Learn more about protecting your personal and company assets.
Here are a few truisms can help guide you in running your small business. They represent lessons learned by entrepreneurs like yourself. (In part one, we took a look at truisms that can help guide you in starting your small business.)
There is no "best choice" for a business structure. Incorporating is only one of many options. Get professional advice and do what is best for your own specific situation. Each situation will be unique, and any advice you receive based on generalizations might not be best for you.
Pay yourself first or you may end up with nothing for your efforts. Don't make the mistake of putting every dollar of profit back into your business. Your business may very well prosper for a number of years and then be plunged into sudden bankruptcy through no fault of your own. If this happens, and you have not planned ahead, you may very well have little to show for your hard work. Remember, YOU are the business. . .so pay yourself accordingly.
Lack of professional advice often and early will cause problems sooner or later. You are probably not an expert in law, taxes or insurance matters. . . so get advice before making decisions.
Your business attorney will not be proactive. Be careful. . .most attorneys are trained to solve problems and may not necessarily understand the business ramifications. They are generally conservative and may not share your entrepreneurial qualities. During an early business venture, I asked my attorney for assistance in developing a contract form to use with my clients. Well, I got my form. . .all three single-spaced pages of it with a total of around 30 items. My attorney had attempted to protect me from every possible contingency, but in doing so, he generated a document so onerous that no one would sign it, including my current customers. I should have given my attorney more direction. . .he assumed, in keeping with his training, that I needed as much protection as possible. With no customers, I would not need any protection!
An independent insurance agent is most likely to provide unbiased advice. Obvious, but don't forget it when shopping for your insurance.
The better your bank knows you, the more exceptional the service will be. Don't jump to a new bank for the wrong reasons. When you really need help, it is useful to be able to call your banker by his or her first name.
A personal guarantee will most likely be required if you borrow money from a bank. A personal guarantee is never a problem when you sign it! Think carefully before personally guaranteeing ANYthing. This may seem obvious, but when under pressure to keep the business going, you might make a decision that has disastrous long term consequences. For example, Ted had been in the manufacturing business for about three years and was doing quite well. During this time he borrowed a number of times from his bank to purchase materials and capital equipment. Without warning, his major customer canceled their order and the business was left with considerable material that had been purchased for this job. Eventually, Ted was forced into bankruptcy. Unfortunately, he had personally guaranteed the loans when times were good and now was faced with having to deal with the bank outside the bankruptcy proceedings. Business or no business, Ted was solely responsible for the loans.
Without marketing, failure is guaranteed. Remember, sooner or later you are going to lose that single big customer. You can't spend ALL your efforts supporting him. Spend some time marketing EVERY day. Like so many entrepreneurs, my first business started with a single customer. The company was a great customer. . .steady and increasing orders. My company grew to support their increasing requirements. Suddenly, due to a change in management and corporate realignment, the orders suddenly stopped (the reason why is of no consequence). So, through no fault of my own, I lost my major customer. I was so busy looking after this "big" customer, my marketing efforts were minimal. A foolhardy mistake. Don't you make the same one.
You never know who your next customer will be. So treat everyone as a potential customer. . .and don't you ever forget it!
You get what you pay for (with employees). When you hire employees, hire the best you can find. Hire individuals who are smarter than you are in what they do. You want your employees to extend your own expertise or perform tasks you cannot perform yourself. Every employee represents you and your business. Think about this before you say, "You're hired."
Perform a daily backup of your data. Loss of certain data could prove disastrous to your business. Don't let it happen to you.
Negotiating will save you money. It is amazing how few people are willing to negotiate a price. Do it! Negotiate EVERYthing, including services. You will be amazed at the results. And don't forget bartering. It also works.
Do not become consumed by the business. Separate home and business as much as possible. "Few people do business well who do nothing else." [Lord Chesterfield]
Stay focused on your objectives. But also strive to stay balanced lest you lose friends and family. The rewards of a successful business can be bittersweet without friends and family with whom to share the success.
[Robert Sullivan is the author of "The Small Business Start-Up Guide." For more information, visit The Small Business Advisor.]