Mike Michalowicz's Blog, page 87

The Inevitable Entrepreneurial Question: How Much You Should Pay Yourself?

Every entrepreneur stumbles sooner or later with the question of what they should be paying themselves. It is a fair question and one that you shouldn’t ask without doing a little fact checking about your business. Once you do that, you will be ready to determine a salary that your business will, most likely, be able to sustain. Believe it or not, choosing what salary to pay yourself is actually must easier than you may think!

The problem with determining what salary to pay yourself is that most entrepreneurs pick a number and say, “I want to make X number of dollars this year.” Then they try to pay themselves accordingly. However, that number was based off of nothing more than wants, rather than needs or what the business can actually eek out each paycheck.

What happens with many entrepreneurs is that they find they are not able to make as much as they had hoped right off, and they start living off the profit. The profit, however, ends up usually being little, or often, nothing at all in the beginning, so they start to skip taking checks all together. In effect, they pay themselves last, which is a big mistake!

I’m sure that you realize just how important it is to pay yourself first. Without doing this, you will have a real difficult time paying your own bills, and quite possibly, keeping the business going. Doing this may have you running back to beg for your cubicle back faster than you can imagine!

So yes, you need to pay yourself first. But the key here is that you need to do it in a specific way. Here’s the best way to determine what you should pay yourself:

1. What you are going to do is take a percentage of the top line revenue. If you are a solo entrepreneur, meaning you have no employees, you will aim to take up to 40 percent.

2. For those businesses that have employees and revenues of up to $1 million, aim to take 20 percent. For example, if your business were bringing in $1 million each year, you would be taking a salary of $200,000.

3. For those businesses that have employees, and a revenue of over $1 million, plan to take 10 to 15 percent.

The key factor here, and what you may be wondering about, is what if you can’t take that amount of the revenue. If you can’t take that amount, then it is clearly a sign that your business needs more efficiencies. This formula is a great way to not only determine how much you should pay yourself, but also whether or not your business needs to be run more efficiently.

If you find yourself falling into one of the three categories above and are unable to take a salary of the suggested percentage, take a close look at your expenses, profit margin, etc. Somewhere along the way, you are not being efficient enough to support your own salary, which needs to be remedied right away.

It is important that you always take your percentage first. If there is not enough money left to pay the bills, you need to become critical of the bills. Find ways to slice the costs and/or to increase the efficiencies.

Being able to determine your own salary is one of the perks of being an entrepreneur and one of the reasons you may have become one. But getting it right is crucial so that you make sure you get paid and the business runs smoothly. Following this will help you stay within a realistic salary that your business can survive with, as well as helping to keep your expenses in check!

What Do You Stand For?

What do you stand for?

What is your purpose?

How is your company a platform for your purpose?

So, tell me. What do you stand for?

Got it? Good.

Now go tell the world about it.

Overcoming Burnout (6 Tips And One Escape Plan)

Feeling a little burned out in your job or career? Perhaps you are feeling it and don’t even realize that’s what it is! Whether you already recognize burnout or not, it’s a good time to evaluate whether you have it and what to do it about it, if you do. Burnout can be disastrous for both you and the company, so the sooner you spot it and address it, the better off everyone will be.

First, however, it’s important to identify exactly what burnout is. My definition of burnout is when you feel your efforts are fruitless and that you have lost all enthusiasm for work over a sustained period of time (typically at least four consecutive weeks). If you have just a few lackluster days, or even a few weeks of them, it could just be a simple anomaly. But when that “lacklusterness” goes on for a month or more, you, my friend, are burned out.

Here are six tricks to overcoming burnout:

1. Take an extended break. There is a saying, “everything in moderation.” That includes work. Burnout is often a loud and clear signal that you need to take a break. Take a break from work, even if it is a few days. But here is the key: it must be a complete break. No laptop, no iPad, no cell phone, no nothing.

2. Start relaxed – Too many people jump out of bed, race through breakfast and on to work. In other words, stress, stress, and more stress. Instead, start relaxed. Adopt a morning ritual that includes stretching, exercising, relaxing, meditation and/or reading. Just like you slowly warm up before exercise, you want to slowly warm up your mind & body before working.

3. Regular breaks – Working straight through the day is not productive and has even been proven scientifically not to be effective. Change your schedule to work in a short burst (ideally 60 to 90 minutes), then take a 15 to 20 minute break. Make sure the break allows your mind to totally disconnect from work. Go for a walk, talk with friends about the past weekend, or read your favorite magazine.

4. Avoid the news – In some cases, burnout is a result of depression. The constant negativity perpetuated by news reports, over time, gives many people the false belief that all of life is horrible. And with that comes depression and burnout. Try not watching or reading the news for 30 days. It may be the perfect burnout cure.

5. Change what you eat – Similar to keeping negative junk out of your mind (as in the previous point), you need to keep junk out of your stomach. A poor diet can not only suck the energy out of you, it can also mess with your mind. Improve your diet and, in many cases, you will see a rise in energy and a rise in your attitude.

6. Write down why – Spend the time necessary to figure out why you are doing what you do. Is it a stepping stone to another goal? Is what you do serving a greater purpose than just making money? Once you know why you do what you do, the passion may return and the burnout out will go away.

If all else fails, it may be an indicator that you need to permanently leave the situation you are in. When this is the case, you need to figure out your escape path. Specifically, determine where you ideally want to be in life (not just monetarily, but also what you wand to be doing, etc.). Then determine all the steps you need to take to get there. Can you find a career in that field? Can you take a small immediate step in the right direction? Can you take a night class? Whatever you do, once you have the “escape plan,” start working on it immediately. After all, it is your best means of escape to a better, more fulfilling way of life.

Get Happy About Your Work Again! Here’s 8 Ways To Do It

Hate your work? Do you know why? It’s because you’ve lost your purpose. I mean you could happily carry a load of rocks on your back for 100 miles if you knew it would save the people you loved. The load would be a lot lighter because you knew what your purpose was. It’s the same with work. So here are the 8 steps for rediscovering your purpose and getting happy about work again:

1. Define your life’s purpose – This is something you can assign your self, or rely on divine intervention or serendipity to do. The thing is once you have a purpose, you can now investigate your work and determine how to use it as a vehicle for delivering on your purpose. And by the way, if you can’t figure out what your purpose is, then make your life’s purpose to be finding your life’s purpose. Use your work as the great investigation of what you like and don’t like. Don’t judge yourself. Just keep asking why you don’t like things and why you do. Become really, really curious about you.

2. Choice – Everything in life is a choice. If you start the morning and say it’s going to be a bad day. It likely will be. If you say it will be great day, it likely will be. It is not what happens, but the meaning you assign to what happens. Recognize you have the power to choose not only what you see, but also how you see it. Choose to be happy at work.

3. Chunk Your Day – It’s far too easy to become unhappy when there’s no end in sight. So intentionally break up your day into one or two hour chunks. Position yourself to have something completed during that time… even if it is just the completion of one step. Then go take a break to celebrate. Come back and tackle the next step. Regular intervals of completion of small tasks give us a string of small accomplishments that make us happier than infrequent success and long intervals between big accomplishments.

4. Stop Watching TV – Studies indicate that unhappy people watch more TV. This is not a chicken or the egg question. When unhappy people started watching less TV, they became happier. TV may be your outlet from an unhappy day at work, but it’s probably just adding to your unhappiness. Try to spend that time with some (happy) friends.

5. Birds of a Feather – The old saying, “birds of a feather, flock together,” is true. Vulture or Bluebirds, it’s your choice. We are the aggregate of the five people we spend the most time with. Those five people are usually the people we work with. If they’re negative you probably are too. If they are unhappy you will be sucked into the same misery party. Pick happy positive people to hang out with. It won’t be an instant cure… but the more time you spend with them you’ll change for the better.

6. Get a Life – You need a life outside of your job to be happy at your job. Having something to look forward to, something to share with co-workers or friends when you’re at work, all make you happier at work. Hobbies are great, but also consider joining a meet-up group that has fun and plays if you’re not the hobby type. There are meet-up groups for sports, movies, dining out, hiking, running, book clubs or even playing board games. To find a group in your area just go to http://meetup.com. It’s free to join.

7. Make friends – Don’t be the weird guy (or gal), who comes in, does their thing, eats lunch huddled in a corner (or their car) over a book or magazine and then schleps home every day without engaging in any social chit-chat. Find and make a friend with someone at work. It will make the day pass faster and you’ll feel better having someone you can run ideas and other things past, or talk to that understands what you’re talking about.

8. Grow – Yes, take advantage of every training opportunity, brown bag lunch, seminar or On The Job Training you can. Not only will you feel better about yourself, you’ll be developing job skills that will take you into a better job (either at the company or somewhere else). If you’re an entrepreneur, take a continuing education class, go to a conference or meet-up, read or hang out with other like-minded self-improvement types. You’ll grow your confidence, skills and networking opportunities.

Remember, your state of mind, or happiness is a choice. To get out of the situation you’re in, or to improve it, choose to do something different. Yeah, it’s that easy.

Episode 29: Profitability and Proactivity with Erik Knight and Jon Wood

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Show Summary

Erik Knight and Jon Wood join us for Episode 29 of the Profit First Podcast. Erik shares his expertise on how hackers go after your business. Jon talks about how he ended up on his entrepreneurial journey.

 

Our Guests

Erik Knight (left) is the CEO of SimpleWan. He is a computer and network security veteran. SimpleWan is a cloud based firewall company designed for IT & Service Providers. This cloud based technology allow service providers to locate, monitor, manage and quantify Broadband Internet connections. The SimpleWan solution gives carriers and managed service providers the tools to increase their customers retention with advanced security monitoring and troubleshooting tools at a very low cost. SimpleWan won Product of the year in 2014 by TMC Magazine.

Jon Wood (right) Jon started a low-risk, low-reward, pooper-scooper business while he was a senior pre-med student. After graduating with his degree in biology, Jon decided instead of medical school to scratch his entrepreneurial itch, and see where it took him. The first 2 years were about just scraping by and paying his bills through other full-time jobs. The next few were about growing and milking every experience as a learning opportunity. And the last few have been about preparing (and as of last week completing) the sale of his business

 

Show Quotes 

Hackers will go after easy targets; there are about 4,000 hacking attempts per day for a small business.

If a credit card gets hacked from your business, it will cost the merchant (you) about $250.00 per record between legal costs and fines.

How can small owners protect themselves? Be proactive.

Never count your chickens before they hatch.

Take your profit first! This forces you to change your spending habits. The more something is available, the more you will use it.

 

Show Links

Erik Knight

Website: www.simplewan.com

 

Jon Wood

jon-wood.com

www.linkedin.com/in/jonwoodleader

tulsapoop911.com

 

Corporate Partners

Nextiva – VOIP phone providers for small businesses.

Fundera – Single source online funding for entrepreneurs. Also offers an adviser program for CPAs, bookkeepers and business coaches.

TSheets – The #1 customer rated time tracking solution!

Selling Ice To Africans

I don’t want that sales guy who is “so good” he can “sell ice to Eskimos.”  Why not? Because eskimos don’t need ice.  That sales guy has a horrible sense of the target market. That guy is a world class scammer.

I want the guy who can sell ice to Africans. That guy understands the target market. That guy understands how to serve. That guy is a world class salesman.

7 Risks You Should Be Aware Of When Using The Cloud

It’s not uncommon for business owners who aren’t particularly tech savvy to hear about running their business on the Cloud and go full-steam ahead heedless of the costs – both the financial costs and the risks involving security and company resources. The Cloud isn’t new; it’s just a new term that describes storage and application hosting that’s web-based, rather than based from your business’ computer systems. There are two things to remember before beginning your adventure in the Cloud – first, it’s not free. There are expenses associated with moving to web-based storage and apps. Secondly, there are some risks that you’ll assume. Here’s a look at the things you must consider before converting to the Cloud.

1. Maintenance times. Since the Cloud spans the globe, there’s no guarantee that site maintenance will be done at a time that’s convenient for your business. Unexpected downtime because of inconvenient maintenance can cause problems for you and your staff. Your best bet to head off these worries is to get to know your providers and pay attention to notices of scheduled site maintenance to maximize your productivity. You want to avoid bringing your staff in for a special project, only to discover that you’re unable to access the data you need due to site maintenance.

2. Upgrade schedule. Sometimes it feels like the second I get everyone on my staff trained on a new app, the cloud provider updates it and we’re all floundering again. Being forced into a new version of an application can require retraining your employees (and yourself!) One of my favorite tactics is to assign a few key folks to get up to speed on the new application and share knowledge with other employees, serving as resources for my team.

3. Terminating Employees. It used to be that when you let a member of the staff go, simply removing their access to their desktop computer meant that they were out of your system. Those days are over. Cloud based storage and apps mean that access can be gained from virtually anywhere, and your company is vulnerable to attack from a disgruntled former employee. You must be prepared with a protocol for changing passwords and completely preventing access for unauthorized users.

4. Inadvertent change. “Butt dialing” used to just be an annoyance, but now accidental manipulation of documents can cause problems if you don’t have a means of controlling potential damage from live editing of documents or financial accounts. It’s not just spreadsheets or company emails that are vulnerable, though. It’s smart to ensure that your social media guru employs security steps to ensure that he doesn’t accidentally post on your company’s Facebook page, rather than his personal Facebook page. Make sure there are steps to prevent accidents from becoming permanent problems.

5. Legal Problems. Particularly for businesses in which there’s a legal obligation for data security – attorneys, physicians, accountants – you must ensure that your cloud provider is as picky about security as you are. You don’t want to open yourself up to legal problems as a result of a security breach.

6. Becoming a Bigger Target. Let’s face it – the relatively small amount of data stored on your PC isn’t that great a target for thieves, but when you move your data to the Cloud and your information is combined with thousands of other companies, you’re at a much greater risk. Think about the magnitude of the problem Target faced with the theft of credit and debit card data. The more data, the bigger the payoff for unscrupulous folks willing to steal that information.

7. The Cloud is Unavoidable. It’s practically impossible to opt out of everything that’s Cloud-based, but that doesn’t mean that you should throw caution to the wind. Just because you’re conducting business via the internet doesn’t mean that you’re sure to be hacked. Your best bet is to analyze your risk and take action to mitigate the risks. Measures like verifying that sites you shop with use secure servers that protect your credit card information are a good start.

Entrepreneurs are inevitably familiar with assessing and managing risk, and your foray into the Cloud should be handled just as any other major business decision. Evaluate your risks and take action to mitigate or avoid those risks altogether.

Increase Your Close Rate By 25% With This Killer Sales Technique

I originally started the introduction to this article by explaining to you that my industry is soooooo competitive.  It is…truly.  I’m an author, and any time I’m pitching a new book, there are literally hundreds of other writers all doing the same thing – all wanting their piece of a publisher’s pie.

But then I thought back to my previous experiences as an entrepreneur, and I realized that competition has always been stiff.  My first company worked on computer networking, and we regularly bid against four or five companies for each job.  My second company did computer forensics, and not only did we have to compete against other bidders for each gig, but every one of those was jobs was time sensitive – we’d frequently get the request for proposals, have to compile and submit the proposal, win it and have technicians on site within twenty-four hours.  Talk about pressure.

Anyway, I realized that we all have pressure and all face tough competition in our struggle to attract and land customers.  I’ve found one foolproof method for making my proposals stand out among all of the others.

It’s all about timing.

Perfectly Timed Delivery.  When you pour your energy and time into creating a perfect proposal, you want to make sure that it’s examined carefully, rather than skimmed and discarded because the decision maker is distracted or overloaded.  How can you get an edge in terms of delivering your proposal at just the right time?  A little detective work!  Scan your prospect’s social media accounts and gather information about his or her schedule.  If you see posts about kids’ soccer games on Wednesdays, your best bet may be to send your proposal over two hours before the game with a personal note saying something like: “I wanted to get you this proposal right away so that it doesn’t interfere with kids’ sports.  I have athletes in my house and know how hectic the schedules can be.”  Now, you want to stop short of being a creepy stalker, but the idea here is to reach out to your prospect when the odds are best that they’re not otherwise occupied.  Use all of your available resources.

Perfectly Timed Follow Up.  The key here is to make serendipity happen.  For proposals sent via email, you could spend weeks wondering if your prospect has even opened your proposal.  My secret weapon is YesWare.com.  It works for both Gmail and Outlook (100 free uses per month) and it notifies the sender the moment an email is opened.  As soon as you get the notification that your prospect has opened the proposal, that’s when you call to follow up.  Your prospect is going to be astonished by the timing of your call, and you’re creating a unique moment that makes your proposal more memorable for your prospect.  If your pitch is remarkable, you’re halfway there!  Anything that makes your proposal stand out from the crowd – in a good way, of course – is to your benefit.

Perfectly Timed Responses.  When a prospect contacts you with questions about your proposal, your goal should be to turn those questions around ASAP – quicker than the other guys, for sure.  I’ve known associates who roll their eyes at a round of questions that precede a final decision on a project, but having a prospect contact you for further discussion is always a good thing.  If you weren’t in contention, the prospect wouldn’t waste his or her time with you.  One trick I’ve learned is to compile answers to common questions ahead of time so that I can copy and paste those answers into an email and save time.  Build some templates with FAQs that let you be the very first to respond and show how important the prospect’s business is to you.  Being prepared gives you the edge.  Make sure that you are ready and waiting for the email with follow-up questions so that you can convey your enthusiasm for the project.

There’s no magic, foolproof shortcut to sending out winning proposals.  They take hard work, and there’s no way around it.  Don’t ever underestimate the effect that timing can have on a proposal’s reception, though.  Do your homework and make sure that your timing enhances your proposal’s chances of success.

Build Raving Fans in 7 (Bizarre) Ways

Marketing is about connecting with consumers. Great marketing, though, is about transforming those consumers into fans, raving fans – people who feel loyalty, and feel invested in your business and its success. Sometimes creating these fans can require creativity and innovation, but the payoff is huge. Here are some ways to get started converting your customers into your biggest fans.

1. Have your clients do some of the work.

This isn’t about being lazy; it’s about involving your clients in a memorable experience. Build-a-Bear is the perfect example of this technique. Children receive many stuffed animals over the course of their childhoods, but none so special as the bear they built themselves, selecting the fabric and components. The consumer’s investment in the experience cultivates loyalty, and their unique experience can’t be duplicated anywhere else. Offer your clients a way to personalize their experience with you.

2. Reject clients.

It’s human nature to want what you’ve been told you can’t have. The more limited an item or service is, the more we value it, and if your customers feel like they have achieved something by managing to get your attention, for having earned the privilege of spending money with you, they’ll give you a lifetime of loyalty. As long as your product meets or exceeds expectations, then making it clear that you’re selective about who you do business with will make you more appealing.

3. Deny your own existence.

Though now a much more public item, the American Express Black Card was long the subject of curiosity, and the company refused to confirm its existence or answer any questions about the sorts of services the card might offer. Now, customers beg for an invitation for the Black Card, even though it comes with a ridiculously high annual fee. Think about it…customers clamoring to spend money with you? It’s a goal worth working toward. Cultivate the mystery and clients will seek you out.

4. Encourage tattoos.

Extreme? Maybe. Effective? Absolutely! Not only are folks who get logos tattooed on themselves acting as walking advertisements, they’re also absolutely certain to be loyal customers. You can encourage tattoos by creating a cool logo and by cultivating a reputation that’s unique and appealing. Question whether this is practical? Two words: Harley Davidson. For folks with Harley tattoos, the brand isn’t just a commodity; it’s a lifestyle.

5. Go underground.

Throw parties and hold events that are exclusive to members or customers only. The key here is not just to thank your customers for their business, but to use these exclusive gatherings to earn new business as well. Give existing loyal customers the inside track on new products and services at these events, and you’ll create your own little club that gives customers a reason to spend their time attending your events.

6. Create your version of boot camp.

Organizations like fraternities or the military create cohesion and loyalty by putting new recruits through tests and challenges. Let your customers know that your business runs differently than others, that you will require work and dedication from them. They will realize that they’re part of a special group, and they’ll feel invested in promoting your services. Providing code words and emblems of membership makes customers feel like they’re one of the elite, special few who have made it through boot camp.

7. Create an annual event or holiday.

Greeting card companies promote the heck out of Mother’s Day, and it ain’t hard to figure out why. Give your customers something to look forward to and a fun association with your brand. Think about something along the lines of 7-Eleven’s annual July 11th free Slurpee giveaway. Maybe your sporting goods store hosts an annual little league homerun derby or maybe your catering company partners with a DJ and hosts a karaoke contest for all of your customers that year. Whatever you choose, make it a fun, positive association for your business.

It’s no secret that marketing is radically different than it was even ten years ago. We have to work harder to promote our brands, but the potential upside is huge, because devoted, raving fans will take up your banner and do some of the work for you. Creating and nurturing these fans will reward your efforts for years to come.

Episode 28: Systemizing and Running Your Business Effectively with Tina Forsyth

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Show Summary

Tina Forsyth joins us for Episode 28 of the Profit First Podcast. Tina shares tips on how to profit from successfully implementing systems in your business.

 

Our Guest

Having worked online since 1999, Tina Forsyth is a ‘jill of all trades’ when it comes to running and growing a profitable service based business. She is the author of the award winning book The Entrepreneur’s Trap (available on Amazon) and creator of the CEO Business School for Transformational Leaders where she teaches entrepreneurs her proven step-by-step process to set a strong foundation for business growth.

Tina also founded the International Association of Online Business Managers and is the creator of the Certified OBM™ Training– the only program of its kind to train high-end virtual managers. As an entrepreneur and recovering control-freak, Tina is passionate about sharing her experience and helping other entrepreneurs setup the right systems, team and leveraged revenue streams that allow them to stop working so darn hard and have a business that can run without them. (woo hoo!)

 

Show Quotes 

Profitability comes from efficiency.

The idea of the bursting point: If you want to grow beyond a certain stage, and you continue to try and grow with having everything on your own shoulders, that’s where you’re going to burst. Look into getting some type of support and build systems and processes around that.

Centralize and get stuff out of your brain. Set up some type of management system or online tool that can help you with the “to do” list of the business. If your “to do” list is way too long, then chances are something needs to change.

At a certain stage of growth, the business owner should not be the one doing everything anymore. You want to really know what should be on your plate vs. what you can have someone help you with.

Make profit a habit. Profit is the business paying itself first!

 

Show Links

Website:  www.TinaForsyth.com 

Twitter: https://twitter.com/tinaforsyth

LinkedIn: https://ca.linkedin.com/in/tinaforsyth

Gift Offer:  www.TinaForsyth.com/gifts/profitfirstpodcast

 

Corporate Partners

Nextiva – VOIP phone providers for small businesses.

Fundera – Single source online funding for entrepreneurs. Also offers an adviser program for CPAs, bookkeepers and business coaches.

TSheets – The #1 customer rated time tracking solution!