Chronicles of a New Business: Planning II

The last post ended with my second phase of planning - the marketing strategy. The final part of the plan includes aspects that are all new to me as a business owner. Everyone creates budgets, and every accountant has some sort of marketing plan, even if it isn't written down. Previously, while working at the firm, I had been pretty insulated from administrative decision making. I did a great job of sticking to my pay grade. Over the years, I recommended hardware purchases, software purchases, marketing purchases, etc., but I never made the final decision. That was done by the owners, and that was fine. The decisions are mine now, and I'll make them all the only way I know how. I will research like a mad man, and then make a decision with 100% of my firm's support. Luckily, my wife is the only other person I need to sell my decision to.

My first decision was hardware. A good computer was important to me. I began pricing around and found that my first year budget didn't justify as much as I wanted with a new computer. So I began to look for a less expensive alternative that could get me through the first year. This basically meant refurbished from a store, or a cast off from someone I know. The price on refurbished computers still seemed high. I don't mind buying a refurbished computer, but it needs to be under warranty for a few years if I do. At that point, the pricing got close to $1,000. That was a little more than my budget allowed. Luckily, I found a great option from family. I had a computer that I had given to my Mom. It was a work computer that was phased out a couple years ago. It was six years old, but could do anything I needed it to. My Mom wasn't using it, so it was a perfect fit. I needed to do a few things to get it ready to use. I bought a second video card so I could have two monitors. I also bought a second monitor, and maxed out the RAM. Total cost of my work computer was $200. That worked for my budget. This was my thinking with all other hardware also. I already had a phone that worked fine. I used Google Voice to organize my office phone. I bought a laser printer, the cheapest I could buy, with the realization that I will likely replace it in a year.

My next thought was location. This wasn't as important of a thought for me because I knew my work station would be in my office at my house. The only planning required was for a place to hold client meetings. Again, family helped out a ton. Mark Just was kind enough to allow me to use conference room space in his beautiful building as needed. Someone else offered the opportunity to use office space on the Northwest side of town if needed. I will also be working with Black Swan Brewpub. That will become a great place on the Southwest side of town to meet clients for lunch or dinner. This gives me many great options, allowing me to be very flexible as I grow.

My next decision was software. I have used several software packages over the years. My main goal was to be as technologically advanced as possible. That meant going to the Cloud. I hate this name, but I really don't have a better suggestion, so I guess I'll live with it. The software I will use will allow me to log in anywhere I have an internet connection. It also will allow clients to have a place to get their tax returns whenever they need them. These two pluses were enough to sell me. As mentioned above, with multiple meeting places, being able to connect to my tax planning or preparation software is crucial. I don't have an assistant who can manage the electronic documents. Therefore, if clients need a return, they either need to be able to retrieve it themselves, or I need to email it to them.

Another decision was marketing materials. I am a huge fan of Google. Free and easy to use, what is not to like? I created a website through Google sites. I registered a web address and pointed it to my site through godaddy.com. This was almost free and very easy. This blog is obviously through Google as well. As discussed in my marketing plan, I also needed a pamphlet to hand out. I spent time writing down short blurbs for specific target markets. These are brief and intended to provoke discussion with prospective clients. I also designed business cards and ordered 500 of them. This was easy through a website, and pretty inexpensive. My only goal with the cards was to list my name and contact info. I can update these as business grows.

So, I was now left with the most important decisions I had to make. These decisions were actually made toward the beginning of planning, but they changed all the way up to the jumping off point. They were my name, mission statement and colors. The name was decided fairly quickly. I could have gone with Big Bob's CPAs, or something not linked directly to me like Shake and Bake Advising or Wolfpack Accountants. But these all seemed better fantasy football names than CPA firm names. In the end, I chose a name I am very proud of. My family has always been who I am. My Dad and his sisters and brother are a tough bunch who command life by always keeping a smile on their face. My sister, brother, cousins and I have lived this way as well, and have done all we can to pass this on to our kids. Using my name as my firm name assures that I will do everything with the utmost care, a high quality of ethics, and a smile. Helping clients attain financial stability by creating a simple system to account for current cash flow while budgeting for future cash flow has been my focus since becoming a manager four years ago. Peace of mind is invaluable, and the skill set I have been blessed with makes my purpose helping others attain comfort in their financial position. This comfort better enables the people who's skill set makes them sales people, doctors, dentists, veterinarians, financial planners, engineers, fireman, policeman...you name it...to do their jobs. My motivation is assisting clients in being able to have total focus on their jobs without worrying about an unknown financial position. Hence, the mission statement, "Stability Made Simple." That just leaves the firm colors. Those who know me know how important Purdue is to me. Going there was the greatest decision I didn't make for myself. That being said, black and gold have been with me even longer than that. My middle school's colors were also black and gold. I have a lot of great memories of my years at both schools. Without the experiences I had at both, I would not have the opportunities I have today.

Planning is now done. Time to get to work. I'll write next month how the first month went. Please know that my family, friends, clients and business associates are very appreciated for all they have done for me. I will work as hard as possible to make it all pay off.

And now, I jump off.

Chronicles of a New Business: Planning

Since this blog is being done primarily as a marketing piece for my new business venture, it seems fitting that I start a series about that venture. First, I will discuss the planning of the business. This has been going on for quite a while. Four months to be exact. At the end of April this year, I took my family out to Denver to visit my sister. At that point, I was pretty drained. Busy season had a lot of good moments, but there were also a lot of moments that made me realize this change was needed. I took this vacation as a chance to step completely away and enjoy the more important parts of life, most notably my family. After the trip, I launched fully into planning mode.

My first order of business was to put together a personal cash flow analysis. This is a backward calculation that starts at zero and goes all the way back up to the cash I need to bring in to make my lifestyle work. The key to this was being honest with myself and being conservative. The worst spot I could see myself getting into was budgeting for a $100 monthly electric bill and it actually being $150. $50 off doesn't seem like much, but 50% off can be a real issue for your overall budget. This first step took maybe six hours. But over the next four months, I would put much more time into it.

The next part of my business plan was a business cash flow budget. This was a lot of fun, at least at first. I started by deciding how I would bill, and at what rates. I took that and created seven different "types" of clients that I feel best represented my client base. From there, I needed to come up with goals for how many of each type of client I would work with each month. Once this was determined, I had to project collections. This is the most important step of the cash flow budget. Let's be honest, spending money is easy, and billing clients isn't too hard either. Getting them to pay is always the trick. Again, I was conservative and spaced out my collections pretty well. I then filled in the expenses. At this point, I did a little research into software costs, licensing fees, legal costs, etc. This was a helpful task because it got me thinking about running a business as well. In looking at the two budgets together, I now had a good picture of how my savings would be affected by this new venture. This isn't something I wanted to think about mind you, but again, very important.

The next thing to plan had to be marketing. Marketing is not my strong suit, so an effective plan was imperative. I decided there were four areas for me to target. The first was referral sources. I listed the names of all the bankers, financial planners, lawyers, realtors, etc. that I knew and their contact information. I am a big proponent of referring people who will best serve each particular client. I also understand that not everyone can work together. Knowing this, I felt it was a good idea to have three to five people in all areas of service. I began organizing my list this way, noting differences that I felt would be important to my clients. The list became my initial call list for my first week. The second area I focused on was associations or groups I wanted to work with. This includes Chambers of Commerce, Professional Associations, Business Incubators, clubs, etc. I began looking around Indianapolis at organizations I could become involved with, and discovered it was incredibly easy to find groups I was interested in. It just took a little desire. The third area I aimed at was current clients. My first week, I wrote a letter to the clients I would retain through the transition from my old firm. I created another call list that I would also go through the first week. This contact with my clients would be to introduce them to my new firm, as well as kindly request that they give my name to anyone who may need accounting or tax planning and preparation help. The fourth and last area to attack was prospective clients. No one wants to cold call, but someone starting up his own business can't pick and choose. For my own comfort level, I wanted to have an organized plan to execute. So I picked a few industries I have a strong background with, and a few local areas I am familiar with, and began looking for clients I could market to who fit both criteria. I then came up with a short summary of what I do with my clients in each specific industry and something about my ties to their particular area. I intended to physically bring these to the prospective clients I had found. I'm still not 100% comfortable with marketing, but I definitely feel better about it with a plan.

The next step was to decide on a location(s), technology, legal structure, internet presence, and the most important part of the whole plan. This will take a while, so I will cover this all in my next post.

Simple

Today's financial world is very complex. Your tax rate depends on your income. However, due to income phaseouts and tax credits, your tax rate is not really what tax you pay. Refinancing your home or business loan can help you save a lot of money in your monthly expenses. However, in the long run, it could cause you to pay thousands more in interest. A company you invest in could have great liquidity, solid profits for the last few quarters, and an outstanding projection. However, instability in the market could cause that company's stock price to be very volatile. The only way to navigate through this complexity is to keep things as simple as possible. Athletes often say they perform better when everything seems to slow down. Things seem to get simpler for them. Financially, we should strive for the same state.

Simplicity is easy to obtain if you really want it. First, you should organize your tax situation. Know what your income sources are, and review them periodically. Find out how investments are performing. Always be asking yourself, "Is this a tax deduction? If not, how could it be?" Discuss your tax situation with your tax professional at least once a year for planning. Second, meet with your financial adviser at least once a year. With market fluctuations, last year's big loss in an investment should be met with this year's big gain. Consider your full investment strategy. How many institutions/advisers do you work with? Investment diversity can be better achieved with one investment adviser than with ten. Your insurance situation needs the same consideration. A good way to have too much life insurance is to have multiple insurance providers. Third, get rid of the clutter. Bundle your utilities as much as you can. Cancel unnecessary credit cards - one credit card is all anyone needs. Narrow your charitable giving by becoming a strong supporter of a few organizations, rather than a minor contributor of many organizations.

It is not a coincidence that the most powerful advice we get is often considered simple. Keeping it simple is the way to make your financial world slow down, allowing you to obtain the control you should always have.

Stability

Financial stability, or the ability to meet the needs of ourselves and our loved ones, is always at the core of our goals. Sure, we may want the big house, expensive car and VIP tickets to all of our favorite events, but we would not consider having any of these if our basic needs were not met first. Most basic needs are the same for everyone - food and water, shelter, clothes. However, we all get into a bit of a gray area when determining what is a need and what is a want as we begin fulfilling those needs. How much do you spend on food? What size of a house is really necessary? How new should your wardrobe be? The answers to these questions are different for us all. But the answers are incredibly significant. Your state of mind factors heavily into your financial stability. If you are uncomfortable about what your basic needs are, finding financial stability becomes very difficult. This is why keeping a clear definition of what your needs are is very important.

Once you have stability defined, you have to find a way to achieve it. Many of us meet roadblocks on the way to achieving our financial stability. For some, it is mounting credit card debt they cannot manage. For others, it is a bad investment they cannot get out from under. For many, it is student loan debt that has put them in a position where it seems impossible to succeed. The good news is stability is always possible. It just takes knowledge, creativity, a good work ethic and patience. A good work ethic and patience are all up to you. A quality adviser can help give you the knowledge and creativity to set up the plan you need to succeed, and to help you evaluate and adjust your plan as you go. The best decisions are those with 100% support. Your adviser will help you make sure you have a plan you can support 100%.

Through good times and bad, financial stability is always at the core of our goals. It should, therefore, be something we plan with a much bigger emphasis. If you have not thought about this in the past few months, it is time to think about it now.

Accountant

When I was 14 years old, I was asked by a friend's father what I wanted to be when I grew up. My response was quick, accountant. In thinking back, I'm not sure why the 14-year-old me chose accountant. I have distant relatives who are accountants, but I'm not sure if I even knew that then. It doesn't matter, accountant was what I said, and I never wavered. Four years of high school, four and a half years of college, and I was an accountant. Now what? Well I figured out pretty quickly what an accountant does at my first job. I started with a local public accounting firm in January. My first week, I worked just over 40 hours. Not too bad, except I started on Wednesday. My second week, everyone left the office except for me and one senior staff accountant. We were in charge of payroll. Poor Jason. My average was four touches on each payroll client. In other words, I prepared the return, I made changes per the senior staff, I made more changes per the senior staff, I made more changes per the senior staff...you get the idea. The rest of my first tax season was more of the same. No two projects I worked on were the same. I prepared 70 personal returns. All were different. I prepared 50 business returns.
All were different. I did salary schedules, fixed asset listings, and more payroll returns. I adjusted clients' accounting files to allocate payroll, recorded depreciation, set up new loans, and set up new companies. I learned about SIMPLE plans, 401(k) plans, Section 179 for fixed asset purchases, and Section 351 for non-taxable asset transfers. After April 15th that year, I knew what an accountant did, and more importantly, I was glad a very smart 14-year-old me said accountant.

Over the years since, what I do has changed a lot. I can prepare payroll as well as anyone out there, but I don't. I know how to calculate a retirement plan match for a company, but I don't. I can key in check stubs into an accounting system quick as lightning, but I don't. Mainly because of government regulation and technological advances, what I do is different now. However, what I am is very much the same. As an accountant, I help people understand the financial environment around them. I do not make business decisions for clients, but I do help clients understand what the decision means for their business. I do not make personal financial decisions for clients, but I do help clients understand where they currently are, and what all their options are going forward. I firmly believe that the worst decision anyone can make is one that they will not 100% support after making it. It is impossible to support any decision, even a little bit, when you have no idea what the decision even is.

So the question now is, what can an accountant do for you? Are you comfortable with your current tax situation? No, not your 2010 tax situation, but your 2011 tax situation. Do you know how your current business/personal cash flow breaks down? If a new opportunity came about tomorrow, would you be comfortable making a decision you can support 100% based on the information you have right now? Answer honestly. This is where an accountant can fit in for you. With new technology, an accountant can get a great picture of your current tax situation. This will leave no surprises for the spring. Keeping up detailed records that allow a quick assessment of your cash flow, and how different opportunities could effect it, has never been easier. Bank files download into accounting programs, websites can keep track and organize personal expenditures, and internet search tools allow you to research more powerfully than ever before. And accountants can use all of this to help you make the very best decisions. That is what an accountant can do for you.