Managing a developing, young business

Rafi Singer

Rafi Singer

Freshman
May 17, 2011
62
0
6
Waltham, MA
www.singerproduction.com
Hey all,

This year, I have hit a bit of a new mark with my little business. I have continued to develop relationships with my clients and do more business, but what I have found is that now that as the scale of things have begun to grow, little things that might have been ok with less business are now becoming risky. This includes things like bookkeeping, insurance, business plans, and such. As well, I am going to be relocating to the other side of the state this summer. Now seems like a good time to start tightening up the ship and being a bit smarter in my approach.

What I would love to pick all your brains about:

- What books/resources on developing solid business and accounting practices would you recommend?
- Are there are any tips you'd be willing to share?
- What pitfalls have you experienced yourself or seen?
 
Re: Managing a developing, young business

It has taken me many years to even start running my company as a business and not a hobby. Here are some ideas I have:

  • Form an LLC or a 'real' company to separate company liability and assets from your own
  • Insure everything
  • Issue at least an invoice for every event or rental you do, and get a copy signed by the customer
  • Get deposits for new customers, I've had some pretty annoying cancellations
  • Have a professional do your taxes
  • Buy items that makes you money (they get used more than a couple times a month) and rent everything else
 
Re: Managing a developing, young business

Tom Manchester said:
If you do not have one already, get a seperate bank account with a debit card for all business activities. Deposit checks from gigs into this account, and use it only for business expenses.
Click to expand...

This is an outstanding idea, and will give you a very good idea of when you can "pay yourself", and when you have zero balance and are clearly subsidizing your business from your personal accounts.
 
Re: Managing a developing, young business

Bennett Prescott said:
This is an outstanding idea, and will give you a very good idea of when you can "pay yourself", and when you have zero balance and are clearly subsidizing your business from your personal accounts.
Click to expand...

All that stuff is a great idea, but I thought that stuff was pretty much 101-stuff.

Anyway.

Get even more accounts. There will be times when you have a lot of money in the business account and you'll be truly screwed if your business debit card is misused. I suggest a "holding account" where you stick "surplus money" while you're waiting to pay taxes, receive a big envoice, or just saving up. That way, if your business debit card is stolen all they get is a tank of gas and a meal at McDonalds.
 
Re: Managing a developing, young business

I am currently reading EntreLeadership by Dave Ramsey. While he does really focus on basics it definetly appears to fill your request of developing solid business practicies. There is a particular religious twist on the information so I will throw that out as a disclaimer as I don't want to offend. I have had non-religous individuals tell me that his other material is writen in a way which overlooking these connections or affiliations is rather easy.
 
Re: Managing a developing, young business

I recently finished reading EntreLeadership, and would highly recommend it as well.

It is not the be all end all for running a business, and a good portion of the material covers personnel management which may or may not apply to the OP's situation. I think the large take away for many would be the financial management portions. In typical Dave Ramsey style, there is a strong emphasis on debt-free living. Many would try to convince you that it is impossible to run and/or grow a business without acquiring some form of debt, but Dave Ramsey shares that his multi-million dollar business grew bit by bit without it. In the tough times, not having a large loan payment to worry about was what saved them from failure.

Sometimes I feel like a bit of a Ramsey fanboy, so take what I have to say with a grain of salt. Get it from the library and judge for yourself.
 
Re: Managing a developing, young business

Vinny D'Agostino said:
I wouldn't have to worry about anyone being able to eat at McDonalds with what they would get from my earnings!
Click to expand...


Haha.

Just to be clear:

The business debit card account should never even contain your earnings! That's what the personal account is for. Your business account should hold your revenue and then the business debit card account should hold a smaller portion of that.

Sometimes a business account may hold lots of money that isn't yours: Collected sales tax, money set aside for freelancers who envoice "through your company", etc, etc. If you are holding a bunch of money for the state or other businesses, just waiting to be redistributed, and that account has a debit card, you might get royally screwed if your card is stolen. Better to keep that money in an account with no card.
 
Re: Managing a developing, young business

If you can be responsible with it, get a business CREDIT card, preferably a rewards card. That 1% cash back will really start to add up.

Having good accounting software is a good start. Something like Quickbooks should be plenty to get you going in the right direction. Find an accountant that can help you get everything set up correctly. You can learn about what you can and cannot do to reduce your tax burden.

Forming an LLC or a corporation does offer some benefit, especially for taxes, but does NOT protect you against personal liability. i.e., if you drop a speaker on someone, they can sue you AND the company for damages. If an employee does it, then you get some protection.

Definitely keep business assets and personal assets as separate as possible. Think of your business as an entity in and of itself. Yes, there will be some crossover, but keep it to a minimum where you can.

Equipment purchases should have an ROI plan. If you are buying gear that you are using once a year, chances are you aren't making a profit off of that piece of gear. Remember you not only have to get back the money you spent on it, but also maintenance costs, interest, storage, etc. This is probably the hardest part of the business, because we all want new toys all the time. :)

The best thing you can do is put together a 5 year plan of what you want your business to look like each year. Set growth goals and targets that are attainable but require you to work as hard as you want to to get them. This will be different for every single operator out there. Some want to be huge with many employees. Others want to do small jobs and never hire anyone. Whichever fits what your goals are is what you should plan for. Of course, you should revisit your goals on a regular basis to make sure you are on track with your plan.
 
Re: Managing a developing, young business

I started my bussiness in 1988.My first accountant was a WWII veteran who gave me 2 pieces of advice.First he said get a line of credit.Second,if someone pays you cash,stick it in your pocket! If you've been running your bussiness as a hobby,you can still take a write off on equipment you already own because the depreciation starts when you place it in service,not when you buy it. One mistake that I have seen many people who start a bussiness make is this: They start off and have a good year or 2 and see the money rolling in so they go buy a boat or a motorcycle.And then things slow down and they don't have any money to pay their bills and go under.Always keep a cushion in your bussiness checking account or put some in a money market account to cover unexpected expenses like vehicle or equipment repairs and for those times when work slows down. The other piece of advice I will give you is to provide good service.I remember reading when I first went into bussiness that,if you do a good job,that customer will tell 3 other people.But if you do a lousy job,the customer will tell 9 other people. It is easier and cheaper to keep a customer you already have than to get a new one.So give 110% everytime.
 
Re: Managing a developing, young business

Write off everything you purchase that is remotely related to the business. This includes such things as 1) your cell phone, 2) your camera (you take pictures of your gigs don't you?), 3) your computer, 4) Any and all office equipment, 5) Clothes that you wear to a gig, 6) Any vehicle mileage having anything to do with a gig such as a sight survey or a drive to the store to buy gear or supplies. KEEP A MILEAGE LOG BOOK! This is important and you will be amazed at how much this adds up to at the end of the year. 7) A portion of your house payment if you have a home office. 8) Any food expense at a gig. 9)Work boots. The list goes on and on and these are all legitimate write offs if you document them correctly. Want a new boat? Paint the name and number of your business on it and it is an advertising expense. This is a creative example but you get the idea.
 
Re: Managing a developing, young business

Randy Gartner said:
I started my bussiness in 1988.My first accountant was a WWII veteran who gave me 2 pieces of advice.First he said get a line of credit.Second,if someone pays you cash,stick it in your pocket! If you've been running your bussiness as a hobby,you can still take a write off on equipment you already own because the depreciation starts when you place it in service,not when you buy it.
Click to expand...

The first piece of advice should most certainly no be shared publicly if you follow it. That's a crime and could land you in jail.

If you had expensed the gear, even as a hobby initially, you cannot expense it again. When the depreciation starts depends on many variables, so that should not be taken as blanket advice.


Eric Cagle said:
Write off everything you purchase that is remotely related to the business. This includes such things as 1) your cell phone, 2) your camera (you take pictures of your gigs don't you?), 3) your computer, 4) Any and all office equipment, 5) Clothes that you wear to a gig, 6) Any vehicle mileage having anything to do with a gig such as a sight survey or a drive to the store to buy gear or supplies. KEEP A MILEAGE LOG BOOK! This is important and you will be amazed at how much this adds up to at the end of the year. 7) A portion of your house payment if you have a home office. 8) Any food expense at a gig. 9)Work boots. The list goes on and on and these are all legitimate write offs if you document them correctly. Want a new boat? Paint the name and number of your business on it and it is an advertising expense. This is a creative example but you get the idea.
Click to expand...

Be careful about what you write off. A boat with the business name on it as a listed expense will likely get you flagged for an audit. No, that would NOT be a legitimate expense unless you exclusively use that boat to take clients out for meetings. The cost of the decal could be listed as an expense.

Clothing, if not a company uniform is not able to be listed as an expense.
 
Re: Managing a developing, young business

Even uniforms can't be deducted if they "are adaptable to normal wear." They would need to have some characteristic (silk screened logo, embroidery) that would mean you couldn't wear them at another job or even for mowing your lawn.

To make uniforms a genuine expense, rent them from a uniform company.
 
Re: Managing a developing, young business

Tim McCulloch said:
SCORE, Service Corps of Retired Executives. It's a function of the Small Business Administration. They have on-line resources and chapters in most cities. You can get an on-line or 3D mentor to help you out. This is one of the gems of our federal government.

Free Small Business Advice | How-to Resources | Tools | Templates | SCORE
Click to expand...
Check around, for example the SBA has an office located at a college near me and I was able to go in and meet with them. The best thing I did was to get a good local Attorney and have them help guide me including putting me in touch with a good local accountant who also put me in touch with a good local insurance agent and so on.

I follow the advice others offered and try to separate personal and business expenses and income. Not only are there tax implications but if you start trying to address personal items or property as business you could also find personal items or property tied up in business issues.

Brian, my understanding is that although it varies by state, an LLC or Corporation can offer significant personal protection. It indeed will likely not protect the individuals in cases of acts of negligence by an Owner or Shareholder, but there are many other aspects where it can offer protection from personal liability. While I've been lucky enough to never have to directly explore the liability aspect, I have found being a Corporation very beneficial in terms of contracting with Clients, insurance and so on.
 
Re: Managing a developing, young business

Agreed that an LLC or corporation does offer protections in many ways, and it's a good avenue to explore. Each has their advantage and should be discussed with your accountant as to the best route.

The point I was trying to make is that neither offers complete protection for your own personal negligence. Many people falsely believe that if they have an LLC or Corporation, their personal assets are completely off limits in the event of a lawsuit. That's never completely the case.
 
Re: Managing a developing, young business

Brian hit the nail on the head. Having that separation helps, but it doesn't ever "fully" separate business from personal assets. Also, when signing a loan or even a credit card you still have to personally back it (when starting up at least).


Brian jojade said:
Agreed that an LLC or corporation does offer protections in many ways, and it's a good avenue to explore. Each has their advantage and should be discussed with your accountant as to the best route.

The point I was trying to make is that neither offers complete protection for your own personal negligence. Many people falsely believe that if they have an LLC or Corporation, their personal assets are completely off limits in the event of a lawsuit. That's never completely the case.
Click to expand...
 
Top Bottom