Small Business

Small Business Tip: The Power of Partnerships

If you ever find yourself stuck with a particular aspect of your business, it might be time to find a partnership.

For example, when I fired up I Was Broke. Now I’m Not., I was the developer of all our web resources. I created most of them with Microsoft Word. You don’t even want to know how bad those looked! So I found a couple of web developers and the partnership helped both of us. The web developers made money and the websites helped us get more free financial tools to people and sell more helpful financial resources!

Our organizations have also partnered with companies that provide database management, marketing consulting services, and leadership coaching. They’ve all helped us move our businesses forward.

Great partners bring expertise and focus that may be difficult (impossible?) for your company to deliver.

One last thing:I’ve heard it said before that “Good partners COMPLETE each other. They do not COMPETE with each other.” Be sure your partners aren’t participating in the same business space as you are as it could create unwelcome competition.

Application Questions:

  1. What areas of your business do you feel are STUCK?
  2. What partnership(s) could you form to get UNSTUCK?

Small Business Tip: Projecting Income

One of the greatest challenges small business owners face is projecting income.

When providing financial coaching to small business owners, I ask, “How much are you paid by your business?”

The answer is usually some variation of: “Whatever I can take. It’s always up and down.”

This makes it extraordinarily difficult to manage household financial affairs and can literally drive the bill payer completely crazy.

Here’s solution to this problem.

  1. Stop “investing” (spending) all the extra money. When you have a great month of revenue, don’t view it as a ticket to spend money. Instead, view it as a ticket to stabilize your income! Save the extra money in an operating reserve account.
  2. Establish a monthly (or weekly, bi-weekly, or bi-monthly) salary. In your household budget, determine the amount of money your business needs to pay you each month in order to thrive. Ensure your household budget includes saving for Known Upcoming Non-Monthly Expenses (KUEs) such as Christmas, Special Days (birthdays, anniversaries, weddings, showers, etc), HOA, Insurance Premiums, etc.
  3. Pay yourself the set amount of money each payday – and leave the rest alone at the business! Even when the business is thriving, it is important to continue to draw only your salary. This is because the “down times” will be coming soon through the natural business cycle of your business. It’s not fun to leave the money in the business during times of plenty, but it sure is nice to have those reserves when the business is struggling!

It’s how I operate my businesses, and I’m confident it will work for you too!

My book, Oxen, is a great resource to help you establish a new business or acquire an existing one.

Small Business Tip: Importance Of Audits

Small business owners don’t lack for things to do. There is the endless work of creating new products and improving existing ones. Meeting with new customers and existing ones – local and abroad. Hiring employees and freeing up non-performing ones to “pursue other opportunities.” You get the thrilling task of managing payroll and cash flow. You get to deal with all of the wonderful governmental entities – federal, state, and local – regarding licensing, codes, rules, laws, and endless regulations. Then, of course, there are the meetings with your CPA around tax time.

The LAST thing you need is to wonder if your financial books are correct and accurate.

Unfortunately, we hear of cases of a modern-day Judas, where a rogue employee who has been entrusted with the money decides to help themselves to it and embezzle money. It can literally bankrupt a business.

This is why it is important to conduct financial reviews and perhaps even complete third-party audits. Annual financial reviews are instances where internal members of your organization are tasked with performing random “tests” of financial records and require those in charge of the finances to provide objective evidence that records are retrievable and accurate.

Third party audits take this process to an entirely different level. An outside organization is hired to put the financial team through a rigorous test of all critical financial systems – accounts payable and receivable, payroll, record-keeping, financial reporting (balance sheet, cash flow statement, and income statement), and separation of authorities (i.e. separating rights of who can print checks from check signers).

While no review and audit can completely eliminate the chance for fraud, it can reduce it tremendously. And it will allow you to make business decisions with full confidence in your finances and the financial team.

Here’s the statement I use: “Trust, but verify.”

This post is part of a Small Business Series here at the wildly popular JosephSangl.com. Click HERE to read more of the posts in the series.

Small Business Tip: Monthly Cash Flow Planning

Every single month, I sit down with Matt. Most of you don’t know him, but he is a key reason IWBNIN has continued to grow and expand. You see, Matt is our Financial Administrator. He manages all of the finances for our businesses. He and his team manage the regular financial management dealings of a business: payroll, accounts payable, accounts receivables, bank account reconciliation, credit card reconciliation, and governmental filings. However, Matt helps with a monthly task which we’ve found to be vital to our success – monthly cash flow planning.

For our two businesses with employees, we sit down at the beginning of each and every month to plan our financial decisions.

Here is the process we utilize:

  1. 12 month rolling plan  We have a rolling 12 month plan. This means at the end of each month, we add a new month at the end of the plan to ensure we are always looking forward for an entire year.
  2. Evaluate last month  We review last month’s plan to identify any major deviations – both positive and negative. This intelligence is utilized to continually improve our planning.
  3. Plan next month  We make changes to this month based upon known information.
  4. Review the next 12 months  We make changes to future months based upon known information.
  5. Make business critical decisions  We utilize the cash flow plan to determine when we can spend money for larger initiatives.
  6. Live by the plan throughout the month  Once the plan is finalized, the financial team follows it. If an unusual opportunity presents itself or major expense crops up, it generates a conversation amongst company leadership to determine an appropriate course of action.

Here’s how we’ve found the 12 month cash flow planning process to be helpful:

  1. Prepare for major financial challenges  As with any business, there are cycles. Some months are higher revenue while other months cause business owners to wonder if their business is going to fail. These cycles can create cash flow crunches if not carefully planned for. Viewing 12 months out allows our leadership to make better decisions.
  2. Prepare for known, upcoming non-monthly expenses  This type of planning forces a leader to think longer-term. As a result, known upcoming non-monthly expenses can be accommodated with ease by ensuring appropriate accrual accounts are established. Nothing makes me happier than to know the money is stored up for estimated quarterly tax payments, car repairs & replacement, annual software licenses, etc.
  3. Communication  Monthly reviews create a “trip point” that forces communication to happen regarding the financial and general affairs of the organization.

Want to get rid of a bunch of financial headaches? I highly recommending instituting a monthly cash flow planning meeting!

This post is part of a Small Business Series here at the wildly popular JosephSangl.com. Click HERE to read more of the posts in the series.

Small Business Tip: Sacrificing To Make The Dream Work

Having successfully started a few small businesses and acquiring another, I can confidently say that it takes sacrifice to make the dream of a small business come alive.

I worked the equivalent of two full-time jobs for an entire year while I Was Broke. Now I’m Not. launched. I would work all week and then jump into a car and drive to some distant place to speak about personal finances. Usually, I would end up spending more money on gas, hotel, and food than I would receive in income from the event!

As I share in my book, Oxen, you can’t load up a baby ox as soon as it is born, or it will die. Yet, many people do this very thing when birthing their small business. They finance the entire start-up costs and then quit their job as soon as they launch the business – forcing the business to pay them a salary from day one. They “load up the baby ox” with all of the costs of debt, salaries, and rent – causing even great business ideas to collapse before they really had a chance to succeed.

It takes sacrifice. Here are 3 key sacrifices you can expect to make when launching your small business dream.

3 Key Sacrifices Business Owners Make

  1. Time With Family  Starting a business is not a 9am to 5pm, 5 day a week job. Curb the impact of this by being very intentional in the time you do have to spend with your family. Another tip is to include them in the work and decisions of the business. For example, I bring my daughter along with me to help with speaking events. She manages the resource table. Better yet, we have the chance to talk during all of the plane and car rides.
  2. Money  People who are launching their small business venture will have to invest substantial amounts of money in the hopes of a financial return. There is no guarantee of success. I’ve found that investing my own money into the business helped me be very attentive to business expenses. It seems to be much easier to spend borrowed money.
  3. Other Dreams  Because of the enormous consumption of time that a new small business demands, many other hobbies and passions are placed on hold. Saying “yes” to starting a business will mean one must say “no” to other desires.

For those who have successfully started your own small business, what are some other sacrifices you have had to make? Please share in the comments?

This post is part of a Small Business Series here at the wildly popular JosephSangl.com. Click HERE to read more of the posts in the series.