Bob Gerritsen said:
But anyway, Scott is very right (correct me if I got the wrong message Scott) in that if your business side of things is anything but crystal clear you're simply in the dark on what you should charge.
Bob,
Yes, you are reading me correctly.
It is about as much fun for most small business owners to talk about as root canal is. Most of us start small, one man sole proprietorships. Thats where I started in '90 and I did it solo for years, simply filing a 1040ez at the end of the year. Thats all pretty simple, but life becomes just a function of how to attract 40 hours per week of work for yourself, how to do the 40 hours of work whilest scheduling and outfitting the next. It becomes a treadmill pretty quick.
That is one aspect of Gerber's book that rang true for me. The number of hats we wear as a sole proprietor. There are not enough hours in the week to do it all, or at least to do it effectively.
Especially if you are attempting to do all of it, including the bookkeeping and accounting. Back to that in a minute.
So, as a sole proprietor, I did most of my business by selling quality work through word of mouth (no marketing expenses). And I was WAY underpriced, even by 1990 standards. So I got REAL busy, and fast. I had one property management account for which I painted all of their student apartment turnovers. All of the houses were old (what we call) hill section Victorians. I literally could not keep up with the work. Long story short, you get to the point where you need help. So you get a helper. Then, your time is spent as a trainer and supervisor, rather than a technician. You become Gerber's manager. (Managing by the way, in my opinion, is a skill that most of us are not adequately prepared to do, so you learn fast on the fly). Then, the person you hired needs a paycheck, and your business entity and ability to process payroll taxes and handle the w-2/w-4 side of things becomes an issue. Or, maybe you decide your helper is a "sub", or just a cash assistant, and start treading a precarious tightrope. Many take this short cut. With each new helper you take on, you start to realize that you don't need or want "help". You need to not babysit. Which means you need to pay well, and create real full time opportunity for others. And have cash flow to pay every week or two. And, you need more marketing than word of mouth at that point, so you start to really have to look at the business side.
You probably get the drift. Anyways, in my experience with my business, the 3 most important human assets to bring on board (no later than when you are considering more of a labor force than just yourself), are a good:
- bookkeeper
- accountant
- lawyer
Bookkeeper handles all billing, tracking a/r, payroll, payroll taxes, quarterlies, payables (making sure all bills are paid quickly), job costing, generation of all financials (weekly/monthly/quarterly/ytd/yty comp) P&L and balance sheets, etc. This is the most important person in my business. She makes me more money by far than it costs to have her. In interest alone. I could sit here all day and write about the ways our bookkeeper makes us money by handling our money well. There is not a nickle that runs through the business that doesnt hit the most capable hands in the group.
Accountant for obvious reasons. You never, ever want to have the IRS notify you that you missed a report or payment a couple of years ago. Thats costly in dollars and time. And you really want your state and federal returns properly done. Ours are about 70 pages long annually. My accountant is the one who helped me figure out what I needed to charge in our current level of operation, and our bookkeeper has made sure it gets tweaked every time it needs to. Internally, we handle issues of different services that need to be billed at different rates.
Lawyer advises you on proper corporate structure and confers with accountant on tax treatment of the entity. Lawyer also makes sure that all corporate documents are current and proper in your state or governing entity. Also advises on delinquent account issues and handles any lien situations that come up. Also, and perhaps most importantly, advises on employment law. Such as, when you start getting former employees who think they might have accumulated a chronic knee or wrist problem while on your watch.
You yourself, as the owner, need to be constantly running the SWOT test over your business, inside and out. As soon as you see concerns, you consult whichever the 3 above listed resources the concern falls under. You do all of this while handling marketing, sales, hiring, supervising, firing, crm and trying not to go nuts.
Bottom line, there is no need to have to run a small business looking over your shoulder all the time, or dreading your walk to the mailbox.
Its chicken and egg. Lots of contractors tell me they can't afford to set up this way. If you don't at least have the bookkeeping properly done, you will have a difficult time really knowing how you are doing. It would be like driving a car with no dashboard or gauges whatsoever. Just keep pumping pumping gas into it and driving. With the right info, you make informed decisions and accelerate the learning curve. Lots of guys tell me they do their own quickbooks. Sure, any one can figure out how to crank invoices out of qb. Thats just enough to get checks coming in. Unless you happened to get an associates in accounting in college, I wouldn't bother trying to figure out that discipline. You will be about as effective as handing your bookkeeper a TS55 and rails.
Anyways, sorry about the short novel. It is a topic of great import.
