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Five Essential Components of an Entrepreneur’s Compensation

The two major ways entrepreneurs can take money from their business is through draws or by receiving a paycheck.  The type of entity in which their business is set up will determine which method can be used. In either case, entrepreneurs need to be careful not to shortchange themselves.

Especially if you’re running a service business, it’s easy to initially think you can do well with a similar hourly rate that you earned as an employee.  Here’s a quick list of five elements that should be included in the compensation of every entrepreneur:

  1. Competitive pay 

    If you were doing the same work for a company that hired you, what would your pay be?  Are you making at least market equivalent or better?  A lot of times, as entrepreneurs, we tend to focus only on this piece of our compensation when we set our pricing, and that’s a big mistake. It’s only 75 percent of what our total pay needs to be.

  2. Profit.

    As an entrepreneur, you take extra risk when you own your own company, and you should be compensated accordingly.  Your capital is tied up in your business and should be earning a good return in addition to your reasonable compensation.

  3. Benefits

    Employees get vacations, health insurance, and bonuses; and you should too.  This should be part of your compensation package as an entrepreneur.

  4. Taxes.

    Although our individual taxes are not deductible as business expenses, we need to compensate for them so that we’ll have enough cash for our living expenses.  It’s a huge chunk too.  We work about three and a half months every year, just to pay for our taxes.

  5. Retirement plan

    When you work for yourself, no one is going to fund your retirement for you.  Although the Social Security program helps a lot of seniors, it’s up to you to set additional money aside for a comfortable future.

Complete Compensation

Your compensation should include all of these components.  If it doesn’t and you feel like you can’t afford to pay yourself that much, then your pricing might not be reflecting all of these items correctly, you might have a volume problem, or your business model may need some adjusting.

It’s normal to take a smaller paycheck the first few years as we’re building our businesses, but if you’re still doing it after several years or constantly having cash flow issues, then something may be wrong.

If you’d like our help in this area of your business, please reach out and let us know.

Make sure your future is bright and financially secure by including all five components in your entrepreneur compensation.

Is It Time for Spring Cleaning Your Business Files?

How much time do you spend each day looking for information about orders, customers, vendors, or employees?  If it’s a lot, a little spring cleaning might pay off.  Here are five quick tips to assess and improve your information access.

Your Librarian

Large companies often have a librarian on staff that is in charge of stored documents, both physical and virtual.  It’s not a bad idea to have this function in your small business, although you certainly don’t want to devote an entire headcount to it.

Today, a company librarian might be in charge of the company’s document portal, which is a very secure area where company documents can be stored.  It might be on the company server or in a secure area of the cloud.  There are companies that offer secure file storage, accessible through document portals.

The librarian will also be in charge of creating recordkeeping policies and procedures.

What’s in a Name

One such procedure that brings order to chaos is setting naming conventions for client files and folders.  Set consistency by using a naming standard such as having a client file name always start with the last name of the client followed by a birth date, or something else unique.

It will save time each time you look up a file because you’ll always know where to look.  Even if it’s only seconds saved per lookup, that time will add up to minutes and hours saved over a year.  That will save you labor costs.  A naming standard will also look professional in front of the client.

Permanent vs. Transactional

Get uber-organized by separating your important long-term legal papers from your transactional documents.  Long-term papers such as your corporate by-laws and tax returns should have a special place away from your day-to-day invoices and receipts.  Also keep major purchases such as settlement documents from real estate transactions in a special file that you’ll keep for many years.

Your daily transactional files should be batched up by month or year and stored accordingly.  You’ll be able to delete these files after their retention period is up, while you’ll want to keep your long-term legal papers almost forever.  You still won’t be able to throw away your annual documents too soon – some agencies require you to keep transactional documents for as long as 11 years.

Paper or Paperless

What percentage of your business documents is scanned and stored online?  If you’d like to increase this percentage, then make a plan to convert your paper into scanned documents you can access online.  So that it’s not such an overwhelming task, break it down into smaller chunks:   start with one area of your business at a time or one vendor at a time.

Purchase a scanner for everyone in your office, and you’ll soon find your office getting more and more paperless by the week.  You can also have fun taking pictures of receipts on your cell phone and uploading the documents to your document portal.

A Backup Plan

So that you don’t lose your documents to a catastrophe, theft or any other disaster, make sure you have a backup of all of your documents so you are able to recover them.

This is where paperless shines over paper, because there is always risk of fire with the latter.  It’s also where a secure document portal beats your company server anytime because of the elaborate layers of security that are required for secure commercial data centers.

After you implement these five tips, you may not even need to do a spring cleaning.  You’ll be organized and efficient, and that’s good for business.

Why You Should Be Paying More Attention to Business Modeling

As a part of your business strategy, you’ll spend time on business modeling. This is the process of deciding how your business is going to create your product or deliver your service in order to increase profit. Some businesses skips this all-too-important step, and find themselves flailing later on down the road when they need answers to process questions. This can bring productivity to a halt, and forethought during the business modeling process could have not only saved time and money, it could have also increased output so the business would be moving forward instead of grinding to a halt.

Business modeling is important for large corporation and the smallest start ups. Setting up the process now will help answer “what if” questions and help you smoothly navigate unexpected bumps in the road along the way. Nothing goes entirely as planned when it comes to the business world, but a good model will point you in the right direction. If your business is badly in need of this kind of guidance but you aren’t sure how to get started, it can be beneficial to bring in an outside consultant to help you think through the process and create a model that will guide your business for years to come.

Tier One Services provides businesses with business modeling consultations. We can help you make sure you have thought through the what if questions and implement the modeling that will drive your business towards success. Want to get a model locked into place for your business? We’re ready to get started. Contact us through our website today and let’s start a dialogue about how we can help create a business model for your company.

 

Nine Tips to Dazzle and Retain Your Top Customers

Your top customers are your most important customers in your business, and it’s important that you hang onto them if at all possible.  It’s much more cost-effective in most business models to retain repeat customers than it is to find new ones.   Here are nine tips you can use to dazzle and delight your top customers:

  1. Know who they are by name. 
    Do you know which customers generated the highest sales for you last year?  If not, let us run a Sales by Customer Summary sorted by descending revenue for you to be sure.  Your top customers will be listed on the first lines of this report.  These are the customers you should be contacting at least once a month, having lunch with periodically, or doing a few extra things for.
  2. Know who sent the most business to you. 
    Do you track referrals?  If not, you may want to consider adding a field to your accounting system if there’s room.  At the least, you can use the report generated above and add a column to it labeled referral source.  Drop in the person’s name that referred the customer to you.  Once you’ve completed the field, you can re-sort it to total up the dollar value of each referral source.

    You should be in monthly contact with these folks, just as if they were your top customers and even if they’re not a customer at all.  Make a plan to lunch with these individuals and/or do something extra for them periodically to let them know you appreciate their referrals.

  3. Ask customers how they would like to be contacted. 

    Do your customers prefer to be contacted via email?  Phone? Text? In person?  If a customer hates being called on their cell phone, wouldn’t you want to know?

    Everyone is different, so find out by asking, and make a note in their file.  Also find out how often they’d like an update.  Some worriers might want to know daily, others prefer a short monthly email.  The best time to do this is during customer onboarding or at the time of the first sale.

  4. Find out what customers need from you.

    At the end of each project, ask your customer two things:

    a. How could we have served you better?
    b. What else can we do for you?

    Then empty your mind and really listen.  Take copious notes, don’t defend yourself, and thank your customer.   Think about what they said, and implement what makes sense.

  5. Provide a customer service contact and great support. 

    Does your customer know who to call when they need to talk with someone in your business?  If the customer has a follow up question on their purchase or service, let them know what to do ahead of time so they won’t feel lost.  This will make the customer feel at home and will have them coming back because of your great support experience.

  6. Practice “consumption marketing.” 

    Consumption marketing is helping the customer fully consume their purchase from you.  The more likely they are to get benefits from your product or service, the more likely they are to come back for more.

    Help clients use your products and services to their fullest by creating a consumption marketing program that includes tips sheets, educational aids, how-to videos, instructional blog posts, and the like.

  7. Develop multiple relationships.

    If your customers are from large companies, strengthen that business by meeting multiple buyers within the company.  If one employee leaves, it won’t be such a crisis to your account if you know multiple people in the company.

  8. Say thanks promptly. 

    Send a thank you note to a new customer or referral source within a week of their purchase or referral.  Acknowledge their action quickly and generously so that you make a great personal impression.

  9. Create and implement a client retention plan.

    Be proactive about customer retention by planning touch points throughout the year and systematizing the contact process with your top customers.  This can be as simple as taking your top 12 customers out to lunch, one each month, or as complex as planning some kind of touch point – a newsletter, email, or thank you note – once a month for each of your top clients and referral sources.

    Try any of these nine tips to dazzle your top customers and boost your customer retention for stronger sales.

CFO Services That Can Help You Plan Your Business Expansion

If you are a business owner, one of the scariest prospects you face is expanding your business. You know it could result in more business and a bigger bottom line, but if it isn’t done in a fiscally sustainable way, you could be facing a disaster. As a small business owner, you might think you don’t have the same access to resources that big businesses have that could help you make responsible expansion plans. But with our CFO services, you have all the help you need.

Our services are designed to meet the needs of small businesses. Now you’ll have an expert CFO on hand to help you make important business decisions, including a plan to expand your business in a way that’s sustainable and fiscally responsible. You’ll know what you need to do and what kind of money you’ll need to spend to get your business to the place you want it to be. Whether it is an expansion of your current business model or location or if you are ready to take your business nationwide, our CFO services will help you create a plan that gets you there.

Give us a call today and learn more about what Tier One Services can do for your business. We can help strengthen your business ecosystem and create a business model that fuels profits. Learn more about the services and benefits to working with our team by browsing through our website. Then get in touch with us by giving us a call or using the form on our website to contact us. We’re looking forward to working with you to expand your business and help you reach your goals!

Do You Know Your Weakest Business Link?

You’ve already built a solid business that you have great pride in.  Yet, if you’re like most entrepreneurs, you’re on a constant search for how to make your business better.   One way to focus your search is to look for the weakest link in your business.

From a return-on-investment standpoint, working on and fixing your weakest link is the highest payback thing you can do.  It lifts your entire company up and makes it stronger.   The key is to look as objectively as possible at what might be holding your business back from being even greater than it already is.

Here are four major areas where you can look for your weakest link:

  1. Client-facing interactions

    A great area to start looking is where you have interactions with clients.  These include things like phone greetings, email, websites, your storefront, your presence at networking meetings, client service interactions, your proposals, invoices, and thank you notes.

    What jumps out at you as the weakest link when you look through the above list?  Perhaps it’s as simple as recording a more friendly voice mail greeting or as complex as getting your website redone.  Don’t get overwhelmed if a lot of these items need attention; instead focus on the one weakest link.  That’s the place that needs your attention.

  2. Your team 

    The toughest area to have a weakest link is when it involves people.  If you have an underperforming employee or contractor that is undermining sales or service, you’ve got a tough decision ahead of you.  If it’s your weakest link, don’t bury your head in the sand like we all want to do.  You need to act so that the person does not drag down your entire business.

  3. Internal systems

    If you feel stymied at the lack of information in your business, you might be in need of better internal systems.  As your business grows, this is the area that changes the most over time.

    Businesses that are newer or smaller need a great accounting system as well as a good point of sale or billing system.  As the business grows, it might need better inventory systems, a good CRM or customer relationship management system, a project management system, or more specialized systems depending on the industry it’s in.

    As the business matures, the functionality of the accounting system should expand to meet the growing data demands.   Integrating the accounting system together with the company’s other systems can become important to control costs and improve margins.

    If you feel like your weakest link may be in your systems, we’re happy to help.  Please reach out and let’s have a conversation about your needs.

  4. Skill set

    No one was born an entrepreneur; it has to be learned.  What keeps it more exciting is that new skills are required at each level you master on the entrepreneurial ladder.  Some of the skills that you need at the entry level include client service, delivery of your service or product, and sales and marketing.  As your business grows, you’ll need to master financial skills, negotiation skills, hiring, and supervisory skills.  Leadership and strategy skills will serve you well when your business is mature.

    Which skill set do you consider your weakest link?  If it’s finance, you’re not alone.   Let us know how we can help.

  5. Focusing on the Payback

    The good news is when you’ve improved your weakest link, you end up improving your entire company and lifting it up to a new level.  Once you’ve fixed your weakest link, congratulate yourself.  Give yourself a reward, and wait a little while.

    Your old weakest link is no longer the weakest area in your business, but something else is.  Since you’re on a constant search for improvement in your business, you can repeat this formula over and over again to keep lifting your company up using this low risk, high payback approach.

Five Browser Productivity Tips

Most of us spend a lot of time browsing the Internet, and that means using browser software.  Google Chrome is the most popular browser with roughly 40 percent market share.  Internet Explorer follows with about a 30 percent share and Firefox is third with less than 20 percent.

Since most people use Google Chrome, we’ll use that browser to describe our five productivity tips.  If you don’t use Chrome, you can still look for the features we list on your browser of choice.

Better with Bookmarks 

Do you have a half dozen or so sites that you like to visit every day?  If so, bookmark them on a toolbar so that you have one-click access.  In Chrome, click the icon with three horizontal lines that is located on the web address bar at the top of your browser.  We’ll call this the Chrome Commands button from now on.  Mouse over “Bookmarks,” and make sure “Show Bookmarks Bar” is checked.

Type in your favorite site URL.  To add it as a bookmark on your bookmarks bar, click the star on the right side of the web address box.  It will turn gold, and then you can name your page as well as select whether you want it more prominently in the bar or simply in your list of bookmarks.  Repeat this for each of your most visited sites.

Now that all of your sites are listed on your bookmarks bar, you can visit them in one click.

Enlarge the Page

If a page is too small and you want to enlarge the entire thing, you can do so with your mouse wheel.  On your keyboard, hold down the CTRL key and roll your mouse wheel away from you while you’re on a web page.  The page will get larger.  Roll your mouse wheel toward you to reverse the effect and make a page smaller.

You can also customize your fonts by going into Chrome Commands, Settings, Advanced Setting, and Web Content.  You can find your font options there.

Download Redux

Do you need something you downloaded earlier today and forgot where you put it?  Access it again here by typing this into the web address box or selecting “Downloads” from the Chrome Commands.  Hey, even better, if you need this a lot, make it a bookmark.

chrome://downloads/

If you’re a history buff – that is, if you closed a browser screen and find you want to re-visit that page, then look for the History command under the Chrome Commands button.  It’s super-handy and will save lots of time when you need to backtrack.

Autofill

Tired of filling out forms?  Chrome will do it for you by remembering certain fields and matching them up with their form fieldnames.  You can have Chrome remember addresses and credit cards; however we can’t really recommend the latter for security reasons.  Manage this feature and its settings by clicking the Chrome Commands button and Settings.  Scroll to the end and look for Advanced Settings, then look for the Autofill area and Manage Autofill Settings.

Instant Dictionary

While browsing, have you ever come across a word or phrase you don’t know or want to know more about?  If so, highlight it right there on the web page and then right-click.  Select “Search Google for “the phrase you highlighted” to bring up the information you want.

Most of us have never had a formal class on our browsers, but it’s not a bad idea.  Hopefully, until you can get to that class, these tips will help you discover a little more about the browser you use every day.

How Painless Is Your New Customer Experience?

Is your business easy to do business with?  Or is it difficult?   The answer could impact your revenue as well as your reputation for service.  Here are a few tips to help you stand in your customer’s shoes for just a few minutes to answer those questions.

First Impressions

What is the first image of your business that your future customer sees?  Is it your website?  A sign in your office window?  An ad?   Whatever it is, take a look at it with fresh eyes, like you’ve never seen it before.  You may have several images to consider if clients approach your business in many different ways.

What do you notice first?  Is the website simple or cluttered?  Is your sign rusty and crooked or new and cute?  Do you need to make any changes based on what you see?

Voice Time

If a customer calls, how many times does the phone ring before it’s picked up?  Does the voice sound inviting and excited that someone called, or is it as if you were just interrupted?  Or worse, did they get a recording?

If they walk in face to face, how are they greeted?  What does your waiting room look like?

Service

What is the interaction like with you?  Are you able to answer the prospect’s questions?  Do they feel comfortable with you or are they intimidated?    What do you suspect it’s like for your clients?

If the prospect becomes a client, what do they have to do?  Are there lots of forms to complete?  How organized are you in getting the client started and serviced for the first time?  Are you respectful of their time if they are in a hurry?

Mystery Shoppers

You’ve probably heard of mystery shoppers who are hired to give their opinions of what their client experience was like for them.  They go through a similar process, evaluating every client touch point and suggest ways to make it a smoother experience.

Almost every business could benefit from periodically reviewing the client experience to discover where the weakest links are and how they can be fixed.  Ask yourself these questions to see where you can improve your client’s experience and make it easy to do business with you.

Five Ways to Go Green with Your Accounting

With St. Patrick’s Day and spring arriving, March is a great month to have “green” on the mind.  There are green shamrocks, green beer, the green of new vegetation, and there’s even green accounting too.  Here are five ways to make your accounting a little more green.

Business Receipts     

When you spend money on your business, ask for an emailed receipt rather than a paper one if you have an option. More and more vendors are providing this option.   Then when the receipt comes in your email, you can forward it to your bookkeeper and/or upload it to your accounting system.

Smile for the Camera

If the vendor does not offer an emailed receipt, do the next best thing:  take a picture of the receipt with your cell phone.   Some accounting systems allow you to upload the receipt right from your phone, and if you don’t have that feature, you can always email it or upload it to your PC.

PDF Invoices

If you invoice customers, send a PDF invoice via email.  More and more businesses are abandoning the snail mail and getting it to customers faster via email.  They’re getting paid faster, and speeding up your green is usually a good thing.

Online Banking

Many people adopted online banking about a decade ago.   If you’re still getting paper statements, you can get those stopped and download your statements once a month from your online account.  It’s better not to get your statement in the mail anymore; it reduces your risk of identity theft from stolen mail.

Software and Supplies

When possible, purchase your software online and download it rather than making a gas-guzzling trip to the store and purchasing a box.  You can also order your office supplies online and have them delivered.   As long as you buy local, it should be a green purchase, and it will save you tons of time too.

These five ideas will help your accounting become a little more green.

Music and Business: Finding the Measure

While I was enjoying the networking portion of a ribbon-cutting ceremony for Shutterfly’s new facility in Fort Mill, SC last week, I had an interesting conversation with someone. Her area of expertise includes bringing together professionals from the fields of education and business to create new possibilities and new opportunities for the students.

As we were discussing the similarities and differences in the two industries, she asked me what precisely was my instructional field prior to becoming a CPA.

“Music!” I replied.

She said regretfully, “Oh, well, that doesn’t have much to do with business…muzak, maybe.”

I said, “I’ve actually used a lot of my underlying musical knowledge in business, just without the music itself. There are small things that make a big difference.” She looked curious so I illustrated.

Picture yourself in a choir rehearsal. The conductor stops everyone and says, “Let’s go back and practice this section again. Please begin on measure 2, in the third system, on page 5.”

Now everyone has to hold these three pieces of information in their heads and employ additional processing to spit it back out in the reverse order. When you’re acting on the information, you have to find the page, then the system, then the measure. And by the time you get to looking for the measure, half the choir has forgotten it. The flow of the rehearsal is lost as pages are being flipped and re-flipped, the conductor is reduced to repeating the instructions instead of giving the downbeat, and choir members are asking each other , “What system?” “What measure?” instead of singing.

Why make the brain work so hard? Any good choral, band, or orchestral conductor will tell you that effective instructions are conveyed in the same order that they will be processed by brains of the listeners: “Page 5, system 3, measure 2.” Notice the use of “measure 2” over “second measure.” Same idea.

So how does this show up in a business context?

Take a quarterly meeting between a CPA and business owner who is new to the idea of reviewing the company financial statements.

CPA: “Look at that 25K.”
Business owner: [scans documents for 25K, feeling out of sorts and somewhat addled with all of these columns and columns of numbers] CPA: “Yeah, the 25K, in Office Expense, on the P&L.”
Business owner: [Holds information mentally, processes it to act on it in the reverse order…] “Which amount? Where?”

System_and_measure-300x190

The business owner should be leaving these meetings empowered and with clarity in what to do next. Instead his experience of himself is “schmuck,” his experience of financial statements is “inaccessible” and his experience of the CPA is “unrelatable.” He loses out on the valuable business intelligence contained within those financial statements and decides that he’s better off with the “gut” technique. Actually, instinct is the most effective when it is powered by actual facts.

Instead, how about:
CPA: “Let’s have a look at the P&L to see the results of operations this quarter.”
Business owner: [Turns to the P&L.] CPA: “In the Operating Expenses section, about halfway down, is Office Expense. Check out the third column – there’s a 25K increase over last quarter. Tell me the story.”
Business owner: “We created new marketing collateral for an upcoming expo. It’s classy and really shares the opportunity of working with us!”
CPA: Oh, the Chamber expo next month? Sounds exciting! Have your bookkeeper move these expenditures to Marketing Expense instead. Let’s talk about what you’d like to have in place to be able to measure your return on your investment in the expo.”

All because of the order in which information is presented.

“Wow,” said my networking partner. “Musical techniques apply more than I’d realized!”

In which other types business conversations do you imagine that this technique facilitate an amazing and profitable result? 

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