Entrepreneurial Eight Ball

This is an article I wrote 10 years ago for a local newspaper.  There are so many people starting their own businesses today that it bears repeating all of this information.

Here are eight essential edicts for establishing an entrepreneurial enterprise.

Remember Calvin and Hobbs with their CalvinBall game? The players made up the rules as the game was played. The only real rule was to let the other person know the rules, but only after the other person broke a rule. In order to win, you had to outwit while out-ruling your opponent. This is a lot like starting your own small business. If you want to win in your own business, here are the rules to the game, in order of importance, to outwit while out-ruling your competition.

1. Have customers. A good idea alone will not work. If you don’t have customers already, you will need a lot of cash for those operating losses you will have until you build up a steady flow of incoming customer revenues. Do you have the cash to throw away like this?

2. Comply with the rules and regulations governing your business. There are local ordinances, State and Federal laws, licenses and permits that you will need to obtain before making your first sale. You can have customers but if you don’t operate by the government agency and general business rules, you can be shut down before you make your first bank deposit. Do you know all about sales taxes, employment taxes, income taxes, excise taxes, local zoning ordinances, and sign permits? Professional legal counsel and Certified Public Accountants aren’t just for getting you out of trouble; they are best used to prevent trouble from happening. Find yourself a good team of business counselors to learn all you can. Ask your friends and business contacts whom they would recommend.

3. Keep control of and understand your financial records. How do you know if you’re making money? The easiest gauge is to see if you have any money left in your pocket at the end of the week. But what if you spent all your profits on personal things, before you paid income taxes? You could be in for a real big surprise on April 15th. What if you need to borrow money? Lenders don’t go on your word alone, they need to see financial statements. You also need to be sure your customers are paying you on time. The biggest killer of small business can be delinquent customer accounts. You need to be organized and you need to know the numbers to get your own answers about how you are doing financially.

4. Communicate and connect with everyone you know. Be proactive, ask questions more than once and get confirmations that you’ve heard correctly, get understandings down in writing (customer contracts, employee policies, and buy-sell agreements with partners, etc.). If it isn’t in writing, it didn’t happen according to you, but rather according to someone else’s perception, which will always differ from yours.

5. Choose your business partners and key employees with as much or more care as you might choose a marriage partner. The same things work in both relationships… you need to complement each others’ skills, there has to be trust between you, and everyone has to have a commitment to the same goals. To prevent your optimism from taking over common sense in the interviewing stage, start with a half full glass, and see if it is still full after you subtract the negatives. Learn as much as you can about what motivates people to do anything, especially wanting to work for you!

6. Don’t spend money unless absolutely needed for survival. A dollar spent for business is a dollar gone. A dollar spent for personal reasons is between $1.37 and $1.50 gone, depending upon your tax bracket. You still have to earn the money to spend it. And you have to pay income tax on anything spent for personal, nondeductible purposes. The difficult part is when you’ve spent all the profits on personal things and then you are faced with one huge April 15 tax bill. Conserve your money when starting a business. You can always spend a chunk on equipment on the last day of the year, and deduct it immediately, known as the “Section 179 Election”, for at least $25,000 for Wisconsin tax laws.  But the used equipment financing market is pretty bleak when you find you need the cash more than the equipment. Even worse for converting past purchases to cash are household rummage sales. Don’t spend…

7. Offer more service. The difference between products and services has become very blurred. Make sure you have the service edge working for you. The more you can do (and get paid for) the more revenues you will generate. Do not go in as the price underdog. There is no customer loyalty in low price. You will only trap yourself into always being a starving entrepreneur.

8. If you go under, it’s no one’s fault but your own. You are behind the eight ball, controlling its every movement. Recognizing, or ignoring any of the above, is your own choice. You may feel pressured to go one way or another, but it is still your choice. Make the right choices and when you succeed at Entrepreneurial Eight Ball, it’s all your money, after taxes.