Small Business

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.

Small Business Tip: Separate Business Accounts From Personal Ones

One of the top mistakes small business owners make is to intermingle their business expenses with their personal accounts. This can create many issues including:

  • Difficulty in identifying true business profitability. When personal and business expenses are in the same accounts, it becomes very difficult (impossible?) to readily determine the company profits or losses.
  • Misuse of company money for personal expenses. Whether intentional or unintentional, this can erode financial margin that is critical for the viability of the business.
  • Difficulty in selling the business. Even if the business is profitable, it can cause potential buyers to become wary of the true performance of the company.
  • Drive the tax preparer nuts. I’ve had conversations with tax preparers who find it nearly impossible to prepare a clean tax return because of intermingled business and personal income and expenses. This can lead to issues with the IRS later. That is never a good thing!
  • Frustrates the family bill payer. When the person in the family who is responsible for paying the bills must balance business bills with personal bills, it can cause them to become very frustrated. So frustrated that smoke may start coming out of their ears!

If you are running your business expenses through your personal accounts, invest a few hours to separate them. The bill payer and tax preparer will thank you, and you will be able to more readily assess the performance of your business!

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: Build Financial Margin For Your Business

If you want your business to thrive long term, you must establish financial margin. In fact, the lack of making saving a priority is one of the top reasons small business fail. Even profitable companies have failed because they failed to make savings a top priority.

Let me share a real-world practical example of “margin in action” – the Hoover Dam.

IMG_1574

Before the establishment of the Hoover Dam (and the entire system of dams and reservoirs), the West was subject to wild water calamities. At times, the river would flash flood and destroy everything in its path. At other times, drought would cause water supplies to dry up. It was very difficult for the area to inhabit the area until the establishment of the dams.

I took the above picture of the Hoover Dam, and it really shows how your business’s financial margin account should work. The dam was built very strong so it could hold back the raging river. As the Spring melt begins, the dam captures excessive water and saves it up. This helps prevent rampant and destructive flooding. During times of great drought, it allows the area to continue to thrive because the water was stored up!

Chances are your business has cyclical revenue – “good” times and “less than good” times of sales throughout the year. Apply this “dam principle” and be sure to “store up” during the good times. This will position your business to continue prospering during times of drought.

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

Small Business Tip – Conduct SWOT Analysis

One key activity that is important for every small business owner to do on at least an annual basis is to conduct a SWOT Analysis.

  • Strengths
  • W Weaknesses
  • O Opportunities
  • T Threats

I’ve prepared a free basic SWOT ANALYSIS FORM for you to download and use.

Here are a few questions to help you start the process:

Strengths

  • What are your strengths?
  • What makes your organization so successful?
  • What differentiates your business?
  • Why do customers use your product or service?
  • What allows you to beat the competition?
  • Do you have any personnel that really give you a competitive advantage?
  • What is your current financial status? Is it a strength?

Weaknesses

  • What makes you lose sleep at night?
  • Where do you see opportunities for improvement?
  • What products or services do your customers ask for that you currently do not provide – and it causes them to go elsewhere?
  • Do you have any personnel that lack necessary training or skills?
  • What is your current financial status? Is it a weakness?

Opportunities

  • What products or services could you add?
  • Are there any similar businesses that you could acquire?
  • Could you serve new markets beyond your current service area – new geographic areas?

Threats

  • What move could the competition make that would jeopardize your business?
  • Do you have non-competes in place for “mission-critical” personnel?
  • What makes you lose sleep at night?
  • What economic conditions would greatly affect your ability to do business?

The overall goal of an annual SWOT analysis is to force “macro-level” thinking that challenges you to prepare for challenges and to identify and take advantage of opportunities.

Small Business Success Tips – Importance of Financial Margin

Every person who begins a small business usually does so because of a passion. They pour enormous amounts of energy, time, and money into making the dream become a success – both in its mission and financially. They dream of the day when the business is profitable.

Then, with hard work, determination, stout decisions, and some luck, the dream comes true! The business becomes profitable.

This is when a massive and critical decision is made that could ultimately dictate the entire future of the company: Should we SPEND all of the profits (to grow the business or on other personal dreams) or should we SAVE the profits?

Or is there an appropriate balance between SPENDING and SAVING?

I encourage you to chose to build FINANCIAL MARGIN by SAVING the majority of the first profits of the company! While I know you see incredible future opportunity that could potentially be realized by reinvesting (spending) the money back into the company, I believe financial margin is far more important to long term success of the company.

A great way to describe this savings is an “Obstacles & Opportunities Fund” (O & O Fund). Having this account fully funded allows you to encounter obstacles head on without it impacting your daily operations (not so fun) and to take advantage of tremendous opportunities when they appear before you (a lot more fun).

It is appropriate to place 4 to 6 weeks of operating expenses in a beginner O & O Fund. Long term, it is desirable to have at least 12 weeks of operating expenses.

Here’s what financial margin provides to you as the business owner:

  1. Long Term and Strategic Focus  When you are strapped for cash, all of your time will be consumed with tactical decision-making. You will constantly be plagued with liquidity and working capital issues.
  2. Happy Suppliers  Margin allows you pay bills on-time and early. Clients who pay on-time and early receive preferential treatment over slow-paying ones.
  3. Happy Customers  Companies that are strapped for cash can be tempted to cut corners which can lead to service or quality issues.
  4. Happy Employees  There is nothing that will make your best employees run for the exits like missed payroll. Margin ensures this isn’t EVER a problem.
  5. Restful Sleep  You will sleep better when you know the bills are paid and you are prepared for unplanned obstacles.
  6. Investment Opportunities  When you have financial margin, you will see opportunities you would NEVER see if you were broke. It’s an amazing phenomena I’ve witnessed many times.
  7. Better Profit Margins  Broke companies who are strapped for cash put valuable products and services on sale or issue major discounts for early payment – all done to generate immediate cash to solve cash flow problems. It is literally equivalent to mortgaging the future. Companies with margin won’t engage in such behavior – because they don’t have to!

It’s never easy to force your organization to save. There will always be competing priorities. Chose to make Financial Margin the top priority.

Your financial manager will thank you. And then you will thank me when you are able to jump on a major opportunity – all because you chose to build financial margin.

You’re welcome. 🙂

NOTE: Welcome to the “Small Business Success Tips” series here at the wildly popular JosephSangl.com! Click HERE to access all previous tips in this series.