Many small businessmen overlook the value of key advisers in the establishment and/or operation of their business believing that they can rely on public sources, trusted friends, or their own experience to handle any likely problems that may arise. After all, third-party experts can be expensive and it is sometimes difficult to see the benefit they bring to the table.
If you’re a small business owner, I may be “preaching to the choir”. If you’re currently thinking of starting a small business, please seriously consider my advice because it might save you countless headaches and stress in the future. Having managed companies for more than 40 years, I would recommend, without qualification, that every businessman needs ready access to:
A Certified Public Accountant (“CPA”)
Many people confuse a book-keeper with a CPA, but they are not the same. The latter requires a college degree, years of apprenticeship under a practicing CPA, successful completion of a rigorous examination, and licensing requirements in each state in which the CPA will work. A CPA is usually paid an hourly fee for his services.
A good accounting and management reporting system begins with the creation of the Chart of Accounts that is appropriate to each business; the list of accounts being not so complex as to generate reams of useless data, nor so simple that key relationships are missed. Creating and maintaining an appropriate Chart of Accounts is essential in the production of concise, correct, understandable financial statements and management reports. There is nothing more frustrating than working in a turn-around situation with unreliable numbers!
By training and periodically auditing my employees’ work, my CPA gave me the comfort that nothing was amiss in the financial records. I enjoyed the best of both worlds – timely, accurate books and reasonable costs. My CPA saved me money in my business as well as on a personal level. For example, Federal, state and local governments often regulate aspects of a business and require regular reports with draconian penalties when filings are late or incorrect. Taxes – employee withholding, FICA, income, property, etc. – are significant costs of every business and require specific treatment to minimize their impact. In addition, the decisions on every day business transactions affecting purchasing, inventory, purchase and sale of machinery, etc. are increasingly complex and obtuse, but directly affect how much profit you will have at the end of the day. A good CPA will help you make better decisions that fit your unique company and circumstance, whether you’re just starting out or ready to retire.
A Licensed Attorney at Law
According to Legal Reform Now, an organization dedicated to progressive reform of the legal system, over 15 million lawsuits – one every 2 seconds or one for every 12 adults – was filed in the United States in 2002, the last year for which such information is available. Law Department Management states that there are over one million lawyers in the United States, each of which manages 20 to 40 lawsuits at a time. The likelihood that you as a small business owner will be sued or will sue a third-party is extremely high. For that reason, you should have a close, personal relationship with an attorney and his number on your speed dial.
The primary reason I work with a lawyer when setting up a company and in its subsequent day-to-day operation is simple – I need legal counsel to protect me, my company and my employees from future unknown and unexpected liabilities. The type of business structure of a company, whether a sole proprietorship, a partnership or a simple corporation, can determine whether or not personal assets are at risk, the ability to attract investment capital or loans, and the amounts of any tax which might become due. A lawyer’s advice concerning potential patents, trademarks, or copyrights as valuable assets may be critical in protecting value, just as is employment contract language and requirements which can determine who can hired or fired.
Virtually every phase of a business operation has legal implications. Establishing an employee benefit plan, whether a pension or a profit-sharing plan, imposes future actions which can be costly and inconvenient. Adding or buying out a partner often requires compliance with a pre-determined procedure and a pricing mechanism. Contracts with vendors as well as contracts with customers need periodic reviews to ensure continued compliance with trade regulations and laws which can alter, even abrogate, language within specific contracts.
Of course, an attorney is essential in a law suit. Lengthy, complex court papers must be filed within strict timelines to ensure matters progress as expected. The consequences of possible outcomes, good and bad, must be assessed and valued in order to make key decisions whether to negotiate and settle or proceed to trial. Even after a judgement has ben rendered, the process continues as the case can usually be appealed.
My attorney, who has handled my personal and business affairs for more than 30 years, is a key member of my business advisers. He becomes a “Superman” when I’m in the midst of any legal troubles.
A Trusted Coach/Consultant
Owning and running a small business is undoubtedly one of the most difficult, most demanding position in the business world. According to the Small Business Administration, approximately one quarter of new companies remain in business after ten years; more than 25% fail in the first year. Imagine starting a business at age 45, risking all of your savings and depending upon the success of the business to pay your living expenses, only to have to start over again in your mid-50s!
Success is never guaranteed since all businesses are vulnerable to threats that cannot be foreseen or controlled – a new competitor, a loss of a critical supplier, the introduction of technology which makes your products or services obsolete, etc. A small business owner certainly earns every good thing that comes his way because he has generally paid a high emotional, social and familial price for any success.
“Change” and our reaction to it is the ultimate cause of stress, according to the psychologists. A small business is particularly impacted by change, lacking the resources to blunt or delay its impact. As a consequence, decisions must be made rapidly, most often without the benefit of complete or reliable information. In effect, the business owner has to fly by the seat of his pants, trusting his experience and intuition that his decisions are more right than wrong. A good friend of mine who owns a local trucking company often says he feels “like he is throwing darts”.
The pressure of being the person in charge who is not really “in control” of the outcome can wreak havoc on the strongest personality, causing depression, family problems and/or substance abuse. When I’ve been under stress, I have found the best course for me is to take a break, get a breath, and talk over the situation with a trusted, experienced counselor.
A coach should understands you and sympathize with your position, hopefully having sat in the same seat as a CEO and small business owner. A good coach will recognize that pouring out your anger and frustrations is a coping mechanism, not a signal that you are giving up or admitting defeat, but a necessary phase in which you can safely engage privately without harming the morale of your employees. When you are ready, the coach will help you logically and dispassionately dissect the problem and examine it from every angle to be sure you understand its causes and effects as much as possible before making a decision on how to correct it.
A coach should rarely brings answers to your discussions, relying instead upon questions and stories of his experiences when facing a similar circumstance. He will encourage and enable you to develop your own solutions, to think critically without the disadvantages of biases, misinformation, and half-truths. By helping you to “listen and trust yourself”, he will give you the confidence to take responsibility and make hard decisions. In short, he should make you a better manager and leader, able to cope with everyday change and stress.
Small business owners need the right resources to succeed. Competent accountants, attorneys, and coaches are critical resources and often make the difference between success and failure.