Watch Out For
Let's face it... running a business can be a
hassle. Despite popular belief from
employees, there is no room in the back of
the building where an infinite supply of
cash grows on pooplenuckle trees. Every
dollar that ends up in the profit margin is
hard earned. As business owners we deal
with customer problems, employee problems,
vendor problems, our own problems and
ofcourse property-management issues.
First of all, pat yourself on the back just
for being a business owner. It takes a
strong person to stick it out. Second, let
me tell you a few things I learned about
running a business. No, my business
wasn't POS related... I ran a computer
consulting firm for 12 years. But it is
amazing how many common attributes all
Let's begin with the formation of a
business. I don't care if you are selling
your time or a product or a service... you
must set up a corporation. This sheilds
your personal assets from those of the
business (the best General Liability
insurance plan you can get). Plus, with a
corporation you are entitled to a much wider
array of deductions which means lower
taxes. ALWAYS make sure the IRS gets paid
on time. One of the ways 'audits' are
picked is from a pool of flagged
corporations. These corporations are
flagged when they are:
in sales / meals tax payments
depositing federal withholdings
their personal returns and corp year end
I've heard a lot of accountants say 'Oh,
audits are chosen by random'. THIS IS NOT
TRUE. If you have ever been audited and
had to pay money, you will be audited
again. I spoke with an actual IRS agent
and she told me EXACTLY how the selection
criteria works. If you want to avoid an
audit, PAY ON TIME!
Next, you'll need to choose a chapter for
your corporation. The selections are C and
S. Basically, if you are a restaurant
you'll want to go with S. If you are a
chain of restaurants, you'll want each
location to have its own S-corp. If you
manufacture something (i.e. your own brand
of salsa) and you are getting into
grocery-chains and brand-names, you'll want
an array of C corporations to hold your
S-corps. What is the point of all this?
Very simple: If you are sued, you want the
defendant to be your corporation (or just 1
of your corporations)... not 'you
personally' or 'the entire chain' of
Now that your business is licensed,
incorporated and hopefully insured... you'll
need to spend HUGE numbers of hours making
sure that the business actually earns a
profit. Here are the ways to insure you
NEVER be the
minority stock holder in any corporation
(less than 51% is BAD)
TRY NOT TO
fire an employee... assign them
jobs/shifts that they hate and let them
a frivilous Personal Injury case...
always fight it (you can get a
reputation among the local attorneys as
being a push over... and your G/L
insurance rates will go way up if you
have a settlement history... and it sets
the ground work for future claims by
establishing a pattern of negligence -
If I am an attorney and I can get you to
say in court that you have settled other
claims in the past, my obvious next
question will be "If you haven't been
negligent in the past, why did you
settle?" and "If you were negligent in
the past, what specifically have you
changed since then?" )
sure employees who have been 'injured'
on the job are given access to the
hospital. EVEN IF YOU KNOW THEY ARE
FULL OF BS... they should be allowed to
go to the hospital.
corporation that runs your 'business'
should be a different corporation than
the one that owns your business's
property. Your business should 'rent'
the property from the corporation that
'owns' the physical building/lot.
This reduces liability.
borrow more than 25% of the gross yearly
profits. The flexible nature of
corporate interest rates is a trap
bankers love to catch you in. Cash on
the barrel is best... but if not
possible, you should be VERY VERY lean
on borrowed money.
health insurance... you can get sick (I
did to the tune of 100K+)
life insurance... don't stick your
wife/kids with a business that has no
vendors NET-45 days. Even if you have
the money early, pay them 45 days. If
you pay net-10 sometimes and net-60
other times, you will be 'unstable' to
your creditors. Pick a set of payment
terms and NEVER be late or early.
After about 3-5 years of working like a dog,
you will experience what is known as 'burn
out'. Life's less black-and-white
questions will begin to flow through your
happened to 'my time'?
Why am I
living my life for everyone else?
Why am I not
happy like I used to be?
all the money go?
etc etc etc
The good news is that these questions are
NORMAL. The bad news is that you are
getting BURNED OUT. After the initial
challenge of starting a business is over,
the day-to-day operations of a business can
get quite repetitive. The highs become
'not so high' and the lows become 'just
another day'. In summary: you num up to
the peaks and valleys.
So how do you get out of the BURN OUT
cycle? Here are my solutions:
Take a day
off (yes, your business will suffer...
who cares?) and do something just for
you. Not for your family, not for your
brother, not for your kids, DO
SOMETHING FOR YOU.
Don't try to
BUY HAPPINESS... a new car is exciting
for a day, the payments are for 60
months. A vacation is $10K... the
same amount of money could have given
you 2 weeks off at home and with family.
your time arguing... if you disagree
with someone, you should try to avoid
them. If a train is coming down the
tracks, DON'T STAND IN ITS PATH. Step
aside and let it go by.
Be LOYAL to
your spouse/significant other. Tell
him/her everything. Tell him/her what
you are thinking about. Be honest.
With everyone else, Be BRUTAL BUT FAIR.
Employees are every business's biggest
windfall or downfall. For me, employees
just about ruined my life. I was in a
technical business in a coal-mining town...
I should have paid a premium for just a few
of the very best people. Instead, I hired
a large number of lower calliber people.
Not that everyone that ever worked for me
was lower cal, but many were. The short
and sweet of it is: you're better off with
1 person you can count on, than 5 people
that show-up for work on alternate Tuesdays
based on the phase of the moon.
Employees should always be hired based on
their need. If they NEED a job, then they
will work hard (i.e. a father with two
kids). If they DON'T NEED a job, they
will be lesser employees (i.e. a college
kid whose Mom and Dad are paying the
bills). Your job should always
represent a STEP UP for the newly hired
person. NEVER hire a previous manager for
an assistant manager position. That is a
step down and the employee will leave
No employee will be profitable in less than
6 months. THEREFORE, if you can't cover
their salary as a loss for 6 months, you
can't afford the employee. Waiters and
waitresses are not an exception to this
Everyone in your company should be paid a
LOW salary and a HIGH 'output based'
incentive. Waiters/waitresses should be
paid based on the average ticket value.
Managers should be paid based on weekly
profit statements. Just as you would not
hire a vendor if they didn't save you money,
an employee should have a 'quota' or
base-line for expected performance.
You are better off having 3
waiter/waitresses that make $14/hour than 6
making $7/hour. A $14/hour job is HARD TO
FIND... a $7/hour job is EASILY REPLACED.
Be the highest paying employer in your
industry, but don't hire a lot of people:
hire the best.
SWEAT EQUITY... if you want
to save a bundle on your business's next
location, buy an old warehouse with lots of
sqft and low $$$. Rent out the back as
office/warehouse space. Use the front as a
retail area. Use the middle/sides/corners
as your HQ. Never buy a BRAND NEW
CONSTRUCTION or owner-built out facility.