Tag: Entrepreneurship

You, Your Business and Internal Controls

~ C.O.R.E. Beliefs ~ Leave a comment

Some of the most exciting people to have as clients are driven small business owners.  Some of the most exacerbating people to have as clients are driven small business owners.  While they want to make their first billion in sales, they also don’t want anything to stand in the way of them making those sales; even if it keeps them out of hot water.

Invariably, the entrepreneur comes to a decision point; start putting others in charge of areas of the business or shrink the business back to a manageable level.  The really driven, focused owner starts hiring managers.  The rest, well they ignore the advice.

The excuse for not hiring managers is mostly permutations of the, “It is my company, I made it so therefore only I can control it.”  Really?  Look at your balance sheet:

  • You have uncollected receivables from 9 months ago
  • You have nothing recorded for inventory but your shop is stuffed to the rafters with stuff
  • You barely have enough cash on hand to make next weeks payroll
  • You have loaned the company $250,000
  • The bank loaned you $500,000

I can go on but I think you get the picture.  You are not in control.  Because you are the only person who makes decisions, you are merely at fault for what is happening.  Being “in control” in business doesn’t mean making all the decisions, it means that there are natural checks and balances which make sure that one person can start a transaction and someone else verifies it.

So, what should you do as a first step to start building a solid internal control structure?

Start acting ethically and responsibly.

I have worked with small business owners who don’t like safety rules.  I have walked into shops where employees are grinding metal and are not wearing goggles.  Guess what?  I carry a set of goggles in my backpack.  I have walked onto job sites where employees are not wearing hardhats.  Yes, I carry my own hardhat in the car.  The point to make is that you need to set the tone that safety matters.  And it is not just about safety, it is about acting ethically and responsibly at every moment.

Set the example: Be the example.  This one little rule applies to every small business and starts everyone on the path towards better decision making.

Reward good behavior when you see it.  I worked with a contractor who sat back and watched an employee help a subcontractor who dropped a bucket of nails off the back of a truck.  Nails scattered everywhere.  The employee stopped what he was doing and helped shovel up the mess.  It was the right thing for the employee to do.  The owner missed a great opportunity to teach his employees how to act responsibly and reinforce actions that benefit everyone.

Don’t be arbitrary as you teach employees to be arbitrary.  A business owner employed his daughter to work reception.  She would on occasion come back a few minutes late from lunch.  The owner berated her out in the open about setting a poor example.  Another employee came back over an hour late from lunch and he joked with him.  You might think it is not showing favoritism by abusing your receptionist/daughter but it is in fact an arbitrary enforcement pattern.  If the rule is “In your seat at 1pm” then make sure you enforce the rule on everyone, not just the convenient target who won’t fight back.

Strong controls begin with the tone at the top.  If you take shortcuts, your employees will take shortcuts.  If you pad your expense account, your employees will add time to their work week.  You cannot grow and be successful if everyone is always looking for the easiest route.  Believe it or not, your success as an entrepreneur is totally based on the success of the people you hire.  Act accordingly.

Have a great day.  If you would like to learn more about how to start implementing effective internal controls that won’t break the bank, feel free to write me anytime for a free consultation.  I can help you understand how to grow your business while also keeping it under control.  If you would like to learn more about C.O.R.E. and how our services can help your business and association, check out our website.

Thoughts on Starting a Business

~ C.O.R.E. Beliefs ~ Leave a comment

Happy Tuesday.  I had an awesome weekend.  Brendan and David had 3 friends over Friday night for video games and movies.  We watched Monty Python’s “The Holy Grail” and it was so much fun watching 5 tweener’s laughing at comedy written when I was a child.  Naturally, the boys were awake until about 4am when they started passing out from sheer exhaustion.  But mornings around here start early on Saturday and we had them up and “zombie-like” by 9am where we went to Esther Short Park to play some Football.  It is great fun to play some touch football with half-asleep 11 year olds!

One of the most enjoyable moments I have is when I get to meet with someone who wants to start a business.  They have an idea, or are tired of making someone else a profit or just want “freedom”.  I look at it as my solemn duty to help the budding entrepreneur understand the risks and benefits of starting a small business and am proud of my track record.

Part of the process is understanding the truth about starting a business.  First,  “The Idea”.  This might sound cynical but there is some truth to what I am about to say… There really is no such thing as an original idea in business.  Think about this, chances are your business idea already exists in some fashion somewhere.  What you have is a belief that you can do it better, faster, cheaper, with different colors, in a different part of town, etc. than anyone else who has tried this before.  And, if by chance, you can’t find a direct competitor, ask yourself why an established business hasn’t tried it before?  The odds are someone has tried it and it didn’t work out; and there is a lesson there as well.

Next, “Keeping the Profits”.  If you have read my other blogs about revenues and expenses and the balance sheet, you have a good idea that there is a lot to consider to get to a profit.  Remember, first you must have the equity to invest upfront to create your business and then you must reinvest your “profits” back into growing your business.  A healthy business is a growing business.  You will likely never know when you have excess “profit” to distribute out of the business – until it is time to sell.  And selling the business, that is, your exit strategy, is when you really are going to keep your profits.  if you have set your business up right.

Finally, “Freedom”.  No one in the world works harder than an entrepreneur.  80-100 hour weeks are common, divorce is high, heart attacks, strokes, and general burnout are the norm.  Most small business owners have no freedom, they have a job they cannot quit and cannot pay anyone to do.

Now, keeping these things in mind, can you set up your new business to address these issues and actually reach these goals?  Absolutely!  It requires you to think hard about the more important parts of the business that are typically not considered until you are overwhelmed.  I created a Pro and Con worksheet I am happy to share with you if you would like to have a yardstick to measure starting a new business against.  Send me an email and I will forward it to you.

To succeed, realize your idea has likely been thought about before and is likely even in operation somewhere.  It may not be exactly the same, but something is close to it.  Try hard to find it, think about what works and what doesn’t.  What strengths do you bring to the table to deal with those things which may not work right?  Where is your plan for automation and scalability?

To succeed, realize that you need to design your business to ultimately be bought by someone else so you can receive the real compensation you have worked so hard for.  Pay yourself well for the work you do, but don’t try to do everything.  Hire the right people, train the right people and help them succeed.  You can command a good price for a business with a solid and dependable system – you will get next to nothing for a business that relies solely on you and your skills and knowledge.  If you don’t think so, ask a lawyer how much her practice is worth when she goes to retire.  then ask Mark Zuckerberg.

Finally, to really succeed, you must focus on your processes so your business can take “you” out of the system.  Yes, you will have to work hard and be chef, cook and bottle washer for a while, but you need to develop a system and an organization that you start hiring for.  Think about what positions your business needs to succeed, design those positions and start to fill them.  Your small business then does what it needs and you can focus your energies on more important things – like living.

None of this is easy but it can be rewarding if you look at it through the lenses of these three areas.  If you have questions, I strongly encourage you to speak with your current accountant and ask her to help you with thinking about how to succeed in starting a business.  If you do not have an outside accountant or would like a fresh set of eyes, contact us at Currie & McLain to schedule your free no obligation consultation.

Have a great day.