Photo Courtesy of Entrepreneur
Business 06 November 2017
Most entrepreneurs learn quickly that you need to stay positive in business, or you will give up. Positive thinking helps, but so do the words you choose in your daily interactions. Throughout my 20-years of consulting entrepreneurs and startups, I have observed many businesses go under.
I've noticed most of these failed entrepreneurs frequently repeat similar phrases as they discuss their routine operations. If you're trying to grow your business during tough times, here are a few phrases you should be conscious of using when times get tough.
1. “I combine my personal and business expenses."
Combining personal and business expenses make any bookkeeping complicated. It adds more stress and increases your chances for audits as you try to identify which expenses can be deducted and which are personal. A recent TD Bank survey revealed that 56 percent of small business owners use a personal checking account for both business and personal finances.
Businesses must provide the IRS with all records related to the operation of a business. The supporting business documents required at tax time range from gross receipts, purchases, expenses, assets, employment taxes to travel and transportation costs, entertainment costs and gift expenses.
When these documents are combined, it will require a lot of time and effort to separate them and the risk of human error increases. Mistakes made with regard to filing taxes can result in hefty fines. Using a simple expense tracking system like Receipt Bank can help business owners separate personal from business expenses.
2. “I'm not good at delegating."
Successful business owners know they must delegate if they are going to grow their business. When entrepreneurs do everything themselves, they are preventing the business from succeeding and growing.
Many inexperienced entrepreneurs don't know when to delegate and when to do the work themselves. Generally, a task should be outsourced when it's not central to generating revenue for the company. If a task doesn't increase a company's competitive edge or requires specialized knowledge, farm out the work. It will give you more energy to focus on growing your business. Accounting, payroll, website design and public relations are good examples of tasks that should be outsourced.
3. "I do my own accounting."
The majority of small business owners opt to do their own accounting to save money. However, in the end, this approach may actually be costing them more money. Accounting requires time and effort, and when a business owner utilizes their valuable time towards accounting tasks, they are not making the best use of their time. The opportunity costs of accounting are exponential. The opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen, like focusing on growing and expanding the business.
Accounting can also reveal the health of a potential failing business. If the books are in disarray then a business owner can't properly evaluate the financial health of the business - which is the starting point of financial growth.
4. "I gave my client (or vendor) a financial break."
Entrepreneurs don't want to lose any deal, which is why many small business owners squeeze tight profit margins as a way to win the business. This isn't a smart approach. When I hear businesses say they gave a financial break to win the business, I know they are headed on the wrong path. Offering a client (or vendor) a financial break might be a genuine gesture, but it is not good for future business. The value of a product or service should reflect the quality of work. And by diminishing the cost, you are effectively telling the client your product or service is inferior. Entrepreneurs must be confident in what they offering, and giving financial breaks implies the opposite.
5. “I use Excel for bookkeeping."
Excel can be a great starting point for startups because it's easy to use, free, and chances are; you have it on your computer. But when businesses continue to use Excel past that initial startup period, they start to get into trouble. Excel provides many opportunities to make manual or financial mistakes in the books. Manually entering the formulas, filters and data connections in Excel is time-consuming and is prone to human errors. Excel also doesn't have the capacity to help you scale your business. As new products are introduced, assets are acquired and new employees join the team, books become more extensive. Excel can't keep up with these changes. Abandon Excel as soon as possible to give your business the foundation it needs to grow into a thriving organization.
6. “I was denied a Business Loan because my books are a mess."
This phrase is too common especially since today, we have online access to information with notes on preparing for a business loan application. A crucial point to remember as a small business is that most banks will evaluate the fiscal health of your business as well as the business owner's credit rating and personal financials. The best way to prepare for a loan application is to have a conversation with your Bookkeeper or Accounting Advisor. He or she can research what will be needed to accompany your application submission and get your books properly prepared for running financials the bank will want to examine like Cash Flow Projections, Collateral Schedule, and Outstanding Debt.
3 Min Read
"How did you ever get into a business like that?" people ask me. They're confounded to hear that my product is industrial baler wire—a very unfeminine pursuit, especially in 1975 when I founded my company in the midst of a machismo man's world. It's a long story, but I'll try to shorten it.
I'd never been interested to enter the "man's" world of business, but when I discovered a lucrative opportunity to become my own boss, I couldn't pass it up—even if it involved a non-glamorous product. I'd been fired from my previous job working to become a ladies' clothing buyer and was told at my dismissal, "You just aren't management or corporate material." My primary goal then was to find a career in which nobody had the power to fire me and that provided a comfortable living for my two little girls and myself.
Over the years, I've learned quite a few tough lessons about how to successfully run a business. Below are five essential elements to keep in mind, as well as my story on how I learned them.
Find A Need And Fill It
I gradually became successful at selling various products, which unfortunately weren't profitable enough to get me off the ground, so I asked people what they needed that they couldn't seem to get. One man said, "Honey, I need baler wire. Even the farmers can't get it." I saw happy dollar signs as he talked on and dedicated myself to figuring out the baler wire industry.
I'd never been interested to enter the "man's" world of business, but when I discovered a lucrative opportunity to become my own boss, I couldn't pass it up.
Now forty-five years later, I'm proud to be the founder of Vulcan Wire, Inc., an industrial baler wire company with $10 million of annual sales.
Have Working Capital And Credit
There were many pitfalls along the way to my eventual success. My daughters and I were subsisting from my unemployment checks, erratic alimony and child-support payments, and food stamps. I had no money stashed up to start up a business.
I paid for the first wire with a check for which I had no funds, an illegal act, but I thought it wouldn't matter as long as I made a deposit to cover the deficit before the bank received the check. My expectation was that I'd receive payment immediately upon delivery, for which I used a rented truck.
Little did I know that this Fortune 500 company's modus operandi was to pay all bills thirty or more days after receipts. My customer initially refused to pay on the spot. I told him I would consequently have to return the wire, so he reluctantly decided to call corporate headquarters for this unusual request.
My stomach was in knots the whole time he was gone, because he said it was iffy that corporate would come through. Fifty minutes later, however, he emerged with a check in hand, resentful of the time away from his busy schedule. Stressed, he told me to never again expect another C.O.D. and that any future sale must be on credit. Luckily, I made it to the bank with a few minutes to spare.
Know Your Product Thoroughly
I received a disheartening phone call shortly thereafter: my wire was breaking. This horrible news fueled the fire of my fears. Would I have to reimburse my customer? Would my vendor refuse to reimburse me?
My customer told me to come over and take samples of his good wire to see if I might duplicate it. I did that and educated myself on the necessary qualities.
My primary goal then was to find a career in which nobody had the power to fire me and that provided a comfortable living for my two little girls and myself.
Voila! I found another wire supplier that had the right specifications. By then, I was savvy enough to act as though they would naturally give me thirty-day terms. They did!
More good news: My customer merely threw away all the bad wire I'd sold him, and the new wire worked perfectly; he then gave me leads and a good endorsement. I rapidly gained more wire customers.
Anticipate The Dangers Of Exponential Growth
I had made a depressing discovery. My working capital was inadequate. After I purchased the wire, I had to wait ten to thirty days for a fabricator to get it reconfigured, which became a looming problem. It meant that to maintain a good credit standing, I had to pay for the wire ten to thirty days before my customers paid me.
I was successful on paper but was incredibly cash deprived. In other words, my exponentially growing business was about to implode due to too many sales. Eventually, my increasing sales grew at a slower rate, solving my cash flow problem.
Delegate From The Bottom Up
I learned how to delegate and eventually delegated myself out of the top jobs of CEO, President, CFO, and Vice President of Finance. Now, at seventy-eight years old, I've sold all but a third of Vulcan's stock and am semi-retired with my only job currently serving as Vice President of Stock and Consultant.
In the interim, I survived many obstacles and learned many other lessons, but hopefully these five will get you started and help prevent some of you from having the same struggles that I did. And in the end, I figured it all out, just like you will.