it may be months before the business actually launches, and months more before you get and kind of real financial reward.

An example of this strategy would be to set aside thirty minutes to work, and then reward yourself with a break to watch TV for half an hour, or play a video game, or read or whatever else seems rewarding to you.

The reason this strategy works is that doing a big chunk of work seems overwhelming, so you never start, but knowing you are only doing a half hour seems much more manageable. Once you get into the work, however, you often end up going much longer than half an hour, and get more done that you expected. This strategy simply allows you to mentally overcome your block on getting started.

Reframing

To reframe means to change your mental perception of the task you have to do. In essence, your procrastination is because you don’t want to do something. But you are thinking about the thing you don’t want to do, not the results that doing that thing will get you. You have to change your mental state, and then the task will not seem a burden but a desired action.

For example, suppose you are procrastinating over writing a business plan. If you can stop think of it as writing a plan, and think of it as taking a step closer to being in your own business, it will change from being a task you don’t want to do to a task you do want to accomplish.

This may sound difficult, or unrealistic. In reality, however, all it usually takes is a conversation with yourself to realize that the negative task you are dreading is actually a positive step towards something you want. This makes it much easier to motivate yourself to do.

Just Starting

If this is about procrastination, isn’t the whole issue “just starting”? Yes, but this is different. Sometimes you don’t start something because the whole project seems like one big task, and you don’t know where to start and anything you do will hardly make a dent in the overall project.

With this strategy, the idea is to take the whole thing you have to do and break it down in a list format into very small segments. These should be things that you finish in as little as ten to thirty minutes. You may end up with a long list, but since no one item is going to take very long, you can just assign yourself a few items to work on at a time.

In this way, you only have to overcome a tendency to procrastinate for a small task, not a large one. And eventually, you will complete all the small task that once seemed like an unmanageable whole.

Reversing Priorities

Sometimes people procrastinate because they feel like all of the time they have should be going to work, and they have no free time. They want to “take” more time for other things and put off work.

By reversing priorities, you start by blocking off time for everything else you want to do- all the fun activities or other time obligations you want to commit yourself to doing. Then, whatever is left over is work time.

The reverse psychology of this approach- making sure you have time for fun before you worry about work can sometimes force you to get more done in the time you have left yourself to actually work. It is also true that in a typical eight hour work day, there are very often several hours of not very productive time.

If you think of it as forcing yourself to work under short blocks of time before you have to quit to go do things you enjoy, you may actually be more productive and get more done. You may also find yourself wishing you had more time to work, and wanting to start sooner or work longer. You might not think that you can reverse psychology yourself, but you can!

Good Enough

One of the less common reasons for procrastination is a sense of perfectionism. The way this works is, you feel as though you have to be perfect, but this is a stressful and demanding situation to be in, so you hold off on doing the project at all until the last minute. That way, at least you have the excuse of not having had enough time to do the job perfectly.

The way to overcome this is to simply realize that the perfectionism is what is holding you back. You don’t have to be perfect, and in fact, the chances are that whatever you thought was perfect will have to be changed anyway when the reality of the business world hits home. So what you should aim for is simply good enough to start with, with the intention of going back later and improving on what you have done. Once freed from the need to be perfect, you can get started without further concern.

The Best Strategy

The best strategy to beat procrastination is to simply employ as many of these tactics as you need until you feel comfortable getting started on what you need to do. First, take a minute to reframe the situation in your mind and realize not what you don’t want to do but what you will get by doing it that you want.

Then start by making your list of small tasks, small enough to fit into a time segment you can live with. Then block out all your play time, and see what is left for work. Tell yourself you just need to get it started, it doesn’t have to be perfect. And then begin. At this point, there shouldn’t be anything standing between you and getting going.

Bookkeeping Help: Fixing Your Chart of Accounts

chart of accounts messYou can think of the chart of accounts as your accounting foundation, and a lot of people have foundation problems! The chart of accounts, or COA, is the list of places you can put your money.

The goal for your COA is that it should be as detailed as you need to give you quality information. At the same time, it shouldn’t be bogged down in detail that doesn’t add value but does add to the effort of doing your books. As you may have deduced from that, there is no one size fits all, standard chart of accounts (although sometimes people will claim otherwise).

The chart of accounts is always the first place I look when evaluating a new business client and it tells me a lot in a very quick glance. I can instantly see if the balance sheet account balances are positive or negative, how many accounts there are overall, how they are named, if they use sub-accounts, if they use account numbers and just overall how organized and logical it is.

A well-ordered chart of accounts that makes sense and is logical to anyone looking at it for the first time is a good sign. The messier it gets, the more likely it are there are errors buried in the numbers and problems that need to be accounted for.

Does it feel like your books take forever to do each month? It might be your chart of accounts- the messier it is and the less efficiently it is set up relates directly to the time it takes to get your bookkeeping done. It doesn’t have to be like that!

Since the COA is never going to be cleaner and more correct than when you start the business, this is the best time to ensure it is set up right.

The default COA from QuickBooks is a good place to start. You can modify sparingly to fit your business. The bigger and more complex the business, the more complicated your COA can be, although it doesn’t necessarily have to be.

Here are the things we most often see wrong with the chart of accounts:

  • Inconsistent use of account numbers. For the vast majority of small businesses, account numbers are not helpful and actually can slow you down quite a bit. They are a tool for big company accounting – “big” as in over 50 employees and millions in revenue with many different departments and managers, etc. If you do use them, use them using the QuickBooks function for them, not by just typing a number in front of the account name as this is impossible to fix except one at a time. And if you do use them, use an account number on every account, not just most.
  • Old accounts. If you are no longer using an account, make it inactive or hide it. If you never used an account, delete it. There are a few QuickBooks won’t let you delete, but otherwise get rid of it. This is especially true of old bank accounts, credit card accounts or anything else appearing with a balance on the balance sheet. If the account is no longer active in real life, zero it out in QuickBooks and make it inactive.
  • Too specific accounts. Meals and Entertainment is a standard account in most businesses. Some people want to split Meals as one and Entertainment as another- that may make sense for your business. But you never need an account named McDonalds for your restaurant expenses. You can have a vendor named McDonalds and you may eat there twice a day every day, but your account names should not name names.
  • Specific dates. These should not be in your COA. For example, you can have an account called State Taxes but you don’t want one called State Taxes 2014. When are you ever going to use it again? Anything that is going to expire of its own accord, only be used once or twice or is specific rather than generic, is almost always to be avoided.
  • Too granular accounts. Office Supplies is a standard account in most businesses. Some people then create an Office Equipment account, thinking they will use that when they buy a printer or calculator or something. This is already going to potentially trip you up, because where does toner go? It is used with the office equipment, but it isn’t equipment itself, really. Now what if you added Office Expenses, Office Supplies Reimbursement, Office Printing and Office Supplies- Executive. How long would you have to stop and think about where to put an expense every time someone went to Staples? And would all this slicing and dicing actually help you figure anything out that would be useful? Not likely.
  • If you can’t instantly decide into which of two accounts something should go, you probably have too many accounts that are similar. Start merging, renaming and generally scaling back on your inclination to add accounts rather than pick from what you have. Just this one change can make a big difference in how fast you can do your bookkeeping. And the same thing goes for income, not just expenses. If you aren’t gaining any useful info from splitting your income into tons of segments, don’t do it. Especially if you already have the exact same info logged somewhere else. Fewer accounts is generally better.
  • Using accounts incorrectly. If you are keeping track of loans in an equity account, using a bank account for a credit card, tracking expenses with negative income entries or anything else weird, you are going to create headaches for yourself. Each account type works a certain way, and while you can force them to do other things, you are going to end up with very odd looking financial statements and a much higher likelihood of having errors in your books.
  • Relying heavily on miscellaneous accounts. If you are dropping more than 10% of all your entries into uncategorized, miscellaneous or similar types of accounts on your first pass, you aren’t doing it right. There really should be very few transactions that aren’t easy to classify and only those handful should fall into the unknown account. Even 10% is really high – at the end of a year, well under 1% of your total expenses should be in this type of account and really it’s better if none is left unclassified.

Bottom Line Solution:

Go through your chart of accounts with a fine tooth comb. Can you instantly decide what kinds of expenses go into what accounts? If you find places you hesitate, or which could go both ways, you probably just found a place you can consolidate.

If you see any of the issues listed in the bullet points above, be ruthless in simplifying and cutting out things you don’t need.

A well-organized chart of accounts is going to make doing your books faster and more painless. And the opposite is true- the longer and more complicated it is, the harder and slower the books will be to finish.

Take the time now to edit names, merge two or more accounts into one and delete unused or seldom used accounts. Adding more is easy, so start with less and try to only add when there is absolutely no way to put something in any of the existing options. If you do this, your chart of accounts will become a solid foundation for the rest of your accounting.

Evaluating the Intangibles in Your Potential Business Partner

business partner problemsHaving a partner can be the best thing in the world, or the worst.

To avoid lots of potential partner problems, you definitely want to have a partnership agreement, in writing, before you start your business.

That is not the end of making your partnership work, however.

Whether you know your partner well or have only just met, you want to get together enough times to make sure you understand each person’s strengths and weaknesses, and you see how the other one handles stress, complications and set backs, which will be a large part of what running your business will be all about.

Here are some basic, but very important discussion topics and tests you can do to see how your partner handles them, and how you handle them handling the tests:

1.      Invite your partner out to eat. Set an exact time. See if they are early, on time, or late. If they are late, do they call to let you know?

2.      Step out and while you are out, ask the waitress to bring the wrong drink, or wrong salad. You may have to tip a little bigger for this. See how your partner reacts- is it no big deal, a minor irritation, or do they blow up? Are they still talking about it an hour later?

3.      During the meal, plan to discuss the business. Ask them about their ideas on marketing, pricing or something else. Challenge their responses. Are they staying calm and presenting their position logically, or are they getting upset and defensive?

4.      Discuss your plans for how much money you each will take out of the business, and how much time you will devote to it. Discuss what should happen if any partner fails to hold up their end of the bargain.

5.      Discuss where you see the business ending up? Is this a path to something else, is it just a way to pay the bills, or is it going to grow into something much larger?

6.      Discuss personal future plans. Is anyone likely to move, get married, have kids or facing a divorce or elder care responsibilities in the near future? How will any of these situations be handled?

7.      Don’t offer to pay, or say you forgot your wallet. How do they handle it? Are they annoyed by your lack of responsibility, or were they planning to stick you with the bill? How do they react when you find your wallet again?

8.      If you haven’t before, visit your partner’s homes. How they live and how organized they are at home will tell you a lot about how neat their desk will be, and how organized you can expect them to be in their work.

9.      Suggest that each partner take the free Myer’s Briggs personality test, and then compare answers. A frank discussion about basic types and communication styles can go a long way toward better work relationships.

10.  Discuss how you plan to handle disagreements about business issues between partners. Having a conflict resolution plan in place, that everyone agrees to use, will help settle arguments quickly before they become overwhelming.

Some of this may seem unnecessary, or like overkill, but if you don’t or can’t get to know your partner(s) before you put real cash and real risks on the line in working together, the chances of things not working out go up dramatically.

Don’t become one of the statistics as a partnership that failed. Take the time to make it work before you start the business, and become successful without the hassles and headaches of a broken partnership.