Working Smarter

April 13, 2006

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Here are a series of suggestions for working smarter:

Pick the right business form. Suppose your partners decide to sue you. If you selected the correct business structure to limit your potential liability and define your relationships with, and responsibilities to, partners or investors, this will not be fatal.

If you own less than 51 percent, you'd really better pay attention to structure. Misunderstandings can and will crop up as you grow, so it's important to have a well-drafted structure with all the rules defined up front.

Don't over-engineer. You had a great idea and developed a nice prototype of your product....but it's just not quite ready, you say? Tweak and dabble all you like, but over-engineering has killed more than one small business in its infancy.

Be very careful not to rely on one supplier, one customer, or even one bank for your business survival. Any one of these could sink the ship. Don't give anyone this kind of control over your future.

Learn to distinguish necessary expenses from "perks." Self-discipline is not just a virtue, it's mandated by the IRS. And the temptation to start out with "first class" facilities and equipment should be overcome by better judgment. There will be time for that when you're farther down the road to true success.

Don't ignore the details. One of the most vulnerable aspects of a small business is the tendency for its owner to concentrate all energies in sales, promotion, and production while neglecting the back-of-the-house detail work. The more rapidly the company grows, the more severe this problem becomes.

Entrepreneurs generally dislike detail work (who doesn't?), but that doesn't relieve them from the necessity to deal with all the "stuff" that's piling up in the office. Keep track of your paperwork — every small business owner should have a file cabinet of some sort. What it looks like doesn't matter — it can be an electronic file cabinet if you're fortunate enough not to deal in printed pages. What is important is how it's organized.

If you want to organize your files by customer or client name, that's fine, but you should also have a series of general files that will allow you to file away every piece of paper that comes across your desk that's worth keeping. Get in the habit, early on, of doing the detail chores every day. A little effort daily will go a long way to reducing the problems later on. When things become so hectic that your sales or production work starts to suffer, retain some competent help to "do the details" for you.

Give some thought to an exit strategy, if you haven't done so already. This is not planning for failure, it's planning to succeed at a later date in a different way.

Protect your income stream if possible. Although it may be hard to do while your business is very new, consider getting disability insurance on yourself in the event of an illness or accident that prevents you from running your business which is your main income provider. And as your business grows, key man insurance can help your business replace your services should you be unable to actively participate in management.

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