Getting Back To Basics – 5 Steps To Strengthen Your Business Foundation And Become More Profitable

One of the most important lessons I learned in my business early on, was how important it is to have and maintain a strong foundation in your business. In order to support our growth and efforts to achieve our goals, our business needs a solid infrastructure on which we can build. If this infrastructure is not in place, you could find yourself in a position where you are growing too fast too soon and not serving your clients nearly as well as you should be. This in turn will create unnecessary stress and frustration, which equals a not so happy Virtual Assistant who is working harder and making less money than she should.

So, it’s important to take stock of your business periodically and see how your foundation is holding up and what improvements you need to make. And if you’re just starting out, you’ll do yourself a HUGE favor by setting up a strong business foundation from day one. This is the perfect time of year to consider these points, as we are heading into fall and the final quarter of 2009. If you set aside time now to analyze your business operations and start making adjustments, you’ll be primed and ready to jump into 2010, while most everyone else is still trying to wrap their heads around their New Year’s resolutions!

Following are my top five tips for assessing your business and strengthening your foundation:

1) Review and revise your business plan – Many times business owners create a business plan when they are first starting out, get excited about it, but then file it away and never look at it again. Sometimes new entrepreneurs don’t even take the time to develop a simple business plan. This is a BIG mistake! Going through the steps to create a business plan is a terrific way to get all of your ideas out on paper and to create a roadmap to follow to grow your business. Its easy to think one can keep all of their ideas, goals and strategies locked safely in their memory. But there are two things wrong with that. 1) You absolutely can’t remember all of the details and 2) you’ll have a more difficult time working towards them because you haven’t committed your thoughts to paper. So schedule time on your calendar NOW to review and revise your business plan. (Or if you’re just starting out, to create one – which we will help you with in our “Get A Strong Start” class). Think about all that you’ve accomplished thus far in 2009 and map out your goals for 2010 and then how you’ll achieve them.

2) Take stock of your financial situation – For some this can be the least “exciting” part of running a business. That is having to deal with all of the “number stuff”. But, most of us start our companies to make a profit and support our families – not to unintentionally be running a non-profit organization where we work for free. You won’t know which category you fall into if you aren’t clear on the financial state of your business. If you are not already doing so, ask your accountant or bookkeeper to start running monthly reports of your expenses and income so you can see how profitable you REALLY are. You may be surprised to find out which of your services is actually most profitable and then start focusing more attention on those. Also, you’ll see clearly how your expenses are affecting your bottom line and what adjustments need to be made.

3) Review your business standards to see if they are still working for you – One of the things my coach helped me to do when I was first starting out was to create a set of standards for my business. This included the hours I would work, my fee structure, how I would handle different clients situations, illness/vacation, etc. – basically ALL of the details of how I would run my business. I highly recommend that you take the time to outline your standards as well. It’s your business, so the way you work and operate your business should be reflective of and work for you. After doing this you’ll be clear about your boundaries and can then easily (and tactfully) share them with your clients to ensure that you are supported and protected to do your best work.

4) Fine tune your marketing systems – Some Virtual Assistants have a bad habit of only marketing their business when they need a new client. That is a big no-no! As a business owner, you should only be spending your time on two things – 1) serving your clients and 2) marketing your business. If you don’t have a marketing system in place – meaning a strategic plan for how to consistently present your services/solutions to your ideal clients and enroll them in your practice, then now is the time to implement one. You should be regularly attending networking events where your ideal clients hang out, following up on leads, engaging in social media and pursuing other effective marketing strategies. Map out a plan of how you will market your business for the remainder of 2009 and then commit blocks of time on your calendar to work on your marketing efforts. Marketing your business will be a lot easier (and much more effective) if you consistently and comfortable share what you have to offer instead of operating from panic mode because you need a new client.

5) Start implementing systems in your business – You likely do some of the same tasks over and over again in serving your clients. At the very least, each week/month you’re doing bookkeeping, marketing, reporting to your clients on project progress, etc. As such you should be developing systems for every aspect of your business. A system is simple a list of guidelines or instructions about how to handle a particular task or project. It’s way for you to implement quality control into your Virtual Assistant practice so that you consistently deliver high quality results for yourself and your clients. It’s a way to save time, because you won’t have to think about or try and remember how to handle a particular project. And it’s a way to make more money. “How so?”, you may ask. Because you can easily delegate certain tasks to someone else, freeing up your time and mental energy to pursue your high-payoff activities. The more you systematize your business the more organized and profitable you will be. So, start today in outlining the steps you take to operate your business and serve your clients. Compile the instructions into one central document or binder and create your own operations manual. As you continue to grow you’ll have all of the information you need to run your business right at your fingertips.

Likely, you set out to be a Virtual Assistant because you wanted to pursue a career that would give you more control over your schedule and earning potential. So make it easier on yourself to achieve your goals, by taking steps to tighten up your foundation and get clear on your goals. Running a successful business obviously takes effort and dedication. And having a strong infrastructure and a solid plan to follow will ensure that you are spending your time and energy on the activities that will get you the results you want!

Your action plan for this week:

1) Pull out your business plan and schedule time to review and revise it by October 31st. (If you’re just starting out, set aside time to create your plan by the same date).
2) Pull year-to-date reports on your financial situation and review them with your bookkeeper or accountant to see what adjustments may need to be made.
3) Outline the details of how you will run your business so that it is working for YOU, not the other way around.
4) Review the strategies that have been most effective in marketing your business and then create a plan around how you will consistently implement these tactics to attract new business.
5) Start creating systems for EVERYTHING you do in your business and compile the information in one central location.

Laying Your Business Foundation – Part One

The current economy is driving more people to start their own business and rightfully so. Business ownership signifies that you have taken the reins of your own destiny. The unfortunate aspect of this decision is that many people are not prepared for what it takes to be a business owner. You’ve read the articles through media blasts and other sound bits. Start your business in as little as three days. Earn more by working for yourself. Take control of your life by working for yourself. Spend more time with your family and friends. The list goes on and on and on. Although there is a great deal of truth to this but let’s be honest. Business ownership is not as glamorous as the media portray it to be. If you decide to take the plunge into business ownership I personally guarantee you the rewards far outweigh the temporary setbacks, delays and pitfalls. I’ve been a successful business owner since 1987 and believe me if I would have known about “how to” do anything in business Warren Buffet and I would be entrepreneurs co-mingling. I learned through “trial and error” which is very time-consuming and incredibly expensive. Thankfully, your business will not start out dysfunctional. Listen, learn and duplicate what is already established and functioning properly.

In this article I will show you “how to” Lay Your Business Foundation.

  1. Decide if you want to be in business. This will shave off 10 seconds of your precious time within a 24-hour window. This is very important because most people in business missed this point. They started doing something without thinking or planning and one day all the pieces did not fit into the puzzle. And those missing pieces goes back to the drawing board called decision. Our thoughts dictate the outcome. Think about it, did you start reading this article out of boredom your where you thinking about starting a business? I think the latter answer is correct or you will probably be somewhere else.
  2. What type of business? You know what enjoy doing so why not turn it into a profitable business. Now before you take the bull by the horns make sure this business is something other people need and want. Never assume what you like is something other people will pay their money for. Always see from the prospects lenses. If they like your product or service duplicate and legally protect it as quickly and accurately as possible. What you have done is taken a hobby, thought or idea turned into a profitable business.
  3. Location. Do you want a home-based business, store front or virtual business? See why I started off with question #1 and you thought I was being a smarty. These are the kind of decisions only you can answer. Although each of these businesses are somewhat similar each one functions differently. Here’s what I mean. Home-based businesses is operated from your personal dwelling; therefore, no overhead costs unless you build onto the existing structure. Let’s keep this simple! Either location will require some type of license to operate your business. a.) For home-based businesses check with your municipality for city or county business license requirements; b.) Store front locations will definitely be required to have a business license among other permits, etc. Again, check with your city or county municipality for requirements and; c.) Virtual business licenses can be tricky. Since you are not physically operating from a physical location or home-based a license is probably not required; however, whenever filing taxes you will either use your social security number or obtain an employer identification number (EIN). If you choose the later and use a company name then you must obtain the proper licenses and or permits to operate your virtual business. Note: An occupational license may or may not suffice to operate your business. Again, check with the municipality in your locale for business license and or permits.
  4. Financial Resources. Regardless of the size, location or dimension of your business, having MONEY is essential. I know you’ve heard that it doesn’t take money to start a business. Whomever or wherever you heard this is emphatically wrong. Look at it this way. Can you go into a store and make a purchase without funds? The answer is NO you cannot; regardless if you used a credit or debit card, cash and another acceptable method once it arrives at the financial institution it is converted into CASH. Make sure you, an accountant or someone you trust that is money savvy to look over your finances before you take the plunge. If the funds are not there WAIT until you can afford to go into business. Trust me I started my first business with $75 I borrowed from a bill I owed to a debtor. This made me very ill because I did not have enough cash to float me from one crisis to another. Note: Being strategic about starting a business is imperative to your life long plans. If you do not have enough cash I strongly advise that you wait until you do. Another option is to start with a small investment from the dollars you loosely spend on things that do not yield you a return on investment.
  5. Supplies and Equipment. Make not mistake you will need both. For a small home-based business your office supplies/equipment yearly average is about $2500+. Keep in mind costs vary according to the type and size of your business. Your supplies/equipment list can be placed on an excel spreadsheet or another suitable software that is comfortable for you. Here is an example of each heading: Description, Amount, Costs, Frequency, Vendor, etc. This will get you started then incorporate other headings as you grow.

Laying Your Business Foundation, Part 2: Business Formation

In this series we will take about business formation. If you have not read Part One, stop what you are doing and read the article now.

Again, laying your business foundation requires the same intensity as building a bridge, school, museum or any beautiful structure. It takes planning, time and execution, which means doing whatever, needs to be doing to complete the project.

I cannot tell you which business formation is best for your business, only you can make those types of decision. Your attorney, spouse, children or friends cannot shape your reality for you, it’s personal. Before making a decision or selecting which business formations consult with a licensed attorney and accountant to advise you of your legal rights.

Let’s begin…

Sole Proprietorship (SP)

The term “sole proprietorship” means that the business is the same as its owner. The assets and liabilities of the business are one and the same as the owner. There is no mandatory filing requirement on the state level; however, a sole proprietor may register a trade name. Although I do not recommend this entity; however the choice is yours.

Advantages

No other documents needed to open a bank account; purchase materials or supplies needed for the business and you can file taxes under your name. There are other reasons but these are the main reasons for doing so.

Disadvantages

You are responsible for any lawsuits against your company; therefore, this will affect your family well-being. Lenders do not see your business entity as a mom and pop business without any growth. Vendors are less likely to extend credit for major purchases. Contractors, governmental agencies prefer to utilize the services of a company that is not a sole proprietorship.

Incorporated (Inc)

A corporation is a type of legal entity, often formed to conduct business. A corporation is an institution that is granted a charter recognizing it as a separate legal entity having its own privileges, and liabilities distinct from those of its members. The incorporated entity can be very complex; however, you can delegate these complexities to someone who is skilled with incorporation such as an attorney or accountant who are knowledgeable about business laws and taxation.

Advantages

Your business will be accepted as a major contender within the business arenas. You and your businesses are separate entities which mean if your company is ever sued or liable the plaintiff can only charge the company not you personally. Lenders are more apt to lend funds to an established corporation entity compared to other business structures. You are telling the world that you are serious about expanding, growing and or selling your business. There are a number of good advantages to this particular entity and the decision is entirely up to you.

Disadvantages

The number one disadvantage is double taxation. You or your account will have to file taxes in the company name and your name. This drives most potential companies to sway from incorporating under this business entity. Contact your attorney and account to help you navigate through the incorporation process.

Limited Liability Corporation (LLC)

A form of business whose owners enjoy limited liability, but is not a corporation. The State of Wyoming is known as the LLC formation capital since 1976.

Note: Wyoming is not the only state that welcomes LLC formations.

Advantages

LLC members are afforded limited liability and have pass-through taxes similar to a partnership. By forming LLC instead of a corporation, you get all the benefits of forming a corporation but you avoid a few drawbacks that you would run into if you formed a corporation. Specifically, when you form a corporation, you subject yourself to double taxation and excessive paperwork. Both of those annoyances can be avoided if you form LLC. The LLC allows for multiple owners, or members. Additionally, there is a managing member, who also enjoys the benefits of limited liability and is typically the person responsible for managing the business. Members of LLC can be other companies, trusts, organizations or individuals. Members share power, ownership and responsibility over the LLC operations based upon an agreement each member signs upon formation of the company.

Note: If you are the only LLC member or manager you are allowed to use the 1040 or 1040-A filing forms. Check with your accountant or tax provider for advice.

Disadvantages

The entity we were forming will be seeking outside investment and will be offering stock options to employees. Many angel investors and venture capital firms are not lenient about investing in LLC because it’s a new business formation that is not well understood. When raising capital, it helps to keep things simple and avoid anything that makes an investor think twice.

Limited Liability Partnership (LLP)

A partnership where a partner’s liability for the debts of the partnership is limited except in the case of liability for acts of professional negligence or malpractice. In some states LLP may only be formed for purposes of practicing a licensed profession, typically attorneys, accountants and architects. This is often the only form of limited partnership allowed for law firms (as opposed to general partnerships).

Advantages

Both LLC and LLP entities are treated as pass-through entities for federal tax purposes. This means that the owners report company profits and losses on their personal income tax forms. The business itself is not subject to a federal income tax, as a corporation.

Disadvantages

LLP offer the same type of limited liability that of LLC; however, some states require a minimum of one partner of LLP liable for the obligations of the company. There are other business formations; however, these are the most popular.

Until Next Time! Stay tuned to “Laying Your Business Foundation.”

The overall scope for choosing a business formation is to give your business an identity that is separate your personal identity. Doing so will level the placing field within the business community should you choose to grow or expand your business. The topic of discussion for the next article of “Laying Your Business Foundation – Part 3”: Customer Service.