Mike Michalowicz's Blog, page 94

Grow Your Business Faster By Paying Yourself

When I’m consulting with clients looking to invigorate and grow their businesses, one question I often ask is: “Who’s your most valuable employee?”  They inevitably give me the wrong answer.  They might wax poetic about their rockstar sales person or their dedicated assistant, but they’re missing an obvious point.  Entrepreneurs don’t realize that they, themselves, are their most valuable employee, and that is a short-sighted position.  You are your most important employee, and you need to treat yourself just as you would any other staff member who’s integral to the success of the company.

Entrepreneurs wear two hats (okay, it’s often more than that.)  You’re both an employee and a shareholder.  You produce the revenue, and you should benefit from that revenue.  Just as you’d nurture a star employee, and just as you’d expect a return on your investment as a shareholder in another business, you deserve – in fact, you’re obligated – to pay yourself for both of these roles.

Why should you pay yourself more?

To avoid being a crutch.

Make a list of your responsibilities and duties.  What would you pay someone to do all of that work?  If you’re not fairly compensating yourself, then you’re not running your business responsibly.  If you’re subsidizing your business by underpaying yourself, then your company is doing little more than limping along.  Paying yourself a fair wage forces you to run your business properly and profitably, and is inevitably better for your business in the long run.  Too many company founders suffer under the delusion that they must sacrifice income in order to start a business.  In fact, the opposite is true:  if you start a business and require it to be profitable from day one, you have a much better long-term outlook.

To make yourself replaceable.

Growth comes when you can hire an employee for part of your current workload and free yourself up for bigger and better things.  If you’re already paying yourself for the duties you’re hiring for, then it’s an easy transition.  If you’ve been volunteering your efforts, then you have to scrounge up the money for payroll – not an ideal scenario.  It’s not uncommon to see entrepreneurs running around like one-armed paper hangers, unable to see the big picture for all of their little daily duties.  You must be able to afford employees as you grow so that you can keep the big picture in sharp focus.

To keep from resenting your business.

I see it over and over: entrepreneurs who sacrifice their income to help their business limp along.  They end up caught in the perpetual cycle of the desire to grow and the frustration of seeing their unsustainable business be unable to support that growth they so desperately want.  If you’re getting paid fairly, you’re rewarding yourself for growth.  It’s responsible and sustainable, and it breeds success.

To become more efficient.

If you’re writing yourself a paycheck, then your business has to bring in money.  It’s that simple.  Without the pressure of expenses to meet, it’s easy to treat your business more like a hobby, rather than the entity that lets you afford to live.  As your business grows, you should also pay yourself more.  Your healthy business should pay you dividends that reflect your hard work, vision, and dedication.

Now you’ll notice that what’s absent from the list of reason you should pay yourself more is a fancy sportscar, or your impending 20-year reunion and your desire to impress the folks who sneered at you in school.  Don’t get me wrong, I get the appeal of success, however you measure that.

The reason I’m telling you that you must pay yourself fairly is because it’s better for your business, both in the short and in the long term.  Requiring your business to be sustainable is smart.  You’ll force yourself to find ways to economize and boost your efficiency.  You’ll find that you attract better employees if you realize the value of the work you’re asking them to do.  And you’ll realize that growth will perpetuate growth.  Creating good habits will yield benefits for the entire life of your company.

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Episode 16: Tips for Starting A Profitable Business With Melinda Emerson

Show Summary

Melinda Emerson, America’s #1 Small Business Expert  joins Episode 16 of the Profit First Podcast. Melinda talks about what it takes to start a business, and how to successfully keep it going.

 

Our Guest

Melinda F. Emerson, known as SmallBizLady, is America’s #1 Small Business Expert. Forbes magazine named her the #1 woman for entrepreneurs to follow on Twitter. She has been a thriving entrepreneur for nearly 15 years and is an internationally known keynote speaker. Melinda’s online small business advice is widely read, reaching more than 3 million entrepreneurs each week. A pioneer in social media marketing, she is the creator and host of #Smallbizchat, the longest running live chat on Twitter for small business owners. In addition to being a regular columnist for the New York Times, she is frequently quoted by other media organizations, including The Wall Street Journal, Fortune, MSNBC and Fox News. She is the publisher of her resource blog, www.succeedasyourownboss.com, which is syndicated by the Huffington Post. She is also a regular contributor to Essence magazine and the lead instructor for the Black Enterprise Small Business University.

 

Show Quotes

First thing you want to think about when starting a business is what you want, and why you want it. It’s really about your life plan first, and then building a business that aligns with it. You DON’T want to trade a soul sapping job for a business that becomes a noose around your neck.

Go work for a business similar to one you want to start so you can gain a sense of understanding for how the business works.

The average business takes about $25,000.00 to start. To start a new business you have to have a life plan, financial plan, honest skills assessment, marketing plan (know who your paying customer is), and you should launch while working. 

It takes 12-18 months for a small business to break even, let alone replace your corporate salary, so it helps to keep those paychecks rolling as long as you can.

People let their fear of math be the reason why they don’t know what’s going on financially in their business – there is no excuse for that. By the 15th of the month you better know how well your business did last month so that you can make adjustments; successful businesses are run based on up-to-date financial information.

30% of your first investors are going to be people you know. If people that know you are not going to invest in you, chances are strangers will not invest in you either.

The more of a specialist you become the more money you can charge. What is it you can do to become the “Cardiologist” of your industry, as opposed to the general physician?

The riches are in the niches (bitches)

Tip of the day: Get into a rhythm with paying your bills. Let your money accumulate for a period of time, and then pay your bills; then let it accumulate again (every two weeks is recommended).

 

Show Links

Website: www.succeedasyourownboss.com

Facebook facebook.com/smallbizlady

LinkedIn linkedin.com/in/melindaemerson

Twitter @SmallBizLady

Google+ google.com/+MelindaEmerson

Become Your Own Boss in 12 Months: A Month-by-Month Guide to a Business That Works can be purchased from www.succeedasyourownboss.com and on www.amazon.com.

 

Show Sponsors

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!

The post Episode 16: Tips for Starting A Profitable Business With Melinda Emerson appeared first on Mike Michalowicz.

Never Be Caught Short On Taxes Again With This Simple Trick

Death and taxes … the two things that are certain in life … and it’s as much fun to talk about one as it is the other.  Getting your tax liability under control requires planning and discipline, and it’s impossible to overestimate the importance of handling it properly.  I’ve seen more than one business go under because they can’t pay their taxes, and while there are nearly always other problems in those businesses as well, a massive, unexpected tax bill can throw any entrepreneur for a loop … unless you’ve planned ahead.  The problem is that bank balance accounting – if your tax money is included in your bank account – isn’t realistic.   You must find a way to separate out the money that you’re going to owe Uncle Sam.  Here’s my solution:

I call my plan the Thanksgiving dinner approach.  Work with me here:  on Turkey Day, we don’t eat off the tray that holds the entire turkey.  We don’t shovel in mouthfuls straight from the casserole dish of your mother’s sweet potato recipe.  We allocate turkey from the serving platter to individual plates.  If you think of your revenue as the turkey, you need to allocate that revenue to different accounts that serve different functions.

1. Create a separate account for your taxes.  

Every time (and I mean every time) you make a deposit into your regular business account, deposit 15% of the total into your tax account.  Now most of us pay a higher tax rate than 15%, but after you deduct your expenses, 15% of your gross revenue should cover your liability.  If you want a more accurate figure, a short conversation with your accountant can give you an idea of the percentage of your income that you should set aside for taxes.  It’s impossible to overestimate the importance of physically setting aside your tax money.

2. Call the account “The Government’s Money.”  

This concrete reminder that one of your roles as an entrepreneur is being an agent for the government helps you keep your hands off the money that you’re going to owe in taxes.  You’ll be much less likely to “borrow” from your tax account if it’s labeled as not yours.  The whole point of setting the money aside ahead of time is that it keeps you from spending it and having to scramble to cover the tax bill.

3. Realize that income tax is a little like sales tax.  

Okay, we all know that sales and income taxes are different, but it can help with your perspective if you think of the 15% of your revenue that you’re setting aside as a tax on all the sales you make.  Separating your “sales tax” out from the very beginning means that you won’t fall short when it’s time to pay the government piper, and it forces you to look at your business’ financial picture more realistically.

4. We all have to pay for our sins.  

Don’t jump the gun here; you’ll never catch me saying that earning money is a sin.  Far from it!  What I mean is that for businesses that are currently using their revenue to pay off debts, it may feel like a double whammy to set aside 15% of the money that you’re using to cover expenses.  It can feel like the money that’s coming in isn’t really income if it’s all going back out, but it is, and you will owe taxes on that income.  If you try to find a way around setting aside the full 15%, you’ll get caught short, and the IRS will get their share, one way or another.  If you consider nothing else sacred, you must respect the power of the government to get what they’re owed.

This whole approach to handling your taxes so that you’re not hit with an unexpected bill that you can’t afford to pay fits into a larger accounting philosophy that I call Profit First.  It’s a simple, yet fundamental, shift in the way we think about the financial health and priorities of our businesses, and it guides us to build wealth consistently and responsibly.  Making sure that you can afford to pay your taxes is essential to the success of your business and frees you up to focus on the important task of growing your company.

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Trusting Your Gut Can Be A Dangerous Move. Here’s Why…

For the record, I’m a big fan of trusting your gut.  There are more success stories than I can count that rely on entrepreneurs who trusted their instincts and profited handsomely.  When you start a new business, full of vision and lofty goals, often the only thing you have to guide your decisions is your gut, and I counsel folks to embrace that – follow your gut and be bold.  Seek your success and reap the rewards.

There’s a point at which things change, though.  As your business grows, you have data – specific evidence of trends, successes, and failures – and you should begin to use the data to temper your instincts.  Go with your gut when you don’t have evidence to the contrary, but when you get to the point at which you can rely on facts and figures to support your decision, you’re foolish if you rely solely on your instincts.

Imagine a major airline that decided – based on the instinct of its owner – that the new strategy would be to focus on servicing small and emerging airports, rather than major cities.  The president of the company decides to forego the urban center of New York City in favor of the grass roots appeal of a small town in Nebraska.  Sure, there might be an argument to be made for extending service to those communities that are underserved, but abandoning the markets that generate the most revenue would be disastrous.  A major airline would certainly have the data resources to prevent such a disastrous decision, but that didn’t happen overnight.

Whether you own an airline or an accounting firm, you’re going to have to make choices that affect the future of your company.  Whether you’re deciding to hire or fire an employee, or whether you’re weighing the risk of expanding your product line, basing your decisions on what’s been proven to work is your best bet.  You don’t have to abandon your instincts altogether, but neither should you ignore the facts.

The transition from gut-based decision making to data-based decision making should be a gradual one.  As your business starts to grow, you should begin collecting any information that you think will help you make better decisions in the future.  Now, this may sound like a common-sense piece of advice, but it bears repeating.  Malcolm Gladwell’s Blink has been widely misunderstood as a book that champions instinct over all other decision making methods, but in fact, the folks with the best “instincts” are the ones who synthesize data and use that information to guide their guts.

While you’re building your data, that doesn’t mean that you stop trusting your gut, because the best case scenario for decision making is verifiable data … with your gut to temper that data.

Why is it so hard to get business owners to start collecting and analyzing data?  One of the reasons is that when your business is small – say under $1 million in revenue, you’re probably able to hold the information you need in your head.  But when you surpass that $1M mark, even the most astute entrepreneur needs some help in managing numbers, growth, trends, and results.

Also, when your business is small, it’s easier to land new customers (because they’re all new to you) and experience dramatic growth.  You’ll probably attribute your early success to your instincts, which isn’t necessarily wrong, but it can get you into trouble.  If you start believing that the same instincts that got you to $1M can also (without the benefit of hard data) get you to $10M, you’re probably overconfident.  The best decisions rely on the accumulation of information and the power of your gut.  Even if you’re certain that your instinct is about to lead you to fame and fortune, once you’ve owned your business for a while, the data exists that will support or counter your gut, and smart entrepreneurs use all of their available resources.

So here’s the takeaway:  start collecting your data immediately.  Today.  Figure out who your customers are.   Determine what your best-selling products are.  What trends do you see?  What marketing tactics have proven to be the most successful?  Amass your information and start your analysis.  If you find that you can’t answer the most pressing questions you face, then go collect more information and use the magic combination of great instincts combined with evidence to make the right choices for the future of your company.

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The Biggest Competitive Advantage Goes To Small Businesses

Every entrepreneur knows that starting and growing a small business is a challenge.  We don’t have the enormous resources – financial and otherwise – that the big guys do, and we don’t have the benefit of name recognition.  Being the underdog is tough, and there’s no denying it.

But small business does have one huge advantage:  we’re able to act much more quickly than a big business with layers of formal procedures that are required for any decision.  Small business can react with lightning speed, and while speed has long been an advantage of sorts, the current, rapidly changing business climate makes it not just a luxury, but rather a necessity.

Think about it:  if you’re not on Twitter and you decide that your company needs a Twitter presence, you could actually make that happen in a matter of minutes.  A big company would have dozens of hoops to jump through, and it might take weeks to actually get the account up and running.  You can act right away, and that’s to your benefit.

Consider the example of Kindle Unlimited, the new program for Amazon that lets subscribers read an unlimited number of books for a monthly fee.  While authors like me, with self-published books, can make the decision to participate in the program right away, the large publishing houses haven’t jumped in yet.  Decision making is a much slower process in a big business.

Being quick is also a huge advantage for small businesses when it comes to acquiring and using new technology.  There’s a new virtual trade show program, for example, that lets users interact in a variety of public spaces which fosters the exchange of ideas and sharing of new products, and also offers more private spaces for confidential negotiations.  Can you imagine how long it would take a big business to put together a training session and set of guidelines for using the virtual trade show program?  Again, the entrepreneur can be up and running in no time.

Given the increase in public feedback – in the form of reviews – that’s available for nearly every category of business, small, agile businesses who can respond to customer reviews can not only address problems right away, but they can also shape public perception of the company based on the skillful handling and resolution of complaints.  When you see a review of a restaurant and a thoughtful response from the chef/owner, you know that the restaurant cares about its customers.  A larger chain would have its managers busy recording the nightly levels in each liquor bottle – too busy to personally review and handle on line customer complaints.  As new forums for consumer interaction and review crop up each day, big businesses may be being reviewed on sites they’re not even aware of.  There is a conversation going on about your business.  You have the ability to get involved in that conversation.

What it comes down to is that speed isn’t just an advantage in our current business climate.  It’s a necessity.  A lumbering beast of a company who needs a committee and a month’s time to review, discuss, and plan every single change is at a marked disadvantage in a marketplace that favors flexibility, agility, and lightning speed.

Consumers love the underdog.  Big corporations headed by greedy CEOs who bring in $8 billion in bonuses don’t have the same consumer appeal as the small business owner struggling to get a fledgling business off the ground.  Establishing yourself as a productive member of your community and trading on your position as a challenger of the status quo will earn you attention and support.  Wielding your quick response time and ability to act on a moment’s notice will pay dividends that big business can’t hope to match.

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Make Your Business Money While You Sleep In 7 Ways

Think about the way your business runs:  you attract prospective clients, convert them to customers, collect the money, cultivate repeat business, and encourage customers to refer other prospective clients.  Each of these steps entails specific challenges, and one of your goals as an entrepreneur should be to automate as many of these steps as possible.  Automation – implementing systems that perpetuate your business without your involvement – is the key to generating income while you sleep.

Here are some ways in which you can set your business to earn a profit while you focus your attention elsewhere:

1. Make yourself into a product.

Once you’ve found success – or even while you’re on the road to it – you should look for opportunities to promote yourself as a brand.  Position yourself as the authority in your niche and develop products like videos or books that share your secrets of success.  The beauty of a book is that once the hard work is over – it’s written, edited, and a marketing plan implemented – then you simply collect proceeds while you move on to your next project.

2. Do fewer things.  

It’s impossible to automate aspects of your business if you insist on doing everything personally.  You need to train your staff to handle certain aspects of your business and the best way to accomplish this goal is to simplify your output.  Look at McDonald’s:  they do basically five things – burgers, fries, chicken, salad, and soda.  They package these things differently and sell them in different combinations, but the simplicity is what allows them to reproduce the menu in locations all over the world and sell their products without requiring highly skilled labor.  Identify your strengths and streamline your offerings, focusing on the items that you can train your staff to replicate.

3. Create continuity.  

Billing for each service or product you supply is volatile; both your revenue and your client’s expenses vary wildly.  By selling a subscription at a flat rate, you create a reliable income for your company and you provide your clients with predictable expenses.  Both parties are invested in maximum efficiency – maximizing quality and minimizing hassle.  It’s the ultimate win-win for both you and your clients.

4. Sell your system cheap and make money on the refills.  

We’re talking primarily about businesses that produce tangible goods, here.  The best two examples of this model are the Keurig coffee makers and printers.  While the devices themselves are relatively cheap, all of the profit is in the individual refills for cups of coffee or cartridges of ink.  If your machine makes a great cup of coffee or great quality copies, once consumers own your brand of device, you’re guaranteed their continued business.

5. Become the middle man.

Find a way to broker business and let other folks do the work for you.  Becoming an Amazon affiliate is a great example.  You link to their site; they sell, and you make money.  There’s also a fortune to be made in consolidating and coordinating the transportation of goods.  Be on the lookout for the opportunity to broker goods and services.

6. Become a teacher.  

I’m not taking about summer breaks and parent conferences.  Look at your business and find ways to teach other entrepreneurs how to acquire the skills necessary for opening their own business modeled on yours.  Say you own a successful pizza shop.  You might think that you don’t really have to opportunity to cash in on the educational aspects of your expertise, and you’d be flat wrong.  You could write a book or create a series of instructional videos on your family’s recipes, or you could market a consumable version of your plan for opening a profitable pizza shop.  An additional benefit is that you’re positioning yourself as an authority, and your name on a book enhances your brand.  Use this side benefit of creating your educational product to generate greater consumer awareness for your business.

7. Become an investor.  

Money makes money, but it’s important that you’re careful about how you invest as an entrepreneur.  Here’s my tip: look at your clients and assess their needs.  Find a company (in addition to yours) that addresses those needs and invest there.  Not only will you be forging a bond between your company and others that focus on enhancing client relationships, but you’re also cementing your position in your customers’ minds as the business that caters to their desires.  Once you’ve done the groundwork, you’re the good guy who makes money without effort.

 

I’m not going to try to minimize the grueling effort that it takes to launch and build a successful business.  What I am showing you, though, are some creative ways that you can make your hard work pay off once your business is on its feet.

 

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Episode 15: Profit In Management Consulting With Peter Laughter

Show Summary

Peter Laughter, CEO of Wall Street Services in NYC  joins Episode 15 of the Profit First Podcast. Peter explains how the staffing industry works as well as how he makes a profit from it.

 

Our Guest

Peter Laughter and is the CEO of Wall Street Services where they allow Management Consulting Firms and Program Managers at Investment Banks take on projects that are beyond their capacity. They provide highly skilled Project Managers, Business Analysts and Subject Matter Experts who help their clients implement key strategic initiatives. Peter joined Wall Street Services in 1995, driven by a passion for helping others identify barriers and self-limiting beliefs standing in the way of a fulfilling career.  Additionally Peter is a founding member of the New York City Chapter of Conscious Capitalism – an organization dedicated to transforming the planet by to liberating the heroic spirit of business. He has also finished the New York City Marathon, several 70.3 Triathlons, and regularly tells stories at the Moth’s Story Slams. More than anything, Peter loves riding the Cyclone with his daughter, Eddy.

 

Show Quotes

Management consulting firms are designed to find specialized people quickly. Most clients don’t have the ability to move as quickly as a staffing company.

I charge my clients a bill rate that is higher than what I pay my employees (typically about 40 – 50% over employee salaries)

Relationships and systems; both are critical factors particularly in finding the really hard to find people. They are not going to respond to an advertisement – get in contact with them through relationships with other people.

Work with customers that have a very narrow demand; focus exclusively on one specific market segment makes all the difference.

Profit is as important as oxygen, however, I don’t live to consume more oxygen.

When I do good work and my clients are happy I make more money. Taking good care of our consultants and making sure they’re happy with what we’re providing to them, more business comes my way.

Hire fantastic people. When you find good people who are excited about what they do, they work harder and they take care of your  interests without you having to tell them anything – because they are good people aligned with your values. You trust them and you enjoy going to work with them.

Profit follows purpose.

 

Show Links

Wall Street Services: http://www.wallstreetservices.com/

Peter’s Speaking Site: http://peterlaughter.com/

LinkedIn: http://www.linkedin.com/in/peterlaughter

 

Show Sponsors

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!

The post Episode 15: Profit In Management Consulting With Peter Laughter appeared first on Mike Michalowicz.

6 Habits Thought Leaders Should Get Used To

As an entrepreneur myself, I’m always on the lookout for words of wisdom from fellow innovators.  Looking to the rule breakers (who often evolve into rule makers) for ways to successfully challenge the status quo has given me the following six suggestions for my fellow entrepreneurs.

1. Strive for minimalism.  

Craig Newmark, founder of Craigslist, has found that he works best with a streamlined workspace that’s free of distractions.  His office isn’t cluttered with stacks of papers or an array of screens.  Newmark’s setup includes his desktop, a window, and Homer Simpson and Grandpa Simpson figurines.  That’s it.  A little nature, a little inspiration from his animated heroes, and the tools he needs to accomplish his goals.  Minimalist workspaces let thought leaders spend the important time where they do their best work: in their own minds.

2. Get regular exercise.  

New evidence confirms what we’ve always suspected – that people who get regular exercise perform better on cognitive tests and are more creative than people who are sedentary.  Guy Kawasaki, business guru, bestselling author, and public speaker extraordinaire has certainly found that exercise provides a welcome break in the middle of his work day and helps him maintain his focus when he’s working.  Kawasaki plays two hours of hockey midday and rides a stationary bike or does yoga in the evenings.  It’s hard to argue with the results of exercise on this admitted workaholic’s productivity.

3. Say “no” a lot.

I am a huge admirer of Seth Godin, and he taught me an important lesson when I approached him about endorsing my first book, The Toilet Paper Entrepreneur.  He declined – politely and firmly – because it didn’t square with his vision, his brand that he worked tirelessly to promote.  I learned that you absolutely must say no to the projects that don’t support your vision, or you run the risk of diluting your brand and your leadership.  Tenacity pays off, by the way.  Godin did support my second book, The Pumpkin Plan because it made sense for his brand to associate it with the principles I laid out in that book.

4. Embrace your inner introvert.  

Malcolm Gladwell is a simply brilliant public speaker, and it’s partly because he’s an introvert, and it’s also because he embraces his nature, rather than trying to be someone he’s not.  Public speaking for him is a performance – a role he inhabits in order to share the important thoughts that sold out every seat in the auditorium.  Thought leaders are typically introverts by nature – spending their most productive time turning inward to their own thoughts.  Check out Susan Cain’s book, Quiet: The Power of Introverts in a World That Can’t Stop Talking.

5. Get back to the room.  

I do a lot of public speaking, and I recently spoke at an event with Michael Gerber, Jack Canfield, and Guy Kawasaki.  Now these gentlemen were thoughtful, generous in sharing their thoughts and ideas publicly, but I noticed that they were absent from the social, networking portions of the event.  I had dinner with Michael, and I asked him about his routine – his work habits – and he typically speaks at events, sharing his stories and inspiring attendees, and then he goes back to his room and gets to work.  He doesn’t recharge by networking, but by turning inward.  That habit lets thought leaders work with the public and still have time to generate the ideas that make them worth listening to.

6. Take sleep seriously.  

Your body needs sleep in order to function at its highest level, and productive people create their own routines to get the amount – and quality of sleep – that works for them.  Joel Gascoigne, CEO of Buffer, realized that he was having trouble filtering out work concerns when it was time for bed, and it was negatively affecting both the amount and quality of sleep he was getting.  Establishing a routine that lets him reflect on the day’s work before consciously putting work away, clearing his mind for restful sleep, has been a productivity booster.

 

We all work differently, but we can learn a lot from the habits of uber-successful folks – the ones who reshape the world to fit their unique vision.  Modeling some of the traits of thought leaders can boost your productivity by helping you focus, encouraging you to turn your thoughts inward, and learning to shape your schedule to support your entrepreneurial vision.

 

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How To Work With Friends (When You Own The Business)

I’m going to be blunt.  The best solution to the problem of how to navigate the dangerous waters of hiring a friend is just to avoid it.  It’s hard, and it doesn’t usually end well.  I hired a good friend early on in a former business, and it was much harder than I thought it would be.  He ended up not having the skills I thought he did, and I ended up unable to afford to keep him on.  For the longest time, his parents refused to speak to me.  We’ve since mended fences, but it would have been better for our friendship and better for my business if I’d never hired him.

That said, I know that some of you will hire your friends, and here are some ways to improve your chances of making it work:

Never do a 50-50 partnership, at least not at first.  

50-50 feels all nicey-nice, but it sets up potentially catastrophic consequences.  You’re much better off structuring the deal so that each of you receives equity for effort over time.  I advocate starting each partner off at 10% ownership and evaluating the business – and what each of you has brought to it on a regular basis (quarterly works well) based on predetermined metrics.  Instituting a schedule and agreeing on the terms ahead of time lets the changes in the agreement be determined by objective – rather than subjective – means.

Set a clear distinction between business and personal matters.

One of the reasons that it’s so hard to successfully employ a friend is that friends relate as equals, and employers don’t relate equally to their employees.  It’s an inherently difficult transition.  If you’re going to hire a friend, I suggest making it clear that since both of your livelihoods depend on your new business relationship, that putting your social relationship aside might be necessary.  You may think it’s an extreme step, but it can make all the difference.

Make expectations crystal clear.

The problem with hiring a friend doesn’t arise until something goes wrong, and then good luck finding a way to discipline a friend whose job performance is unacceptable.  The key here is to outline your requirements and the consequences if they’re not met – ahead of time.  Rather than having to find a way to tell your friend that he’s not measuring up, let your objective standards speak for themselves.  Being clear ahead of time saves headaches later

Prepare for strong emotions.  

Since you share the same social circle as your friend, you will find that it’s difficult not to become too competitive with your new employee – a problem you don’t have with the rest of your staff.  This competition can create stronger emotions than you’re used to, and you need to agree ahead of time on what you’ll tell your group of friends should things not work out.  It may feel like a prenup, but that’s okay.  Taking steps to preserve your business and its reputation before problems arise is prudent for both you and your new hire.

Decide if it’s worth losing your friendship.  

The most common outcome for entrepreneurs who hire friends is that it ruins the friendship.  If you’re not willing to lose the friendship – even if the relationship sours despite your best efforts to preserve it – then you shouldn’t make the hire.  If you bring a friend on board, you have to be prepared to make the decision to save one or the other if necessary.  Everyone thinks that it won’t happen to them, but the numbers don’t lie.  Preparing yourself for the worst case outcome (while hoping for the best) helps you make a clear-headed decision.

Can it work?  Yes.  Is it likely?  Unfortunately, not.  My advice is to avoid hiring your friends.  If you absolutely must, then you need to prepare yourself – sort out how you’ll handle potential problems and resolve disputes – in order to increase your chances of success.  Weighing the importance of your friendship against the importance of your business – your livelihood – can be difficult, but you’ll find that if you avoid being realistic and honest with yourself, it will cost you more in the long run.

 

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Have An Effective Meeting With These 6 Steps

We all know the truth, and it’s time we started admitting it.  Most meetings are ineffective.  Frustrated with sessions that seemed to accomplish little except functioning as insomnia remedies, I set out to perfect my meeting style – shooting for “The Meeting to End All Meetings.”  I did extensive research on what makes a good meeting, and here’s what I’ve found:

Categorize your meeting type.  

There are basically three types of meetings: information dissemination, assignments, and idea generation, and if your staff is prepared to participate, knowing what sort of meeting you’re conducting, they’re more likely to be engaged and productive.  Prepared participants lets you dispense with background information and get right down to work.  Requiring your staff to walk into the room primed to absorb information, accept or make assignments, or share their ideas creates a climate of productivity.

Only essential people should attend.  

Keeping your meetings small eliminates potential distractions and uses your company’s structure more efficiently.  Empower (and require) the leaders within your company to share information with the folks who report to them.  You’re endorsing their leadership, and you’re making a much more efficient use of your own time.

Follow the rule of fifteen AND bring a timer.

The simple fact is that our attention spans are only good for about fifteen minutes.  Rather than going to crazy lengths to push your staff beyond what they can endure, embrace the rule of fifteen and use it to limit your meeting time.  Make it an absolute rule (enforced by your timer) that no one – not even you – can ramble on for longer than fifteen minutes.  Even better than whole fifteen-minute chunks of solid information is breaking the meeting into five-minute segments.  You may object to this point initially, thinking that there’s no way you can accomplish anything in only fifteen minutes, but you will discover that you  end up accomplishing more because you’re more prepared and focused.

Singular assignments.

George Washington once said, “My observation is that whenever one person is found adequate to the discharge of a duty, it is worse executed by two persons, and scarcely done at all if three or more are employed therein.”  Our founding father knew that efficiency improves when there’s one person responsible for tracking and reporting progress on a project.  Even if the employee you designate as the contact person isn’t the one doing the work, then that one employee comes to the meeting prepared to offer a concise summary of what’s going on, rather than using your valuable meeting time to allow every team member to meander through their portion of a larger job.

Have an agenda (and stick with it.)  

Whether you send an agenda via email before the meeting or you use a whiteboard to jot it down, having a written agenda demonstrates that you’re holding a meeting for a reason and that you value your staff’s time.  Use your timer to ensure that you accomplish everything on your agenda and that you neither belabor points unnecessarily or digress to the point that you’re off topic.  Modeling efficiency helps get your staff on the same page – literally and figuratively.

Ask for anonymous feedback.  

I employed this tip a bit skeptically when I was working on perfecting my meeting protocol, but what I discovered – based on the recaps and responses to my meetings – was that I wasn’t being a very good listener.  I realized that I needed to spend more of my meeting time listening – and writing down – the valuable insights and information shared by my staff.  Anonymous feedback from your employees will absolutely help you run more effective meetings, and will help you and you staff get more out of your shared time.

I’ve learned a lot about meetings, and one of the most interesting things is that inevitably, the people inside meetings want out of them, while the people outside the meeting want in.  Good meetings are powerful – especially the small ones – because they convey important information and help shape the direction of the work your company does.  Running efficient, effective meetings sends your staff back out into the office as informed, empowered employees who share a clear vision, direction, and plan of attack.

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