The biggest lesson I have learned from this experience is that we have a different mindset when it comes to our personal finances. When managing cash for a business we tend to make fairly educated decisions. For example, we analyze why we need the new equipment and how it will create efficiencies. Or we have a list of reasons why the new item is necessary for the business or how it will be beneficial in the long-term. This does not appear to be the case with our personal monies.

As individuals we tend to participate in emotional purchasing. We buy what we want vs. what we need. We make impulse purchases (and stores know this, which is why they have so much “stuff” near the cash registers). Or we can be guilty of buying something when it is on sale so we can brag about what a great deal we got.

One of the guest lecturers had a tool that showed the difference in the amount of money someone would have if they invested 5 percent of their income over a 20 year period. He then compared this to how much money they would have if they increased the investment to 10 percent. This difference was staggering. If we could all cut out 5 percent of our spending and put that money into a savings account we would all be much more prepared for retirement.

Personal financial planning does take time. I have learned a lot about my own personal goals and limitations during this process. It was interesting to see what my net worth is as I haven’t completed a balance sheet using my personal information before. Where you really see your spending habits is in the creation of an income statement. Once you see where you are spending money, it is easier to make changes.

So set aside some time to write your short-term, intermediate and long-term financial goals. Then create a balance sheet to determine what you own and what you owe. From there complete a summary of your income and expenses. Find an area or two where you can reduce your spending and allocate that money into a savings account. You are on your way to financial freedom.

About six months ago I had a coach who specializes in Feng Shui visit my office. She asked me to write down a few key things that I wanted to get clear about as well as a few goals. One of my goals was to maximize the work day hours doing productive activities so that my family time was maximized in the evenings and weekends. The other goal was to really focus on teaching as my main career and to make my classes fun for the students (which can be challenging when you teach accounting).

She provided me with a few tips about how to organize my office to maximize the ability to realize my goals. And it worked. A few months after rearranging my office I was invited to be an online instructor for undergraduate accounting courses. Recently the university added graduate online courses for me to teach as well. The university where I have been teaching since 2003 offered to convert me from an independent contractor to a part-time employee.

Feng Shui isn’t for everyone. My husband thinks it is silly. It worked for me because I established clear goals and created actions for how I was going to achieve my goals.

A friend of mine didn’t use Feng Shui but he did create a plan of what he would like his business to look like. He has been working on a business plan and is in discussions with an investor. We can make anything happen when we have clarity.

Most of us know that new year resolutions do not always work. We get excited about changing our habits, but we easily fall back into the bad ones. A friend of mine stated that she is not going on a diet, but making a lifestyle change. There is a huge distinction in the words we use. A diet is seen as something negative and temporary, whereas a lifestyle change is more permanent in nature and uses more positive wording.

How can you apply the concept of lifestyle change to your business? What are some goals you have for you business that you have not been able to reach? Is it because you don’t have enough time or because you haven’t had enough cash on hand to make the investment? Whatever the reason, consider what you can do today to make the goal a reality.

Do you want to write a book (or any other type of professional publication)? If so, put a block on time on your calendar to write for 30-60 minutes each day. If you schedule the time you will be more likely to make the time.

Do you need more time to work on your business rather than working in your business? Working on your business means generating revenue whereas working in your business means you are doing the mundane tasks that you truly should outsource. What can you delegate to someone else? Maybe your monthly bookkeeping? Or maybe some marketing? Consider how much your time is worth, then compare that to what you would pay someone else for their expertise. Let’s say your billing rate is $150 per hour and it takes you 2-3 hours to input your daily receipts into Quickbooks (TM) each month. A bookkeeper might only charge you $100 for the same task. By doing the accounting yourself you are actually costing your business $200-350 each month.

Where can you create some efficiencies this year? Make some lifestyle changes to your business in 2011. Happy New Year!

A budget is a great planning tool, but it is generally a static document – meaning it usually doesn’t change after it has been created. When you compare the January budget to the January actual results the differences may be significant. To reduce the wide gaps between budgeted figures and actual results you can create a flexible budget. There are many different types of flexible budgets, but the academic version of flexible budget is a budget that uses the “static” budget estimates using a per unit rate to estimate a “revised” budget for actual production or sales.

For example, assume that you had budgeted to sell 1,000 units (or hours) in January but you only sold (or billed) 900. Comparing a static budget to actual results will show you variances in quantity. However, creating a flexible budget at 900 units will allow you to compare a budget at 900 to the actual results at 900. When comparing the same number of units you can then see inefficiencies instead of just quantity differences. This information can be helpful in determining why you had higher than expected labor or materials costs.

As you sit down to prepare your 2011 budget, reflect on what worked and what didn’t work in 2010. What are some areas that you can cut costs and others that should be allocated additional dollars? Has the marketplace changed, for better or worse, since you prepared your last budget? What changes, if any, do you anticipate for sales, labor costs, and other operating expenses? Remember that you can always change the data later if you need too. A budget is a tool helpful too, create one that it is relevant to your business.

As I reflect on the past year, I am thankful for right where I am in my life and my career. I enjoy my work, especially teaching, and more opportunities are abundant this year than one year ago. I am thankful I have been lead down this path as it is not one I would have consciously chosen. Never would I have imagined myself in the classroom year after year and still loving it.

Where are you at in your business? Are you where you thought you would be? If not, what can you do in the new year to get on track? If you are, give yourself a pat on the back to congratulate yourself for your achievements.

Have a wonderful holiday weekend.
Kelly

A friend of mine recently told me he has become a cash buyer. If he doesn’t have the cash, he doesn’t buy. In my personal life I follow this logic, to some extent. Our home is financed as is one of our cars, but everything else is paid for in full at the time of purchase. My husband and I are both simple people so this work for us. However, this might not work for you in your personal life, but can it work for your business?

What would happen in your business if you only made purchases when you had the cash to do so? Note, we are talking about big purchases, not your daily operational costs associated with inventory or supplies to provide your products or services. Would your manufacturing process suffer because you don’t have the most modern equipment? Can you get by with the computer equipment you current have?

We have all heard the saying that you have to spend money to make money. And while this saying does make sense, especially for advertising and outsourcing, we should strategically plan for how we use our cash. Incurring debt to buy a new laptop creates additional burdens on the business owner for how they manage the cash available for daily operations or emergencies.

I challenge you to only make purchases when you have the cash on hand for one month. Can you do it? If so, does the “cash only” negatively or positively impact your gross sales? If your sales are not negatively impacted, could you use this strategy for one more month? What changes do you notice in your bank account? To your stress levels?

Share your story here.

This shorter-version business plan can include items that are important for your business. There are many templates available, but I recommend creating a document that makes sense for your business so that you will actually use it on a regular basis.

When writing this short business plan consider the following sections:

1. Vision/Mission. When you started your business did you create Vision and Mission statements? If so, copy/paste them into this document so you can easily refer to them. Does the Vision or Mission need to be updated? Or do you need to re-evaluate how your business is following the original Vision and Mission? If you did not write a Vision or Mission, go ahead and create them now. The Vision Statement is more about the big picture – what do you want to accomplish.

The Mission Statement is about why the company exists, i.e., what is it that you are trying to accomplish with the services or products the business offers. Many Mission Statements include a brief declaration regarding employees, customers, and/or the community.

2. Product/Service Summary. Since many businesses are constantly changing their business offerings, it would be a good idea to include 2-3 sentences within the document that summarize the product/services you are offering. A business plan Executive Summary includes this information too, it is the basis for everything else in your document.

3. Target Market/Competitors. In this competitive environment it might make sense to re-evaluate your target market. Are the demographics of your customers the same as they were 18-24 months ago? If not, how would you describe your current customer? What about your competition? Have new competitors entered the market? How have they changed the way you attract or retain your customers? Have any competitors left the market or changed their focus? What were some reasons for them doing so? Can you gain insights as to how their exit might impact your business, either good or bad?

4. Tactical Goals. What are some tasks or projects that you want to complete within the next 9-12 months? For example, obtain XX number of new clients or XXX number of quality Twitter followers. Maybe you want to open XX number of new locations or add XX number of new products to your retail mix. The objectives should be measurable and realistic. You’ll use this information to create your strategies and plans.

5. Long-term Strategies. What are the long-term goals of your business? What types of activities will help you move from where you are today to that goal in 3-5 years? If you are a sole-preneur, would you like to add employees? If so, what would that look like for you and your business. If you have a retail operation, have you considered moving to a bigger location or adding stores? Think about what your business should look like in 3-5 years and create both long-term and short-term objectives to help you get there.

Remember to include a summary of the action steps you will take to achieve your objectives. For example, let’s say you want to attract 10 new clients for your coaching program. What types of activities could you engage in that might drive clients to your program? Establish Teleseminars, create a referral program or book speaking engagements/seminars. Where do you currently find your clients? Use that information to determine what activities you should be participating in to drive business to your door.

A short (or single page) business plan is easy to create. When you don’t have time to update your regular business plan, this is a great alternative. You can create these types of plans for different divisions, departments or product/service lines. Update your business plan at least once per year or when a major change occurs in your business or marketplace.

Consider the book by Jim Horan, the One-Page Business Plan to create this type of document for your business.

A corporation might sound like a good idea to a small business owner because Corporations are their own separate entity. Meaning that the corporation stands alone so there is little to no risk of loss of the owner’s personal assets, unless they personally guarantee a business debt. Whereas this is not the case when you operate as a Sole Proprietorship- where the owner is at risk for ALL business related debts.

Forming a corporation might not be the best decision for a small business owner, but it might be the right decision for larger businesses. There are several reasons why this is so.

After a corporation is formed there are many rules and regulations that must be followed by the business. These rules and regulations might not sound bad at first but for a small business owner these rules might be a bit constricting. Also, there are forms that must be filed on an annual basis to maintain the corporation in “good standing” with the local Corporation Commission.

Other disadvantages are associated with how items are taxed within the Corporation. Sometimes corporations are subject to what is known as double taxation. This occurs when a Corporation pays a dividend to the shareholder, i.e.,owner. The Corporation does not get to treat the dividend as an expense, yet the shareholder treats the dividend as income. With a Sole Proprietorship or LLC any losses flow through to the business owner on their personal income tax returns. But with a Corporation those losses remain within the Corporation until the entity generates positive taxable income. For a small business owner this can be tough, because it could be a number of years before that business really turns a profit.

If at some point in the future you want to “go public” consult with your CPA or attorney to determine if a Corporation is the right decision today. Sometimes it might make sense to start as an LLC then convert to a Corporation when the timing is right. There may be tax consequences with this approach so you have to weigh the benefits of another entity type, such as an LLC, with the limitations of a Corporation.

One primary disadvantage of a sole proprietorship is that the owner is personally liable for ALL business debts and lawsuits. Meaning a sole proprietorship, i.e., the business owner, can lose personal property (such as their house, cars, jewelry, etc.) and savings to cover business related debts or to cover the costs of lawsuits. The sole proprietor is also responsible for the mistakes made by employees, if any, that can result in lawsuits or loss of income.

A sole proprietorship is also limited in the ability to obtain business financing. Financing for this type of entity structure is usually in the form of personal loans and credit cards because the business is not separate from the owner. Another disadvantage of a sole proprietorship is that it will be dissolved upon the death of the owner meaning this entity structure does not have continuity.

When choosing a business structure think about the future of the the business. Decide what the current and future business goals are for the company. Think about the longevity of the business and the protections afforded by organizing under a different form, such as a Limited Liability Company, S-Corporation or Corporation. Consider the ability to raise capital by adding partners or shareholders.

A sole proprietorship can be started simply by setting up “shop”, but unlimited liability is the main reason you should consider another form of organizational structure. Take into account the long term goals of the company and the protections afford by certain forms of organization. It is best to consult with your CPA or attorney to determine which entity structure makes the most sense for your business.

Ultimately, the owner makes the decision as to which form of organization is best. It is ease and relatively inexpensive to register an LLC, Corporation or S-Corporation with your local Corporation Commission. Visit their website to read the instructions and determine the fees based on the entity type you choose. If you decide you need help, there are many online sites that can help for a small fee.

I have been teaching undergraduate and graduate classes for six years, yet I had never written a Teaching Philosophy. I had to do a little research to determine what a teaching statement/philosophy was and review some samples so that I could write my own. What I found is that a teaching statement is a fairly formal document approximately 1-2 pages in length. At first I thought it was going to be impossible write more than one paragraph, but found my words flowing effortlessly on paper.

A teaching statement or teaching philosophy is used as a hiring tool by colleges and universities. It allows the hiring managers to assess the applicant to see if they have similar philosophies on what the classroom experience should be for students. This can be both bad and good for the applicant.

The more I think about the teaching statement, though, the more I like it. If a college hires me as an adjunct faculty member it will be because they agreed with my approach to teaching. In the long-run the use of the teaching statement during the hiring process should help establish a good fit between the faculty and the school.

Could a tool like this be used for traditional hiring for a business? Would prospective employees be honest in their essay about their work ethic and expectations from the employer? Such an exercise would weed-out the candidates who are not really serious about working for YOUR company. You would have to check with your HR department to see if this is a tool you could use during the hiring process. Or if you cannot use it during hiring, maybe have your staff write a paragraph or two about what their expectations are for the next 12 months and how they plan to help your company achieve it’s goals.