"Numbers? Eh."

"I know how successful my business is by looking online at my bank account."

When someone tells me this with a straight face, I am immediately nervous.  It just isn’t possible. Financial statements give a more complete picture of the business' health.  If you don’t know how to read financial statements, you’re in trouble.  Period.

"But, I’m not a numbers person."
Is not the thing to say to a bank when you are trying to get a loan.

"I’m a big-picture thinker. Numbers just bog me down."
Is not what you tell your vendors when you haven't paid them.

"I’m better at marketing." 
Is not what you say to your one employee when their payroll check bounces

"I’m not a “business person.” (Yes, I've actually heard this from business owners.)
Is not what you say when the IRS levies your account to pay back taxes owed by the business you own.

You better learn to be a numbers person if you want to run a successful company.  This is one of the reasons we established Start-Up School. What better place to learn how to read important financial data than in a series of one-on-one mentoring sessions with a CPA?  What if you knew exactly which numbers were the most important, and you could focus on them? You can and you should.

The Heart-Attack-Inducing Certified Mail

Audit.  Certified mail.

Two things that strike fear into the heart of any business owner.  When Louis’ company was randomly chosen for an audit, he sent in the notice for our review.  At first glance, it looked like every other random notice.  But Louis knew something I didn't know.  He discovered that his company had accidentally omitted revenue from his tax returns, because he had no accounting system in place to effectively track his activity.

There will eventually be many lessons learned in this ongoing situation, not the least of which is that sometimes you need someone else to help you track your business' finances.  After all, Louis is great at his job...he sucks at accounting.  But, to Louis' credit, he is the typical "head-down, nose to the grindstone, works from dawn to dusk" entrepreneur, and he adds value to his customers' lives.  He's got most of it down just fine.  He could use someone to round off the edges of his business' financial house, you could say.

We are firm believers in the adage that "You don't know what you don't know."  In fact, when my wife Meghan and I came up with the idea for Start-Up School over a couple of beers one evening in a local restaurant, we wrote down a long list of reasons why we felt this was a great idea for entrepreneurs.  She wrote that quote within about three minutes of brainstorming.  Teaching entrepreneurs through real-life experiences is why we're here.

Three Reasons Business Plans Shouldn't Be Comic Books

When I started my CPA firm in May 2002, I wrote a business plan.  I wrote it because I thought I was supposed to write one….I needed something to distribute to potential banking partners, right?  I put together a bound, thirteen-page work of autobiographical non-fiction and numerical fiction that was sure to wow anyone that read it.  I took it to my favorite bank, walked out with a $50K unsecured line of credit, and was sure that it was my business plan writing prowess that did it for me.

But, I know now that it wasn't.  The reason I know this is that I projected profit in the third year of my cash flow projections that I, to this day, haven’t yet achieved.  My business plan, except for the parts that were purely autobiographical, was crap.  It is comical to read it now.  For a CPA, I sure put together some junky financial information.

On what basis did he grant me that large, unsecured line of credit? I had banked with this bank personally for many years, as had my father and his small business.  Maybe it was that.  Maybe he called some people who knew me.  I know for sure it wasn't due to my prowess in crafting my own financial projections.

What can we acknowledge to make sure we aren't competing with DC Comics’ Batman Eternal #41?

You don't have Spider-Sense, so you can't predict the future. I think that readers should assess your grasp of grammar and your ability to use spreadsheets to prepare financial information, not commit to your version of the future as predicted in your business plan.  

Ask yourself, would Bruce Wayne endorse these financial projections, or would his Board of Directors at Wayne Enterprises advise against that?  Today, things change too quickly.  I think that preparing financial projections is a good exercise (see, I used that word again), but to think that lenders and investors hold you to those figures is folly.  Unless you’re starting a business with a guaranteed customer list and immediate, measurable profitability, the projections are shaky at best.  And, we all know now that running a business and generating profits isn't the same as sitting in your cubicle and sniping at your boss from a distance. 

Lenders, customers, and investors buy into Hulk, not his well-crafted anger management plan.  In the small business world, you can have a great idea for a business and be a total jerk, only to find that no one wants to work with you.  You can be genuine, care about your work and your potential clients or customers, and have a less-than-stellar presentation, only to find that you've impressed people with what is inside YOU, not the business plan.  Today, people care far more about why you do something than what you’re actually doing.  You can almost bet that you aren't the only person in your line of work, so it has to be about more than just the business plan.

I’m not saying that you should never have a written business plan.  I’m simply saying that you need to call it what it is, and depend on it only for what it can do for you.  It’s an introduction to WHY you’re starting a business, and then WHO you, as the owner, are.  Blow people away with serving customers, not with a well-bound work of fiction.  Save that for the authors.

"But, I didn't know."

James owned a successful construction company, utilizing some of the best subcontractors around.  However, one of those fantastic subs was relieved of his duties when he came to work drunk for the third time in a row and he decided to file for unemployment benefits.

This subcontractor thought he was entitled to them, even though he wasn’t technically James’ employee.  The unemployment office told the terminated subcontractor that he may have been compensated incorrectly….maybe he really was an employee.  Maybe this deserved a second look.  So, they audited James' construction company, and found that most of the “subcontractors” were, in fact, James’ employees.

James had to pay a hefty amount of penalties, going back three years, and re-file every payroll tax return for those three years.

Lessons are effective no matter when they’re learned.  It just would have cost a lot less if James had learned his lesson BEFORE the audit.  We have a passion to teach entrepreneurs and allow them to learn from our mistakes. That’s why we chose to create Start-Up School….why make needless mistakes and learn the hard way when we can run interference for you?

Why Will Start-Up School Help You?

Start-Up School fills a void that most entrepreneurs will have in the very beginning of their new adventure.  You can’t know everything immediately, and you’re going to make mistakes.  That’s inevitable.  But, we feel that serving as a mentor to a new entrepreneur will allow us to point out problem areas before they become crippling, and also share our experience of succeeding, failing, blowing things up, and starting over.

Every entrepreneur feels alone in the beginning, no matter how many people she’s surrounded herself with or how large her office may be.  We want Start-up School and our mentoring relationship with that entrepreneur to be a source of strength and comfort, and a value-add to a thriving new business.

A successful mentoring relationship requires a few things to remain valuable to the parties involved:

• Mutual trust
• Mutual caring
• Freedom to voice opinions
• Truth
• Availability
• A desire to see the other person succeed in their role

Entrepreneurs benefit from having a mentor in many ways, but here is a big one:  We ask questions that may not have been asked yet, prompting answers that lead to more questions, whose answers hopefully point the way to success.  It's hard to get that interaction while working away, with your head down, stressing about paying bills, and trying to time your next Tweet.  This is how we envision Start-Up School helping our "students."

How Sick Day Policies Turn Your Business Into a Daycare

Sick day policies have been in the news lately.  This isn’t a political commentary, I promise.  I am a fellow entrepreneur, and there are times when we can write our own rules as long as we don’t break the law or discriminate. This is why I think that sick day policies, for the most part, suck for small businesses.  I tend to gravitate toward “trust and reward” than “police and punish.”

Most business owners write sick day policies like David Hilbert wrote algorithms.  “If you work for three consecutive orbits around the sun, then you are entitled to one Earth day of sickness, provided you bring us a vial of infected blood and a note from your physician of record.”  What the hell?  Why not give the new employee a slide rule and a set of litmus strips and wish them good luck?

Sick day policies immediately make everyone think they have to call you with hourly updates.  I have a 10-year old daughter, and I can remember her daycare calling me hourly to update me when she showed the smallest sign of not feeling well.  “Mr. Godwin, she’s not as active as she usually is, but she ate her strained green beans so we think she’s OK.”  I had a client tell me the other day that one of his employees called him to let him know how her…um, intestinal regularity…had turned into chronic stomach upset…no lie.  And she was much more graphic than I’m being here.  You could be reading this over lunch, right?

You become the hall monitor.  Jeez, running a business is hard enough without you having to read a doctor’s note and a summary of hourly fever changes.  You’re making things happen….generating profits….talking about matters of state….being the MAN.  You have no time to do a drive-by and make sure that your employee is really in bed and not waiting in line for “Mockingjay” tickets.  Give me a freaking break.

If you can’t trust your team, then you don’t need them in your office.  If you can trust them, for the love of all that is holy, please don’t treat them like children.  If you expect them to deliver like grown-ups, treat them like grown-ups and they will.  Life is too short and entrepreneurship is too challenging to require you to act like someone’s second grade teacher.  I get it, Mr. President….paid sick leave makes for a great headline.  But for small business owners, let’s call it “salary.” Get out there and tear up your sick day policy, and then watch people act like adults.  It’ll change your life.

The Prayer Walk

You may think by the title of this blog that I am writing about a spiritual experience.  Maybe I am, but it didn't feel that way at the time.

If you've owned a business for any period of time, you've made the Prayer Walk.  This was my version of the Prayer Walk:

My first office was in an old house, built in 1909.  I had no mailbox, only the slit in the door where the postal carrier would PLOP my mail.  When it hit the hardwood floor, it made this popping sound and I was out of my chair and on my way.  I was on my Prayer Walk.

You see, when I started my firm, no one paid you online or with ACH.  You got a check.  Every now and then, someone paid in cash.  But 99% of the time, you got a check by mail.  I can distinctly remember days of updating my accounting records and looking at a small balance in the checking account, knowing that I had to make payroll the next week or pay my rent.  I would say aloud “How am I going to make that happen?”

When I would hear the mail hit the floor, my Prayer Walk began.

Two steps…echo, echo….Please let there be a check in the mail.

Two more steps…echo, echo….Please let there be a check in the mail.

Two last steps…I only need $750 to get me to next week….come on, no Whammies, no Whammies…

Then, I would see the result of my Prayer Walk.  Some days, prayers were answered.  Other days, I was told to ask again later. Prayers aren't always answered when you pray them and sometimes they aren't answered at all.
Sometimes you are required to hold on until the next day. Which means you have to figure out how to hang on one more day. String together enough days of "figuring it out" and you are running a business, like any true entrepreneur.