Time Management

Instead of Taking out More Debt, Do This Instead

One of the first ways most people try to cover a financial shortfall is to incur more debt. Whether this is to support a struggling business or even on a personal level. This may be a solution in some cases or may be used in conjunction with other financial methods. However, there is another solution that may work to solve your shortfall.

Reason for shortfall: Simply put, there will be a shortfall when your income is less than your expenses. Sometimes this is temporary or seasonal and you may be able to predict a shortfall based on business patterns.

The debt solution: Usually, most businesses turn to debt to smooth out the shortfalls. While this may be a viable solution, it should be well though-out and other options should be explored.

Alternative solutions: Aside from needing funds to support a large purchase, if your income is not enough to cover your expenses then instead of first choosing debt, here are a few other options:

Sales: Focus on increasing your sales. An increase in sales will help to increase your bottom line results. Will your expenses increase as a result? Most likely yes, but so should your profit. Aside from industries that have a poor cash conversion cycle, which is a topic all by itself, the additional business activity should help to offset your financial shortfalls.

Expenses: Small businesses should always be conscious of what they are spending their money on. Based on observation, small businesses do not usually spend their money excessively, but they may spend allocate it to areas of their business that do not generate a benefit, such as poorly spent advertising dollars.

Profitability by service/product/client: It may come as a surprise, but most likely there are several aspects of your business that are really not that profitable or may not be profitable at all. If that is the case, then by eliminating these activities your profits will increase as you can focus on increasing sales of higher profit services.

Don’t always go for the “easy” solution, but perhaps a simple, more sweat-producing, long-term solution to help the finances of your business.

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5 Ways Your Calendar Will Help You to Work Less Hours

Are you using your calendar as a tool to be as productive as possible? Most people do not use their calendar in a way to maximize its effectiveness, but if used properly, it can help you to reduce the amount of hours you work. Here are 5 ways your calendar can help you to work less:

Scheduled tasks get done: When a task is scheduled there is a high probability that it will get worked on. Have you ever had the feeling that you did not get anything accomplished on a particular day? The main cause is most likely due to not having tasks scheduled.

Allocation of time: How much time should you allocate for a specific task or meeting? By allocating specific time slots and durations, this will help to alleviate the open-endedness of meetings and tasks. Parkinson’s Law states “Work expands to fill the time available for its completion.”

Batching of activities: Similar activities may benefit by scheduling them close together or within the same day(s). For example, new clients or patients may need a much longer time slot for an appointment, which can all be scheduled on a specific day.

Schedule key tasks early on: Important, but usually not urgent tasks, should be scheduled first thing in the morning or early in the week. There is a constant pull for your time and if you do not focus on important items first, then you may never get to them.

Long-term planning: A calendar can include tasks that are several weeks or months in the future. This can include both tasks and meetings. If you can plan your vacation months in advance, which is very important, then you can and should plan business tasks well in advance also.

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Business Lessons from a Paperboy

I was a paperboy when I was a kid and I also mowed some of my neighbors’ lawns. These are two activities that have become extinct in modern times. I was fortunate to learn some good business lessons from these entrepreneurial endeavors.

The value of money : If I worked not only hard, but did a good job then I made more money. I learned the value of money, how to save up for larger purchases, spending money wisely, and also saving for the future. Unfortunately, kids and adults nowadays tend to ignore these basic financial principals and choose impulsive, debt-incurring decisions.

Customers are interesting: Each customer is unique and interesting. Some more than others, but if you take the time to learn about your customers then you will find out about their lives, families, interests, personalities, and unique characteristics. Positive interactions create a wonderful experience and help to make your job or business responsibilities easier to handle, especially on a rainy day.

Responsibility: Take responsibility for your actions. There are many things that are out of your control, but many things that are. Be accountable to yourself and others even when it is the hard thing to do.

Sometimes bad stuff just happens: The owners of the newspaper I delivered newspaper for decided to replace us all with adults. I believe we had some notice of the transition, but we had no control. It was just like a corporate layoff or having your largest customer go bankrupt.

I could probably list another dozen or two lessons from my experience as a paperboy, which have stayed with me through all these years.

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What is all the Hype About Generating Passive Income? Here are Four Examples

I’m sure that you have seen YouTube commercials about generating passive income while lounging in a pool with your collection of high-end sports cars collecting dust in your oversized garage. Is this really practical and can you really generate massive amounts of passive income? The answer is yes and no . . .

Passive income defined: Passive income is any income that is derived from sources that you do not actively participate in to generate that income. Examples can include rental real estate, businesses that you do not materially participate, and royalties.

Can you really do it?: Yes, you can do it, which is the simple answer. However, it is much more difficult than the commercials let in on. Here are several ways to generate passive income starting from the least amount of capital needed to the most:

Side business: Start a business on the side while you are either working as an employee or if you already have a business. In order to make your endeavor take as little time as possible, then your need to focus on a either a product or information based business, while skipping a service-based business. The reason for not choosing a service business is because it will most likely require much more of your time.

Existing business: No matter which business you are in, you can make your business less and less dependent upon you so that you are not required to materially participate in the day to day activities. However, this can take at least several years or more to make this happen, and you have to make sure that your sales can support the additional expenses. The approach must be methodical whereas each aspect of your responsibilities is either transferred to employees or outsourced. It is easier to do this if you have a business that is not very complex.

Real estate: Depending upon where you purchase real estate, this can take a lot of capital. However, if you choose a rental property wisely and continue to build your portfolio, then eventually your rental income can substitute your regular income over many years. A good place to start is to either purchase a building for your existing business or to rent your home if you plan on moving.

Investor/lender: Once you have a sizable amount of cash, then you can and should look for privately held businesses to provide capital for. This can be in the form of equity or debt. If you are very selective then you can build a great portfolio over time with returns that are much higher than traditional investments, although the risk will usually be much higher.

There you have it now go for it!

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When Should Your Parents Stop Being Involved in Your Financial Affairs?

Our parents raised us and shaped who we are today, and there is probably nothing that we can do in comparison to what our parents did for us, except for perhaps raise our own children well. But, when should our parents stop taking charge of our finances, career and/or business?

It is a good for us to always seek counsel from our parents, especially on matters that they may have more experience with or needed expertise. Even when we are in our fifties it is wise to communicate financial issues with a knowledgeable parent. However, make sure to separate having trust in someone versus their ability to competently advise you.

Once you are in the workforce and are an adult, then you need to deal with your employer directly. Several examples have been shared with me regarding parents contacting their adult child’s previous employer over payroll issues. Even worse is that in those situations the adult child was a professional that advises others! Again, feel free to seek the advice of your parents, but do not have them act as your “proxy.” I can just picture this now, “This is Mr. Smith, and I am calling to let you know that Timmy will not be at work today because he is under the weather. Please cancel his meetings with the executive vice-presidents of Fortune 500 Co.”

Sometimes you may own and operate a business and employ one of your parents, which does happen occasionally. Your parent may be able to give you insight that you are not seeing regarding employees, customers, or finances. However, unless you hired your parent as a strategic advisor because they have developed successful companies in the past, or the CEO, which small business owners actually are, then your parent should not be actively deciding the direction of the company or connections with key people.

Anecdotally, it seems that adults who enforce boundaries with their parents make better financial decisions, are more successful, and have more confidence.  I’ll let the psychologists further elaborate on this topic.

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Just When I Thought I Was So Smart . . .

As a professional, it’s always wise to project a good image of yourself, especially that you are intelligent. However, sometimes or many times we do things that really humble us and hopefully help us to not be so prideful. Here are a few things that I have done recently and not so recently:

GPS: My GPS on my phone showed that it would take about 2 hours to get back home, which I thought was due to traffic and was normal, even though I was about 35 minutes away. For some reason the GPS kept on taking me through side streets with lights, which seemed to appear every 200 feet. Finally, after about 20 minutes I pulled over and took a good look at the directions and realized that I was taking the bike route. Yes, it took me 20 minutes to pull over.  I think that my pride ran away at that moment.

App and phone purchases: If you know anything about children and video games then you know that you can make in-app purchases within the games to obtain more virtual money, coins, or gems. There weren’t the proper safeguards in place on their tablets and in a blink a lot purchases were made. A lot of purchases were made. Did I mention that a lot of purchases were made? We were able to get some refunds, but let’s just say that where this is a will there is a way, especially when your children then ask if they can borrow your phone and decide to go on a shopping spree at Amazon. I really don’t need a PS4.

Per diem: When I started my practice years ago during the recession it took time to acquire clients, which is normal and expected. In the meantime I could have worked per diem at another firm at least for that first year or so. However, I had such a bad experience with the previous firm that I worked for as an employee that I told myself I would never again work for anyone else. The extra cash made working per diem would have been nice and would have made the transition from employee to practitioner easier and less stressful financially.  Eventually, I did work per diem after about a year or so at a few different firms, and I met some really good people.

There are many more that I’ll keep to myself, but we all need to be humbled from time to time.

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Want a Better Business? Focus on Recurring Revenues!

There are more ways to make money in business that can be listed. However, one mostly overlooked business model by a majority of small businesses is the recurring revenue model. Larger businesses already know this and are taking advantage of the benefits. Here are some pros and cons and how to implement the recurring business model:

Pros: Recurring revenues, specifically monthly recurring revenues, provide a steady stream of predictable cash flow. Since you can easily predict your income you can plan ahead for the amount of expenses needed to support your revenues, such as employees, technology, supplies, inventory, etc. This will in turn significantly lower your expenses and help to increase your profit margin. Additionally, a business with recurring revenues has a much higher value than one-shot deals. Think homebuilder (one-shot) vs. a subscription service like Netflix (monthly revenues).

Cons: Many small business owners love the large payments that they receive when they land a one-time or short-term project, which do not exist with the recurring revenue model for the most part. It can take time to build a recurring revenue business, but an existing business should realistically be able to see a massive change with a one year period.

How to Implement: Take a look at the services and/or products that you provide, and determine which ones can be modified to fit the recurring revenue model. For example, a marketing company that helps clients with social media can develop a package to perform certain tasks each month in exchange for a recurring monthly fee.  Virtually any business can turn at least a portion of their business into recurring revenues

The recurring business model is not costly or difficult to implement, but rather a low-risk, high-reward activity. It takes courage and openness to change your business, but it will be worth it.

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Small Business, Large Profits

All small business owners want to increase sales, open new locations, obtain more customers, add employees and grow, grow, and grow some more. It sounds good, but is it really necessary? Is there an alternative?

Necessity: It is necessary to grow your business as the alternative isn’t too appealing. You have financial obligations and people that depend upon you, such as family, employees, and customers. So, yes, it is necessary, however, here is a different view on growth.

Focus on profitability: If you double your profit margin then this has the same impact as doubling the sales of your business. Even if you increase the profit margin by several percentage points then it has the same impact as increasing sales. It sounds too easy, but here are some ways to do this:

  1. Decrease the number of services/products. Spreading yourself too thin usually decreases your profitability because it is hard to do everything well.
  2. Service the proper clients by targeting a more defined niche.
  3. Use marketing methods that only target the customers that you want to serve.
  4. Plan ahead for large purchases or investments, including space requirements, people, vendors, equipment, and technology.
  5. Price your products and services properly.

The interesting fact is that when you are more profitable, then each additional dollar of business is worth more to you, which makes it easier to actually grow further.

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How to Successfully Start a Second Business

Quite often entrepreneurs want to start a second business or even possibly a third, fourth and so on. What are the ways to make this successful, especially without selling or potentially harming your existing business(s), and what are some alternatives?

Similar or complementary business: Instead of say, an attorney, starting a restaurant, they may consider developing software to help other attorneys manage their practice better. Since they already have the experience of being a practicing attorney, they can transfer this knowledge into helping other attorneys and ideally use it in their own law practice.

Business with similar customers: Some businesses also serve your customers with a different product or service. To determine the other business that your customers use, observe which products or service providers your customers are also using and see if there is a pattern. Also, look to see who you are referring your customers to. For example, a landscaper may constantly refer their clients to a lawn sprinkler company, pest control business, or tree removal service.

Have a foundation in place: Make sure that you have a foundation in place for your existing business(s) so that they do not suffer as you develop other businesses. This usually takes years, but the main goal is to make your current business less dependent on you with everyday tasks. If your business suffers when you are not there for a few days then you are not ready.

Alternatives to starting another business:

Add a location: If you are successful in one location and have a good business model, then it is much easier to repeat this with another location. This can include second or third offices for a medical or professional practice, additional restaurants, and additional sales offices.

Purchase an existing business in the same industry: Having a strong foundation is important because you can easily absorb another business in the same industry as long as you have all of the infrastructure in place. This can include capital, space, employees, technology, and operating procedures.

Operate a business within your existing business: Instead of creating a distinctly separate business you can operate the additional business within your own business as a separate service offering or division. This can work well if the service offering is very similar to your existing business. Legal and tax implications should always be considered.

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3 Ways to Turn Around a Struggling Business

After the Great Recession there are still some businesses that may be struggling and don’t know what to do about it. Here are a few ways to turn around a struggling business:

Upgrade: The rate of change nowadays seems to be accelerating at a pace that has not existed in the past. This includes technology, competition, lifestyles, behaviors, and preferences. Although business principals never change, everything else around us does. Questions to ask are:

  1. Is my service or product still relevant and in demand? A perfect example is Blockbuster and department stores.
  2. Are delivery methods of your product or service in sync with customer preferences, lifestyles, and behaviors? Another closely related question is, “How easy is it to do business with you?”
  3. Have demographics changed?

Your business may need to upgrade/change any of the following: location, technology, including website capabilities, payment processing, scheduling, and communications with customers, turnaround times, product and service offerings, the type of customer you are servicing, and so on.

Marketing: Marketing methods have changed dramatically over the last 10 years. Are you marketing your business to keep up with these changes? If you relied heavily on newspaper or phone book advertising in the past, then I would make a bet that it is not very effective anymore. Even businesses that serve very local customers need to have a strong Internet presence. The best products and services still need to get the word out. Rationally, they shouldn’t have to, but this is just not true.

Analyze and take action: Take a fresh look at your business and seriously consider hiring a consultant to point out your blind spots. Most likely you are not recognizing what needs to change or possibly you do but do not know how to go about making changes. The next step is to actually implement changes.

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