So here I sit debating whether or not I should resend my Monthly Minute newsletter after noticing 2 spelling errors. I used spell check, but missed these two words somehow. Oh well. I’m not perfect. Do I risk offending my subscribers by sending them a “corrected” version or just hope that most of them don’t notice or don’t care? I’m happy to admit I made a mistake, but I’m not sure doing so will matter.

This got me thinking. How often do managers or business owners or coaches or parents admit they are wrong or made a mistake? What is the risk of admitting fault as compared to not doing so? While it most likely will depend on the situation and the people involved, it is generally a good rule to at least acknowledge the truth.

I have found that honesty is the best policy. When I first started teaching I was hesitant to admit I had made a mistake for fear that my students would think I didn’t know the material or question my fairness in grading. However, I found students are very forgiving when you admit you made a mistake, most of the time. They tend to trust and respect me more for admitting my error(s). I find this to be true with clients too.

I haven’t always been quick to admit fault. But it is so freeing to do so. In the workplace it improves your relationship with your staff. Consider two options. The first is to pretend like you didn’t make the mistake and place blame on someone else, probably your staff. When you do this you create conflict – conflict that could have been avoided. Now your staff doesn’t trust you, they don’t believe you know your stuff, and they are resentful that you blamed them. The second option is to admit your mistake. Your staff won’t resent you and they will probably develop a greater trust toward you. They know that we all make mistakes so it is unlikely they will start to doubt your abilities, unless you make BIG mistakes a lot.

Try it and see if it works. Maybe try it at home before taking the plunge at the office. You might just find your personal relationships start to improve too. Good luck.

Owning a small business can come with a lot of decisions, even before you make the first sale. One of the most common decisions is whether to form a Corporation or to operate as a Sole Proprietorship or Limited Liability Company (LLC).

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.

A sole proprietorship is one of the easier and most common forms to start a business. The only requirement of a sole proprietorship is registration as a business if any name other than the owners name is used for the business. The sole proprietorship is an extension of the business owner, not separate from it. Although this form of business is one of the simpler forms of organization there are numerous disadvantages.

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.

As you finalize your 2009 taxes, it is time to look at how your business has performed during the first 3 months of 2010. If you have not received your March financial statements from your bookkeeper, contact them today for that information. A review of the first quarter will give you insight about what worked well and what did not. In addition, it will help you plan for the next nine months.

When you review the first quarter results, I recommended looking at the following 5 items:

1. Revenue. Did you generate more sales in March than January? If not, why? Is your business seasonal with a lot of sales taking place in January or February? They say the economy is in a slow recovery. Do your revenues show this to be true? If you have the ability to see revenue by customer, which customers generated the most sales in the first quarter? Do you expect this trend to continue? How can you keep them coming back to buy more? Which customers did you spend a lot of time on, but didn’t generate much revenue?

2. Accounts Receivables, if applicable. How many days does it take you to collect payment from your customers? Is this trend increasing or decreasing? Do you have the ability to offer discounts for early payment? For slow paying customers, consider creating a repayment schedule and hold them accountable for paying you on time.

3. Accounts Payable. Do you seem to owe your vendors more in March than what you did in January? Why the change? Are you carrying more accounts payable or did you order more inventory or services in the month of March? It is easy to let the amounts you owe others increase when cash is tight, but be careful of using your vendors as a line-of-credit.

4. Miscellaneous Expenses. Take a look at some of the basic expenses, such as office supplies, meals and entertainment, travel, outside consultants, and telephone/cellphone. It is very likely that you can streamline and reduce the amount spent on some of these items a little more than you already have.

5. Prior year. Compare your first quarter of 2010 to the first quarter of 2009. Look at both your Income Statement (aka Profit and Loss Statement) and the Balance Sheet. How are the two years similar? How are they different? Make a list of 5 items where your business could do better, either by increasing sales or decreasing costs. With this list create 2 action steps you can take over the next 2-4 weeks to implement those ideas.

A review of the first quarter is a great place to assess how you are doing and help you create a course to meet your 2010 goals.

It has been a few years since I have reviewed and updated my resume. It is not always easy to translate a project or accomplishment onto paper. But doing so allows us to recognize our own achievements, something most of us do not do enough.

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.

It’s official. The March edition of the ASCPA Magazine (Arizona Society of CPAs) has announced that I am the recipient of the 2010 ASCPA Public Service Award. The award can only be “won” once and I am honored to have been chosen as their award winner in 2010.

To read more visit the ASCPA.

In order to succeed in business, it is important to have a sound business plan. Without proper planning, a business may fail and this is unfortunate. The utilization of tactical planning to compliment strategic goals, is a vital step towards success. 

It is particularly important for small business owners to establish tactical planning goals to help achieve success. It is much easier to create realistic budgets and to create action steps when there is a sound plan in place. It is imperative to allow some flexibility in this type of plan because of unexpected occurrences. Small business owners gain focus when setting goals and objectives for a specific period of time, such as 12 months.

A tactical plan usually includes between three to five goals that may be challenging, but are achievable. An example of tactical planning includes the notion of increasing sales by a certain amount within a one year time frame, such as increasing sales by twenty percent within the next 12 months. Or they may commit to adding a new group of customers during their plan time frame. Another example could be the reduction of employee turnover and operational costs. All of the above examples would be especially beneficial to the small business owner.

Because every business is different and their needs are unique, tactical plans are individualized and tailored accordingly. Tactical plans can promote teamwork because they promote clarity as to how certain goals will be achieved. Tactical planning allows everyone to be on the same page and to work together to reach specific goals. 

Small businesses, in particular, tend to run much smoother when specific goals are developed and a plan is put in motion to reach them. Although each business may have a different set of goals, it is important to strategically plan for the future and establish proper tactical planning to support the strategic plan. When plans are followed, goals are easily achieved.

Good credit is an important aspect in both your personal life and in your business. Many people often assume that they are one in the same, but they are not.  There are different factors considered when it comes to figuring out your business versus your personal credit score. The organizations that report and monitor personal credit are separate and completely different from the organization that monitors business credit. Many new business owners do not establish business credit for their business and instead personally guarantee everything. In doing so, their personal credit is hurt and their business cannot stand on its own.
 
Personal credit scores are determined by a number of factors such as bill payment, debt to income ratios, and total credit card debt and history. If you are late when paying your bills, this will show up on a personal credit report. If you have many unsecured debts such as credit cards, it may negatively affect your credit score. Generally, it is recommended that you pay off credit cards and other debts on or before the due date to keep your credit score as high as possible. It is also important to keep a close watch on your debt to income ratio, which can be achieved by living within your means and by avoiding overspending. Try to pay cash for items rather than charge them on a credit card. 

Business credit is determined in a different manner. The business credit score is determined by the payment history of the bills that are specifically for the business. This can include utility bills, bank loans, and payments to vendors that report to the credit bureau (Dell is one company who reports your payment history to D&B).Your financial assets are also included in determining your credit worthiness. Financial history, current assets and liabilities are three important aspects that will help you to determine your score. It is a good idea to avoid revolving credit lines or the use of business credit cards when possible as these may lead to a lower score.

It is important to keep the two scores entirely separate. In the event that the business fails, you would not want to lose your home or your savings in the process. Try to avoid “guaranteeing” any bank loans that are for the business, when possible. The more you can separate your individual credit from the business the better. Otherwise, your risk negatively impacting your personal credit if the business is unable to pay its debts.
 
Good credit is something that everyone and every business should strive to achieve. To learn more about business credit visit the D&B website.

When you purchase supplies the transaction is an easy one from an accounting stand point. You use cash, credit card or vendor credit to make the purchase and report the supplies as an expense on your income statement. Most business transactions in accounting make sense. But one that trips up business owners and students is the concept of Depreciation.

Unlike the purchase of supplies the purchase of a large asset, such as a car, is “capitalized”. What this means is that you don’t recognize the full cost of the car as an immediate expense. Instead, you report the value of the car on the Balance Sheet as an asset. You should have a corresponding debt for the car in the liabilities section of the Balance Sheet, unless you paid cash for it. Then you determine the life of the asset, cars are generally considered to have a useful life of 5 years for depreciation purposes. As such, the cost of the car would be allocated to the income statement for each of the next 5 years. We’ll ignore the Balance Sheet aspects for now.

Depreciation is what we commonly refer to as a “non-cash” expense. Continuing with the car example, if we pay for the car with cash our cash outflow is in the first year, yet we allocate the cost of the car over 5 years. Which means that the profitability of your company is going to be impacted by the depreciation even if you no longer have any car payments because the payment of the asset and the allocation of depreciation expense do not take place simultaneously.

Depreciation allows you to better match the useful life of the asset with the revenue you are generating due to the benefits produced by that asset. If you were to expense the entire value of the asset in the year of purchase your profits in that year would be unnecessarily low and future years too high.

There are many ways to measure the profitability of your company. Income taxes are calculated based on net income, including all non-cash expenses. Whereas you can also look at cash basis profitability which would only include items that actually increase or reduce cash. Sometimes business owners like to see a line item on their income statement that is commonly called EBITDA (earnings before interest, taxes, depreciation and amortization). Another approach that I use for my clients is EBDA (earnings before depreciation and amortization) so that they can compare their net profits with non-cash expenses included to their net profits based mainly on cash only items. Figure out what works for you and use that as a measure to determine your monthly, quarterly and yearly goals.

Below are some words of wisdom from my friend Larry Barkan. It was in his email newsletter and I thought it was worth sharing. Enjoy.

I visited a friend the other day. He is a brilliant marketing
strategist who consults with and teaches marketing to companies all
over the world. In just the last month, he has worked in the United
States as well as Egypt, Istanbul and Moscow. I had lunch with him
while he was enjoying a brief respite before going to Paris.

I asked him what he saw as the differences between consulting and
teaching in Europe and Asia versus in the United States.

He said that, in the United States, unlike either Europe or Asia,
he is frequently asked if a four-day seminar can be completed in
two-days. Or, an executive will say to him, “I’ve got an open slot
of half-day at our meeting. What can you do?” Or, he might hear, as
he did from one seminar participant just before the start of a
Monday through Thursday seminar, “I can’t be there on Tuesday and
Wednesday. Will I miss anything?” (To which my friend was tempted
to respond, “Oh no. I always plan for nothing important happening
on Tuesdays and Wednesdays.”)

As someone who has worked in training and development with mostly
United States companies for the last 25 years, I can echo my
friend’s experience. Seemingly, what can’t be done quickly, won’t
be done.

Naturally, we are nostalgic for a simpler, slower time. By
definition, one is nostalgic for what one no longer has.

I believe there is a relationship between our “just do it quickly”
culture and our current problems.

When speed is a high value, it is difficult if not impossible to
consider the long-term consequences of one’s actions (credit
default swaps anyone? How about subprime mortgages?).

When one doesn’t take adequate time to learn what’s important about
a topic (“can you do it in two-days instead of four?”), one can
believe that one knows all one needs to know and will act based on
this faulty assumption.

When one lacks patience to do what’s right, one will do what is
expedient (after all, bonuses depend on it).

In a culture that demands instant “Google” answers, we are
commanded by “ready, fire, aim.”

In the absence of deep, meaningful relationships (“Yes, but I’ve
got 5,000 Facebook friends whom I’ve never met”), we’ll settle for
a consumer rather than a citizen culture.

Just because we can do everything faster doesn’t mean we should do
everything faster. Perhaps it’s time to slow down and really inhale those roses.

Have a great day,
Larry

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