Leadership is Overrated

This week on my Facebook page, that shares the same name as this blog,  I asked a simple question.  If you had an academically capable eighteen year old daughter, would you advise her to go to college or have a baby?  I thought this question had a simple answer, and it does, college.  That is, if you have a brain.  What amazed me were the incorrect answers.  Incorrect is a polite term for stupid, dumb ass, and moronic.

Someone wrote, "Kids are gonna do what kids do.  It doesn't matter what you tell them.  So why bother?"  Some other genius wrote that we have no right to tell kids how to live.  A number of Bill Gates wannabe's wrote that college is useless and too expensive.  Do you think Bill Gates's kids are going to college?  

The people, who made this last statement, fall in two categories: people who never went to college, and college dropouts.  Their opinions are about as useful as mine would be in the area of childbirth pain. If you haven't experienced it, you don't have a clue or any basis for an opinion.

The answers to this question brought me to two important realizations.  First, kids are screwed up for a reason.  What's amazing is that so many turn out well.  Second, most small businesses fail for the very same reason, lack of leadership.

Leadership has three parts which combine to create the credibility that makes leadership effective.  First, leadership is based on deeds, how you live your life.  Telling your kids, "Don't take drugs." won't work if you're just getting out of ninety days of drug rehab.   This is the walking the walk part.

Second. leadership is about results.  Losers can't lead, at least not to any desirable destination.  If your ex-wife is chasing you for back child support and you haven't held a steady job in years, you aren't in a position to lead anywhere except bankruptcy.  Why would anyone take your advice?

Successful leadership requires a base of previous positive results.  If you're looking for career advice in software programming, would you listen to Bill Gates or your next door neighbor schmo, who tells you he'll be rich in five years as he asks to borrow fifty bucks until God knows when?

The third leg of leadership is advice.  The privilege to advise others stands on the base of credibility established by deeds and results.  If you have no credibility, you'll receive no acceptance as an advisor.  If you're a loser, your kids are idiots if they take your advice.  Ditto for your employees.

Finally, leadership doesn't begin when a problem arises.  If your leadership began with your daughter at age eighteen, don't be surprised when she gets pregnant by the guy picking up your garbage twice a week.  Apparently he was delivering as well. 

Positive leadership should have started with her birth.  By her eighteenth birthday, you'd have credibility by your deeds, accomplishments, and prior good advice. In fact, you've been leading all of her life, just maybe to a bad destination if you haven't been leading by setting a good example.  Leadership isn't alway intentional, only good leadership is.

Leading children is easy compared to leading employees.  Unless, you're a real miscreant, deviant asshole, your children love you, even if they show it by driving into your garage door with your brand new car.  

Employees are much harder to lead.  You're dealing with someone else's barely human offspring, who have been taught that the least amount of work is the proper amount.  I don't mean all employees are like this.  They aren't.  But, over the life of your business, you will manage many of these demonic vampires.  They'll suck the blood out of your soul and the money from your accounts if you let them.

Vampires feed on poor leadership.  If you can't get your ass out of bed for work until 10 A.M., don't be surprised that your staff shows up promptly at 9:59 A.M.  You lead by deeds and accomplishments to establish the credibility for leadership, or the vampires feast.  They'll suck the life out of your good employees as well.  You don't need wood to stake these creatures.  You just set a good example and hold your staff to this standard.  Your fanged employees will leave for another blood bank.

In our CPA firm, guess who has the highest billings and who works the longest hours?  Go ahead, we're vampire proof here.  The partners bill the most and work the hardest, year after year.  All the numbers are available for our staff to see.  We don't lead with, "You should.."  We lead with, "We do..."

 We have established our credibility with deeds. When we lead, if someone doesn't follow, we encourage him to move his ass on down the road to his next victim.

The answers to my Facebook question about pregnancy or college shed light on why small businesses fail.  Many business owners can't correctly evaluate the simplest of situations.  I was tempted to show definitive mathematical proof that the college student earns more over a lifetime than the pregnant daughter even if the pregnant one goes back to college later.  But, what's the purpose?  People, who can't answer this simple question correctly, won't understand the math anyway.

How can you determine the best marketing method for your business if you can't correctly advise an eighteen year old girl not to get pregnant?  Either intellectual laziness or stupidity has to be the cause. Neither leads to successful business ownership.

I need to take some Prozac.  I'm beyond amazed that anyone would advise a teenage girl to become pregnant.  This is why people join cults and fall prey to financial scams.

I would like to thank Jeff George, quarterback of the Redskins for about thirty seconds, for the quote, "Leadership is overrated."  George had a gun for an arm and a pea shooter for brain.  He was gone shortly after he shared his bit of wisdom.

Thanks for reading!  For real tax and accounting advice, please visit the main S&K web site at www.skcpas.com, unless you think your eighteen year old should get pregnant.  Also, please like the "How to Screw Up Your Small Business" Facebook page.  You too can be amazed at the responses to my posts.

Until next time, let's do it to them before they do it to us.

How to Become an Effective Business Manager

Effective Business Manager

So often, a small business manager is responsible for a myriad of tasks, including recruiting, hiring, overseeing and coordinating the activities of employees, setting strategy, establishing budgets, and finding new markets for expansion. Thus, in order to be effective in this position, you must be, above all, flexible. Additionally, you might consider taking the following tips to heart.

Train Employees Thoroughly

A business cannot prosper without productive employees. So commit plenty of time, attention, and resources to employee training programs; be sure these sessions explain in detail every aspect of the business. It’s also wise to partner a new employee with a longtime worker, so the latter may mentor the former during his or her initial weeks. Let new employees know that you’re available to answer questions and hear concerns, too.

Know Your Stuff

Study your field constantly. Learn to use new technologies and media platforms. Always scrutinize the marketplace, the work of your competitors, trends in advertising, changes in the law, and anything else that might possibly give your business an edge.

Hold Yourself to the Same Standards as Everyone Else

If you want respect as a small business manager, you must earn it by holding yourself to high standards. If you make a mistake, admit it to colleagues candidly and then move on. And don’t bend the rules that you expect everyone else to follow. Always follow the company dress code, for example, and don’t exceed the lunch hour. Do not award yourself special bonuses or unnecessary perks, either.

Goals and Detailed Plans Go Hand-in-Hand

An effective business manager is both a visionary and detailed oriented. To that end, always have in mind a broad, long-term vision. For instance, you might decide that your business will achieve X amount in annual sales or Y percent market penetration. Then craft a highly detailed strategy to make that vision a reality. Devise a budget. Decide which cost management strategies you’ll employ to stay on that budget. Create monthly goals, and communicate those goals clearly to every one of your business’s employees so they’re keenly aware of what they need to work towards.    

Build Relationships with Customers

To the greatest extent possible, get to know your clients and customers personally. Engage them in conversation. Stop and say “hi” whenever you see them, whether it’s at your business or at the mall with your family. Send your biggest clients holiday cards, or even invitations to dinners or golf outings. Doing so will increase their loyalty and bring in new business through positive word of mouth.

One Thing at a Time

When you focus on one task at a time, rather than trying to multitask, you decrease the number of errors you’ll make, reduce your overall stress level, and increase the chance of a creative breakthrough. Multitasking is sometimes necessary for a business manager, but it’s greatly overrated. In addition, prioritize your tasks: Allot the most time and energy to the most important among them. See if you can assign less important activities to someone else.    

Continually practice these tips and become an effective business manager.

Die Without a Buy-Sell Agreement

I just returned from a week of sightseeing in Boston.  Reading a book on Thomas Jefferson ignited my interest in the pre and post Revolutionary war periods. We did all of the normal touristy stuff.  At the end of our week, we took a Ghosts & Ghouls tour of Boston burial grounds.  As part of the tour I was hanged at Boston Commons.  Please send money to my not so mourning family.  Then the tour guides married me off to a serial killer.  She killed her first four husbands before being slain by her fifth.  It was a tough week.

September 2012 was a tough month for me.  Actually, it wasn't so much tough on me but on my clients.  Four died in one month.  Our staff joked that being my client was a terminal disease.  Three of these clients had their affairs well in order.  But one didn't.  He owned a business with a partner.  He died without a buy-sell agreement or an operating agreement.

Fred and Al owned an IT business that served the federal government.  They provided fail over services for government agencies.  If you had computer operations in say... the World Trade Center, and someone flew a plane into the building destroying your IT facilities, Fred and Al made certain your operations continued as usual.  You can probably understand that Uncle Sam had quite an interest in their services.

Fred and Al were both in their mid-forties and in good health.  Then Fred got run over by a truck, literally.  He died instantly.  Fred and Al had neither a buy-sell agreement nor an operating agreement.  What happens when your business partner dies, and you don't have the legal documents to ensure an orderly transfer of the business?

You end up with unwanted partners, and they aren't usually the silent type.  Al was contacted by a personal injury attorney representing the two daughters from Fred's first marriage.  Al barely knew the daughters existed.  Since, there were no legal agreements regarding what happened to the business upon Fred's death, the attorney volunteered to draft an operating agreement for the business installing the two daughters as Al's new partners.

Here's the problem with allowing a personal injury attorney to write an operating agreement in these circumstances.....  Personal injury attorneys don't know a damn thing about estate law, at least this moron didn't.  Fred's daughters were not the rightful owners of Fred's share of the business even though they were his heirs.  In Virginia, Fred's estate owned Fred's share of the business.  The attorney was busy writing an invalid agreement.

I referred Al to an estate attorney, who began the process of probate for Fred's estate, working with Fred's second wife to close out the estate.  In Virginia, counties administer the probate process.  Periodically, the estate executor files an asset inventory and reports on the progress in winding up the estate.  Besides the legal fees, the county requires substantial probate fees based on the value of the estate.
Fred's share of the business was his primary asset.  So the estate engaged me to provide a valuation of Fred's share on the date of his death.  Al, and the estate attorney, hoped to use this valuation to settle the estate and buy out any claim on the business from the daughters.  Hoped is the key word here.

If you are caught in Al's situation, you can be certain of one thing.  The heirs of your business partner will smell the pot of gold.  They are thinking millions of dollars for their share even if they peed in his porridge while he was alive.  It's party time, baby.  Fred's daughters were no different.

Fred and Al had a nice business, but it was really just two well paying jobs.  They provided all of the services personally, relying on their combined forty years of engineering expertise creating fail over systems.  That doesn't make for a valuable business.  For Al to continue the business, he needed to hire someone with similar expertise.  These people aren't cheap.  In fact, it was going to cost more to replace Fred than Fred's salary.

Fred and Al were very valuable computer engineers, but the business itself was worth pretty much nothing since the pool of potential buyers was almost nonexistent due to the technical qualifications required of a new owner.  I valued the business at just the cash on hand and the receivables at the date of Fred's death.  Fred's half of that was about $100K, hardly the millions his daughters envisioned.

Are you surprised that they weren't happy with me?  Al was faced with tens of thousands of dollars in legal fees, not to mention the business disruption.  He offered the daughters the opportunity to pick a business valuator of their choice.  But, that would cost them money.  They were content to threaten legal action and delay the closing of the estate.  The county was after the estate to close and continued to impose more fees.  The business was being ignored.

In frustration over the lack of progress getting the business out of the estate, Al hired a litigation attorney.  Al's attorney asked the daughters to submit what they thought the business was worth telling them that Al would either buy it from the estate for that price or sell his share for that price.  They would then be obligated to buy Al's share at his option.  Of course, they refused.  They had no money, but they had plenty of attitude.

Al's attorney then told the daughters that Al was resigning from the business.  Since there was no operating agreement, Al was free to withdraw from the business and form his own new company.  Of course, he couldn't take any existing contracts with him, but those contracts were worthless without him.  The daughters would never be able to manage the existing contracts, and the business would fold.  Then Al could bid to get the contracts back.

The daughters' attorney called for a mediation meeting and the daughters settled for almost the exact value I had calculated.  Al had his company back after spending $20K or so, not exactly a happy ending, but a satisfactory one in the end.

Dying without buy-sell and operating agreements is malpractice for a business owner.  You are ensuring heartache for your family.  Of course, if you hate your partners, spouse, and family, go for it.

Thanks for reading!  For real tax and accounting advice, please visit the main S&K web site at www.skcpas.com.  Also, please like the "How to Screw Up Your Small Business" Facebook page.

Until next time, let's do it to them before they do it to us.

Growing Your Small Business

Growing your Small Business

Most entrepreneurs dream of building their company and making a lot of money in the process. Sadly, many business owners work hard but fail to realize their dreams because they did not develop a solid plan. Here are five tips on how to grow a business.

Plan:  When dreaming of an idea, most people want to get started immediately. When starting rapidly, an entrepreneur feels that he or she can start making money and building a solid customer base. Instead, one should create a solid and workable business strategy. One must include financials, marketing strategies and a basic idea on how the company will turn a profit. Remember, to grow a business, one needs a plan. Of course, when creating the plan, one should not go overboard or stress. It is just a simple outline of the company and its long-term plans.

Adequate funding:  Many companies never gain traction in their market. This happens for a lot of reasons with one of them being that the company does not have enough money. When the business cannot afford to pay top-notch employees or buy products, it will have a hard time making money. Simply put, when trying to grow a small business, one must have enough money. To get capital, one should apply for a credit card and build their profile. Then, after some time, one can apply for a loan at a bank or lending institution.

Employees:  In trying to cut costs, some opt to pay employees or contractors a low wage. Now, in the short-term, one will save money by using this method. However, in the long run, one must invest in their employees and contractors. When paying a decent wage, the organization can attract the brightest talent who gets results. Without a doubt, one cannot grow a small business without some solid and dependable employees.

No salary:  When turning a profit, some entrepreneurs want to live it up and draw a large salary. This mistake can lead to serious problems when the company faces leaner times. Ideally, a CEO should not draw a wage. Of course, this is not always practical; a company owner, should, at the least, draw a small salary, so he or she does not take away money from the organization. Without a doubt, to grow a business, one must make this sacrifice.

Bookkeeping:  Some companies neglect to set up a solid and long-term bookkeeping plan. Instead, many busy entrepreneurs opt to throw receipts into a box or drawer. One should not do this as it can lead to serious and difficult problems. Instead, a company should hire a professional bookkeeper and keep copious records and notes of all transactions. In the long run,  this will pay off since the organization will have an easy time obtaining loans and doing taxes when they have organized books.

Most people do not know how to grow a small company. Luckily, when following these five simple tips, an entrepreneur will know how to grow a business and rise to the top.

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Setting Business Priorities

Time Management for Small Business

Small Business 101

Setting Business Priorities for Building a Successful Business

Building a successful business normally takes time, and it requires setting priorities so that the business can survive through good and bad circumstances.

Business priorities will often vary based on a diversity of factors including the company’s mission, financial status, human resources and the industry. Therefore, it is essential for each business owner and their representatives to develop a list of priorities and remain consistent in accomplishing them.  However, before an individual or a team of representatives starts this process, there are some things that they should know.

Why are business priorities a necessity?

In an ever-changing global business environment, it seems nothing is remaining stable. Consequently, when the business leaders are in the process of managing their operations, whole organizations have to regroup to keep up or remain on the cutting edge of the industry’s competition.

In many circumstances, the challenges during these times can become overwhelming since there are so many different things on the table to do. However, when the business is well-versed in setting priorities and keeping everyone on the same page, the business will not get side tracked by accomplishing goals and objectives that will not add value to the mission.

Another top reason for setting priorities is it allows the team to accomplish the more lucrative projects first. Consequently, the team will increase business profits and everyone involved can enjoy the fruits of their labor (i.e. company bonuses etc.).

Defining Priorities

With so many variables that can affect today’s businesses, defining priorities usually takes more skill and experience to do it effectively.  Fortunately, there are software applications available on the market, and they can assist with expediting this process.

This software is designed to help with making an informed decision because it may also provide trends and other valuable information.  For instance, the business owner can set the top priorities based on the activities that bring in the most finances. Whether the finances are derived from cutting out unnecessary procedures in an operation or selling more products to a specific target market, the business owner and their representatives should set the highest priorities based on financial income.

In some cases, the company may have a need for additional resources so that the company can expand their activities into other markets. To achieve these and other objectives, the business owner and their representatives must know what it considers to be the most important. By defining priorities, everyone in the company can stay on task and move forward together.

Tips for Setting Business Priorities

Tip #1 - One of the first tips is to create a list of objectives. This list will assist the staff with setting the business’ priorities effectively.

Tip #2 – Set a specific criteria designation to each objective. On a scale ranging from 1 to 3, it will make the items easier to classify. With the highest priority ranking number 1 and the lowest priority ranking number 3, the group can decide which objectives should be accomplished first.

Tip #3 – Involve all key personnel in the process. To ensure the process is thorough and effective, everyone who has a stake in this process should be involved. Leaving out key stakeholders can present major problems in the future. 

Now that you know the basics of setting business priorities, it's up to you to put that knowledge to action.

Fire Your CPA

What's the difference between a CPA and a prostitute?  People willingly pay the prostitute.  CPA's are like hockey coaches.  We are hired to be fired.  Experienced CPA's understand this.  Just as a hockey team quits listening to its coach, a client will quit listening and responding to a CPA.  Sometimes this happens in ten years.  Sometimes it happens in two.  Good CPA's won't stand in the way of your switch.  We're on the other side a lot as well.

There are two good reasons to fire your CPA.  First, if you're not getting what you're paying for.  Second, if you're not getting services you're willing to pay for.  Note that both of these reasons are about payment.

If you want good service from your CPA, expect to pay...and pay without incessant griping.  Complete this sentence.  If great clients get great service and good clients get good service, bad clients get...

Here's the definition of a great client for a CPA: someone who pays on time without griping and meets client obligations on a timely basis.  That means, if I have to hunt you down and beat your ass to get a question answered for a tax return, you aren't a great client.  You're creating your own bad outcome.

My most successful client gets great service from me by paying on time and in full.  He also pushed me to increase my rate to near what he pays his attorney.  He didn't do this out of the goodness in his heart.  He expects my full attention when he wants it.  He gets it.

Imagine this scenario.  He calls and you call at 6 PM on a Friday night.  Both of you need something by 7 PM.  He pays top rate and on time.  You gripe about my rate and pay when you damn well feel like it.  Guess whose job gets done.  Go ahead, guess...

However, if you pay on time, have reasonable expectations and you aren't getting what you pay for, fire your CPA.  If you bring in your personal tax information in late February, answer your CPA's questions timely, and still your tax returns aren't done in mid-July, fire the bum.  If he doesn't return your phone calls and e-mail messages, you're not a valued client to him, despite his protestations when you tell him to kiss your ass.

Here's what doesn't count as your CPA's fault.  A few years ago, my first personal tax client came in January.  Her return was the last to be completed before April 15th.  Why?  When she came in, she had about ten percent of her tax documents.  I sent her a questions list on early February.

In April she complained that her returns weren't done yet despite coming in early.  She wanted to know why they weren't done.  The answer was that she's a dumb ass.  She wasn't functioning on a normal adult level.

"Oh Frank," you say, "Why didn't you follow up with her?"

We have a wonderful project management system that sent her e-mail reminders every five days.  Maybe sometime between early February and early April, she could have been bothered to play her part in the great tax return drama that closes every April 15th.  This wasn't my fault in any way shape or form.  This isn't an isolated case either.  Some variation of this occurs thirty times every tax season.  Repeat after me, "Bad clients get bad..."

FInally, if your CPA doesn't offer the services you need, move on to someone else.  A 21st century CPA offers services besides income tax preparation.  If he closes down on midnight April 15th never to be heard from again until next tax season, he's headed towards retirement.

At the very least, most affluent clients need tax and retirement planning.  We are busy all year with tax and retirement planning.  I have trouble scheduling vacation.  We meet (or meet virtually) with almost all of our business clients between September and December.  We prepare detailed tax projections that frequently include multiple scenarios and multiple years.  The tax biz is a year 'round biz.  If your CPA isn't a year 'round dude, time to find one who is.  Operators are standing by.

Thanks for reading.  As always, for real tax and accounting advice, please visit the main S&K web site at www.skcpas.com.  Also, please like the "How to Screw UpYour Small Business" Facebook page.  I post snarky tidbits there daily.

Until next time, let's do it to them before they do it to us.

Ignore Customer Demographics

"Frank, it's Billy Ray Cyrus on the phone.  I need your help.  Miley is pissed."

"Hang on Billy Ray.  I have a call on the other line."

"Frank, it's Miley Cyrus.  My doddering old fool of a father has been tapping into my tour fund again.  I need you to do some forensics work."

Since I have an obvious conflict of interest here, whom should I choose as a client?  How should I decide?  I could use Frank's rule of reality shows.  Root for the hot chick.  But, maybe something more scientific is appropriate.  Let's look at my choice in terms of demographics, specifically age.

Billy Ray is fifty-one.  Miley is twenty.  If men, on average, live to be seventy-two and women live to eighty-one, Miley could potentially be a client for sixty-one years, while Billy Ray could would likely only be a client for twenty-one years.  That's a pretty simplistic way to use demographics - too simplistic.

What if my average client stays with us for ten years?  In that case, either Miley or Bill Ray would likely be clients for the same number of years.  Age demographics are important, just not in terms of time until death in most cases.  There are three ways the age of your customers affects your business operations.

First, age affects your marketing methods.  Different age groups respond differently to different marketing methods.  Here is an example.

A charity receives almost all of its cash contributions from direct mail marketing.  Guess the average age of its contributors.  Fifty.  No.  Sixty.  Try again.  Seventy.  Still no dice.  The average contributor is over seventy-five.  Why?  People less than sixty don't respond to direct mail.  We just toss the two pounds of crap the mailman delivers every day.

Do you think the charity has a demographics problem?  Of course.  Their contributor base is literally dying.  Today's sixty year olds won't respond to direct mail any more in fifteen years than they do today. Their potential contributor base is deteriorating rapidly.

How are they responding?  They are exploring marketing methods to attract younger contributors.  People in their twenties, thirties, and forties want more from a charity than just a thank you note.  They want direct participation.

The National MS Society has a great and lucrative program sponsoring bike rides.  I participate in a couple every year.  Biking is participation.  How do they market the rides?  They use e-mail and Social Media.  If you want a younger customer base, use marketing methods appropriate for that group.

Second, age affects your customer communication methods.  Go to the local mall.  Watch people using cell phones.  Older people talk on their phones.  Younger people text.  Why does this matter?

Customers under forty regard phone calls as an intrusion.  It's an unscheduled interruption.  Though I'm over fifty, I agree.  The phone allows any one of seven billion morons on the planet to interrupt whatever I'm doing, usually for something less important than a good ass scratching.  E-mail let's us young folk schedule our communications.

However, if you're serving older clients, telephone communication is the norm.  Of course, I don't understand this.  What faculty typically goes as people age?  Hearing.  So older people rely on a faculty they can no longer use effectively.  Of course, my opinion here doesn't matter.

The third way age affects your business is workflow.  Our CPA firm relies heavily on automated systems.  We use a cloud based project management and client communications center that lets us automate most day to day communications tasks.  Our clients less than fifty love being able to access their tax return information from anywhere at any time.  However, our older clients are lukewarm at best in their attitudes towards the system.

Thus, we have to maintain two different workflow systems, one for the 90% of our clients who use our client center, and one for the 10% who don't.  Surprise, surprise, we have more problems and are less efficient when we can't use our normal procedures.  I don't want new clients, who won't use our system.  They are better off somewhere else, where everything is done by telephone.  We are better off, because we are more efficient and profitable with our system.  The people, who don't like our system, aren't bad people.  They just shouldn't be our clients.

So am I breaking Billy Ray's achey heat and choosing Miley?  Or, am I choosing Billy Ray since we speak the same version of the English language?  Neither.  Ditto for Lebron James.  Entertainers and professional athletes have unique tax problems in which I don't specialize.  I'll stick with small business owners.

Thanks for reading!  As always for real tax and accounting advice, visit the main S&K web site at www.skcpas.com.  Also please like the "How to Screw Up Your Small Business" Facebook page.  I post snarky advice a few times daily.