Thursday, December 16, 2010

15 Days til New Year's Eve...The Time is Now

Countdown to New Year'sWhile everyone else is busy counting days until Christmas, accountants are busy counting days until New Year's Eve. And here’s why:

Do you itemize your deductions? If yes, look at your spending plan for charitable contributions. You have 15 days to maximize your gifts. Plus your favorite nonprofits are busily trying to meet their year-end goals, so gifts that come in during December are hugely appreciated! Have you spent out your Health/Flexible Spending Accounts? Now is the time.

Are you a business owner? If yes (and you file cash basis) then every dollar you spend in the next 15 days saves you in the neighborhood of 25 to 40 cents. Our advice to clients at year end: Any equipment you plan to buy in the next six months, buy it now. Any bills scheduled to pay at the beginning of January? Pay them now. And on the income side, for every dollar you put in the bank, you’ll be sending 25 to 40 cents to the IRS on April 15th. This is the one time of year you ease up on your receivables calls, slow down your invoicing process, walk to the bank very slowly.

And for my nonprofit clients? You have 15 days to maximize contributions for the year. Call one key donor every day until the 31st. You can ask for support, or just wish them a happy holiday and thank them for their support. Craft one last personal email solicitation. People want to give this time of year, and it’s your job to remind them.

Happy New Year!

(The accountant’s disclaimer: this is clearly generalized advice. It's something to be discussed with your trusted advisor. If you don’t have a trusted advisor, we know some great ones!)

Friday, December 10, 2010

2011: Is your plan in place?

Winter is a time of reflection, both personally and for our businesses. How did this past year go? Did I meet my goals? Um, did I have goals? What do I want next year to look like? What do I have to do to get there?

At Creating Answers, it is the time of year we are busy working with all of our clients on 2011 goals and budgets. It is one of my favorite times of the year because you get to do two really fun things: analyze how last year went, and draw the financial road map to follow next year. It's financial art at its most fun.

If you think of this work as a chore, I invite you to reframe your beliefs about planning and numbers. I invite you to think of it as a game, or a puzzle. Make it a date with yourself. Go to your favorite coffee house, or pour yourself a bottle of fine wine. And then...start asking yourself questions.

What percentage of your total income goal did you reach this year? 120%? Great! 85%? Not so great. What do you need to do differently in 2011? What amount of marketing dollars would have closed that 15% gap? Do you need to increase your networking time? Upsell existing clients? Raise your prices?
“If you think of this work as a chore, I invite you to reframe your beliefs about planning and numbers.”

Take a look at your discretionary areas of spending? How much did you spend on marketing and advertising? What were the financial results? Professional development? Results? Equipment? Results?

How much did you spend on staffing and/or outside consultants? Did they work at capacity? Did you generate revenue from your staff? How much? A great rule of thumb to start with is three times their cost.

While it is difficult to assign numbers to each of those questions, the exercise of trying will create answers. What if you spent nothing in each of those areas? What if you spent three times as much?

Most importantly, don’t overdo the process. It’s more effective to do a really thorough look at your 15 most critical spending areas consistently than it is to look at all 60 of the expense accounts you have in Quickbooks. (And if you have 60 expense accounts in Quickbooks, you should give us a call!)

Find out more about what we do at

Here's to a prosperous new year full of financial clarity!

Wednesday, November 24, 2010

Holiday Financial Clarity

Manage Holiday Spending

Want financial clarity for the holidays?

Entertaining, stocking stuffers, extra travel expenses, cookies for the neighbors, decorations, office holiday party gifts, holiday grocery shopping and of course, presents… these are just a smattering of expenses that are about to edge their way into your spending plan over the next several weeks.

Whether you’ve been saving all year, plan to squeeze it into your regular monthly spending, plan to not partake in any of it, or have a credit card you use for the holidays, now is a good time to make a plan. Even if you don’t stick to your plan completely, just spending the time to fill out this handy holiday plan will provide you a road map for the trip you are about to take.

What are your priorities? What are your limits? What are your expectations?  How do you feel about the money you’ve spent during past holidays?  What could you do differently? And a favorite question from our Financial Boot Camps, what would your hero do?

 Print the “Manage Your Holiday Spending” guide from the AFSA Education Foundation. Take a walk, think it over, journal the above questions if you’d like, then get a pencil and a calculator and make your plan!

And… enjoy the season.

Wednesday, November 17, 2010

Stories Are Gifts... Share!

Starbucks has a new tagline on their holiday cups: Stories are gifts…..share. What a great reminder that sometimes the most meaningful gifts don’t cost money. As we near the season of gift giving, I hope that this sentiment is taken to heart.

What if we all gave the gift of a story this year?

I heard that stores are opening not just at 5am on Black Friday, but on Thanksgiving Day itself. One more step toward the commercialization of what is meant to be a time of family, friendship, and for many, faith.

When people talk to me about the holidays, they often talk about the season with a sense of financial dread, or disappointment in themselves that they didn’t set aside a holiday fund…again, or about the credit card bill they know will be coming in January. They talk about not wanting to disappoint their children, about the expectations placed on them in their workplace, or about “this is how my family has always done it.”

If you hear yourself in any of the above, make a commitment to do it differently this year. Completely different, or just a little different. Here are some ideas:

  • Give the gift of a story: the day your child was born; a fun experience with a good friend; how a coworker has inspired you.

  • Give the gift of an experience, rather than a thing: a walk along the river; a Sunday morning brunch; a drive to the mountains.

  • Give the gift of memories: old family pictures; old family movies; old family recipes. (One of my most treasured gifts is a recipe book from my mother of favorite recipes and notes with each one about which family friend first introduced us to the recipe.)

  • Get your family to draw names. Or better yet, my unique neighbors instituted a family tradition of CrapMas. They each scour their homes for items that they no longer use, but know that someone else might find of value, and then do a sort of live auction based on who declares they need it or want it the most. They have great, great fun with it.

  • Give the gift of service: spend the holiday serving others at a homeless shelter.

  • Give the gift of self-esteem. I asked some important people in my daughter’s life to share a word or a sentence about how people see her, and then I compiled them in a book. $8 at and….priceless.

What ideas do you have?

 -Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

Are you ready to reach your financial goals? Get motivated. Get support. Get results!

Friday, September 3, 2010

Monday, August 16, 2010

Time is Money: 5 Steps Toward Balanced Business Ownership

I didn’t feel like working the other day; It was a Monday morning and I actually didn’t feel like working. That bothers me. In a big way!. Partly because I come from a family of workaholics, and thus our self-esteem is all nicely packaged with our work. But mostly it bothers me because 1) I had a fabulously free and fun weekend and 2) Monday is the day that I get to work ON my business, not IN my business. So, shouldn’t I be excited about going to work on a Monday!

I called my coach. He said “Stacey, don’t you think that there’s about 25 million Americans at this very moment who don’t feel like going to work today? Doesn’t that just make you normal?” Good point; I’m normal. I was really hoping I wasn’t, but I am.

How does this relate to the small business owner and their money? Well, time is money. In my experience, business owners fall to one side or the other of the scale; few fall in the middle.

There are the “I have all of these other things I need to get done, and I am the keeper of my own destiny, so I can work whenever I feel like it” business owners. Fine; great; IF they are independently wealthy, or have a wildly profitable business, or don’t have clients or customers that are relying on them. Then they can work whenever they want.

But for all of us who are normal, time is money, and not feeling like working can become an issue with our bottom line. My recommendation to clients who struggle in this area is to develop a schedule for themselves; an ‘employee contract’. If it is within your integrity to work 20, 30, 40 or even 50 hours per week, then provide yourself some clarity about it and stick to your schedule. If you’ve provided yourself this flexibility, and still consistently miss your 30 hours, well, you might consider an employee counseling session with yourself.

Would YOU hire someone that expected to earn a full time salary, agree that they only had to work 30, and then be happy when they were constantly on the phone with friends, running personal errands, coming in late and leaving early? I’m guessing no. I’m guessing you’d be counseling that employee, or firing them.

It is helpful to look at our performance as business owners from time to time from a different angle. Are we too soft on ourselves, or are we too harsh?

Some practical suggestions:

  1. Create a vacation, sick and mental health day policy for yourself. Track your time taken just like you would an employee.

  2. On days you don’t feel like working, rearrange your schedule for the day and fill it lightly with work activities you truly enjoy.

  3. When taking personal calls during the day, set an egg timer; or let your friends know that you can’t take personal calls during the day.

  4. Schedule quarterly or semiannual retreat days for yourself. You are your business’ most valuable asset.

  5. From Bryan Dodge: create a geographical line between the office and your work, and when you cross the line, you’ve crossed into work life, or home life. Never the two shall mix.

Saturday, July 10, 2010

Financial Art~An Interactive Art Experience...


Thanks to everyone who came by and participated! By the end of the show, we had about 300 wishes/prayers/hopes fluttering in the wind. So, what does it all mean? Why the crayons? Why the overly simplified pie charts? Here’s the story:

Last year we launched our Financial Boot Camps. The results we’re seeing are phenomenal. In the Boot Camps we do brief, hopefully powerful, Money 101 trainings, teaching, or exercises. This January the crayon pie chart was the Money 101 topic.

The accountant in me questioned the exercise that the right side of my brain had created.

But the right side of my brain, the creative side that has been fed and nurtured by a lot of research into the psychological and emotional aspects of our relationship with our money said: Forge on!

The boot campers drew their pictures, first "How I spend my money," and then "How I want to spend my money."  As they were sharing their pictures and explaining what they’d drawn, one boot camper, "Chloe", had a rather large part of her "How I spend my money" going to her past. This surprised me. I know a lot about her financial situation, and I know that she has little, if any debt. So what was going to her past?

[caption id="attachment_167" align="alignleft" width="175" caption="Chloe's "How I Spend My Money""][/caption]

[caption id="attachment_166" align="alignright" width="175" caption="Chloe's "How I Want to Spend My Money ""][/caption]









She said was spending all this money (and time, and physical energy) on her rental properties every time one of them changed renters. She hated it. It was dragging on her. Most of her rental properties she had once lived in, and thus, she saw it as her past. The accountant in me wanted to tell her she’d done the drawing wrong. Rental properties are assets, investments, spending on your future. That portion should have gone into her "Future" section. But the creative in me sat on my hands and listened.

Then, rather amazingly, over the course of the next 4 months she:

  • discussed the drawing with the Boot Camp,

  • then her spouse, and

  • then their financial planner.

  • She made a decision to put one of the rental properties on the market.

  • They slowed the home improvements they were spending time and money on.

  • They got an offer; the buyer said stop ALL work immediately.

  • They went into escrow.

  • The house sold.

  • The money now sits in an investment that does not require time, or physical energy, or monthly reinvestment.

Most importantly, Chloe has peace of mind. She feels much happier and much more aligned with how she wants to be spending her money, her time, and her physical energy. She has her weekends back, and she has her money solidly invested.

All from a crayon drawing.

So why do I think that a crayon drawing so inspired Chloe? Sometimes we work so hard to make the perfect spending plan, and have the perfect financial plan, and we balance our checkbooks to the penny. Yet something still isn’t quite right. Sometimes, the calculations, and the financial advice, and the reports aren’t the answer. Sometimes, using a crayon, evoking the 5 year old within, creatively looking at how we “are” living our life, and how we say we “want” to live our life, provides the greatest inspiration to find financial clarity.

Stay tuned as we continue to tell the story of Financial Art ~ An Interactive Art Experience.

Thursday, July 1, 2010

An Extraordinary Connection with Your Business’ Finances

I love financial tools! Excel, Quickbooks and Microsoft Money are just fun. Today’s software lets me fly creatively when I’m trying to help a client understand how their business is doing, what’s working, and what’s not.

But as with most things there is a flip side to the amazing software we have at our fingertips. Quickbooks, meant to bring simplicity to accounting, easily becomes a behemoth, spitting out 3 page reports that no one could understand or connect with. And that is the point, the goal, of accounting: to connect with your finances. It’s not all about filing your tax return at the end of the year. It’s about understanding your business and the financial impact of your decisions and activities. Your numbers should tell you a story, a story that you feel connected to.

My first experience with accounting was at 19, bookkeeping for my family’s business, the The Buz Buszek Fly Shop. I used ledger paper. I don’t feel old enough to be saying that, but I guess I am. Today, one of my tenets for those who are having a difficult time connecting with their finances  is to pull out the old ledger paper.

[caption id="attachment_135" align="alignleft" width="157" caption="The Old Fashioned Way"][/caption]

I’m not suggesting you literally do your accounting on ledger paper. What I do mean, though, is to get a pencil out, and a calculator, and a piece of paper. Write down, every single month, the 8 to 12 numbers that are really important to you. Not the 50 or 100 numbers that Quickbooks is telling you. Just the 8 to 12 numbers that help you feel connected to your business.

If you’d like to learn more about having an extraordinary connections with your finances, I’m being interviewed by Marcia Brixey on July 6th at 11:30am as a part of her Money Wise Women Get Smart Teleseminar Series. You can participate by signing up at:

You’ll also find a lot of great past teleseminars you can listen to. A personal favorite of mine is Mikelann Valterra’s interview  “Earn at Your Potential: Embracing the Seven Challenges.”

Happy learning!

Monday, June 21, 2010

Late charge, latte charge, at least you’ll know.

[caption id="attachment_119" align="alignleft" width="158" caption="$3.35 a day"][/caption]

Microsoft Money has this cool new tagline: “Late charge, latte charge, at least you’ll know.” I love it.

When you’re an accountant, people talk to you about their money. Not just your clients, but your friends, relatives, acquaintances, and even people you stand next to waiting in line. It’s kind of fun, because its this secret little window into peoples’ worlds that most don’t ever get to see.

So why do I like Microsoft’s tagline? Because the overwhelming first step to tackling one’s money issues is know how much money is coming in, how much is going out, and where it’s going. Most people have no idea. Even those that use software like Quicken or Money often still have very little idea. They can look it up, but they don’t know. I must admit that there was a point in my life that I realized I was tracking all the data, but not often enough to really use the information in a constructive way. More on that later.

[caption id="attachment_122" align="alignright" width="130" caption="$39 a month"][/caption]

There is an axiom that goes: “What we measure, we accomplish.”

If you have financial discomfort in your life, start measuring. If you’re measuring and still have discomfort, take a step back and look at how you’re doing it. Shake it up; try it a different way. If it’s still not working, check out our Financial Boot Camps. You’ll make movement there; we guarantee it.

Friday, June 18, 2010

Changing the World

[caption id="attachment_110" align="alignleft" width="198" caption="Cape: yes | Tiara: looking"][/caption]

"I'm fairly certain that, given a Cape and a nice tiara, I could save the world."

I have a cape, and I’m trying to find a tiara. Some of you know that I have this crazy wonderful inspiration, and with this inspiration, and a tiara, I could change the world. Not save it, but change it.

I heard some great advice last night, as I do on the 3rd Friday of every month. “Read about people who have changed the world.” So I’m wondering, who would you read about? Who is one of your heroes or heroines?

And if you want to experience some of my crazy wonderful inspiration, save the date: July 10th, 6-9pm.

Monday, June 14, 2010

Community Service, Leadership and Small Business

[caption id="attachment_105" align="alignright" width="131" caption="Tina Reynolds, Phyllis Lyon and Armistead Maupin"][/caption]

My best friend Tina Reynolds, owner of Uptown Studios, was honored today by the California Legislative LGBT Caucus for her extraordinary inability to stand by and watch even one person be treated as less than equal. I’ve know Tina for 15 years. We met when she was doing volunteer work for CARES, and through the years I can not begin to recall how many organizations, actions and activities she has led or been a part of. And not just LGBT issues; she’s an equal opportunity activist. I’m proud to be her friend, and I’m proud that she’s a role model for my daughter.

What does this have to do with small business? For those of us that own small business, we all know that we have less time, not more, to spend on our passions. How in the world does Tina have time to do all that she does? Well, there are 50 different ways to market your business in the ActionCOACH model. By doing what she loves, she has become a successful business owner. She could have spent all of her time going to endless networking events, but instead she has used the less direct path of following her passions and making a difference. You don’t get clients as quickly, but over time you get them just the same because we all want to do business with good people.

I’ve learned a lot from Tina about what it takes to be a business owner. She taught me that if you are going to own a business, you must connect with others. We  joke when one of us gets a new client, “did they come from the Yellow Pages?” Well the Yellow Pages hardly even exists now. She has inspired me, a bit of an introvert, to become a connector, and to even enjoy it.

[caption id="attachment_106" align="alignleft" width="106" caption="A Cherished Friendship"][/caption]

I’ve also learned from Tina about how to be a better human being. We go walking in the early mornings around our fabulous midtown neighborhood. She says hi to everyone, and I mean everyone. Not just the people that are going to say hi back, and not just the people who look like they might. No matter who it is we pass, there is a cheery hello. It’s reminded me that that simple act of kindness can lift someone else’s spirit, even if just for 5 minutes.

Almost all of us that own a business began because we wanted to lift someone else’s spirit. And that’s what makes Tina Reynolds not simply a tireless activist for equal rights for all, but an amazing business owner as well.

p.s. She was honored amongst some amazing people. Today, I got to shake Phyllis Lyon's hand and thank her for all she has done for us, for me. I also got to tell Armistead Maupin how incredibly funny his books are. If you don't know who those two are, look them up on Wikipedia!

Saturday, June 12, 2010

Bobbleheads and Small Business Seriousness

I’ve had a particularly successful week on a number of fronts. Every day had a triumph, some large, some small. That’s a week well worked.

I was out celebrating with my friend Anne last night, and she gave me a gift in honor of my week: a Guy Noir, Private Eye bobblehead.

[caption id="attachment_90" align="aligncenter" width="162" caption=""A dark night in a city that knows how to keep its secrets. But high above the empty streets, on the 12th Floor of the ACME Building, one man is still trying to find the answers to life's persistent questions...Guy Noir, Private Eye.""][/caption]

I love Prairie Home Companion, but that wasn’t the purpose of the gift. The purpose was to remind me to not take myself too seriously, to not dive into workaholism just because I’ve got all these fun new projects and clients that are going to need my focus in the next couple of months. She said every time I see the head bobble, I’m supposed to ask myself, “have I done anything fun today?”

It’s the myth of business ownership. We get in to it thinking “oooh, flexibility!” My daughter Dakota was 4 when I started my business; it was a great idea. But after a couple of years I realized I was consumed. Dakota had less of me, not more. I’m very grateful I had that realization, and then did something about it.

I rarely work on the weekends anymore. But, this weekend, I have some special stuff to accomplish. One woman trying to find the answers to life’s persistent questions. And Guy is sitting here bobbing his head, reminding me that if I work smarter, I get to go have some fun tonight. And that makes me a better, and more successful, business owner.

Have you done anything fun today?

Wednesday, June 9, 2010

The Perfect Recordkeeping System

“We never do anything well until we cease to think about the manner of doing it.” – William Hazlitt

The allegory of the centipede makes the point nicely: asked how it knew which of its hundred feet to use when, the creature found itself unable to move. I am frequently asked what I think is the best way to do recordkeeping, file your financial information, which is the best software to use, should I do it by hand or use Quicken or Microsoft Money or Excel, do I have to use Quickbooks, etc, etc. My answer is the same as Nike’s: Just do it!

It’s not that I don’t have opinions about the best way to do it. (Anyone that knows me knows I have opinions!) It’s just that when someone asks me that question, its not usually because they’re trying to refine and make better a system they are already using. The people that ask me that question aren’t using a system at all, and they’re waiting until they have a perfect system to start using it.

If you recognize yourself in this post, my suggestion is to pick the easiest system you can think of, do it consistently and with reverence for 3 months, and then evaluate how it worked.

Don’t know where to start? Here are some ideas. Pick one:

  1. If you’re starting from scratch, get a little notebook and write down everything you spend. Everything. Then, twice a month, total your spending in some broad categories. No more than 12.

  2. If you’re using financial software (Quicken, etc.) but you still feel you aren’t doing it right, or you don’t KNOW your numbers, make a commitment to update it once/week. Once updated, write by hand, on a piece of paper,your monthly spending in each of your major categories.

  3. Try the old fashioned coffee can approach. Dole out at the beginning of the month into separate envelopes your monthly spending plan for groceries, eating out, entertainment and any other area of discretionary spending. If a month is too long, use a paperclip and post-it note to identify the 1st – 15th and 16th-31st spending.

    [caption id="attachment_74" align="aligncenter" width="227" caption="Perfect Envelopes (top); Done is Better than Perfect Envelopes (bottom)"][/caption]

Ok, now that you’ve picked one, just do it, don’t think about how you could do it better, just do it for 3 months. At the end of 3 month, let me know what you picked, how it worked, and how you’re going to make it a little better for your next 3 months.

Consistently, and with reverence!

Thursday, June 3, 2010

Where’s your 50 year old?

I was talking to a friend of mine the other day. He’s 50ish now, happily no longer a business owner, and was telling me this story from when he was 30ish. He had started his own firm, set out on his own, was happy, was proud. A new, big client came in one day, looked around his office and asked him and his partner, “where’s your 50 year old?”

The breed of business owners is a fiercely independent one. We’re smart, risk-taking and capable. We aren’t the kind of people who pause to think that it might be a good idea to hire someone who has the experience, good and bad, of a 50 year old. A lot of us don’t want to take anyone’s advice at all.

What’s the value of having someone on your team who is the 50 year old? They have been through year after year after year of watching decisions and outcomes. They have seen what works. More importantly, they have seen what doesn’t work. It is hard to get to 50 without making a whole bunch of mistakes in your business life. What a blessing it would be to have someone on your team who could say, “oh, I saw a guy do “x” once, and two years later, he realized that it caused “y”, and “y” cost him a lot of money, or heartache, or legal battles.

Does your business have a 50 year old? If your answer is no, you might want to think about finding one. My "happily no longer a business owner" friend wishes he had; he figures it could have saved him tens of thousands of dollars.

Thursday, May 13, 2010

How I Do Money Is How I Do My Life

I have a friend who is both a yoga instructor and a therapist. We were talking about a sibling of hers who has constantly had both money problems and all kinds of other problems in his life. In yoga, she tells me, there is a saying that “how you do yoga is how you do your life.” We mused over how that saying could just as easily relate to how you do your money. It was easily seen in the life of her sibling. I’ve turned it into a  question that I’ve often asked people that seem to be “stuck” or “baffled” by there behavior around money.
If how you do yoga is how you do your life, then how does this statement relate to you: How I do money is how I do my life?

Having gotten many interesting responses, I was inspired to ask the question in the Financial Boot Camp. I got a unanimous response: “that’s a stupid question.” I smiled and suggested that they write about it anyway. After a number of weeks we came back to the question and unanimously, everyone had had an ‘ah ha’ moment when thinking through the question.

I’ve put it up on the wall in the office as the question of the month and clients, boot camp members, friends, really anyone that walks in is asked to write a response on the windows in the office. It’s fabulous! There’s graffiti all over the office. So… does the question relate to you?

Here are some answers created:

“When I avoid responsibility, I avoid being empowered.”

“When I relax and do what is next consistently with clarity, focus, ease and grace, it is there.”

“When my life teeters out of balance, so does my money.”

“When I allow someone else to become my priority, I become the option.”

“Be it, let it, it will be.”

“When I don’t pay attention to it, it bites me in the @#%.”

“Inconsistently, but with reverence.”

“When I have enough, I pay attention, when I don’t, I run away.”

“If I pay attention to that which I run from I will lose fear, gain experience and live more fully.

Monday, May 3, 2010

How much DO other people spend on food?

I get to talk to a lot of people about their spending plans. It’s kind of fun. Most people know what they spend, or what they think they need to spend. But not many know what is average or “normal”. Amongst all of my clients, the outliers are $100/month and $1,400/month, both two person families. I was stunned at the $100/month family. While they don’t buy pre-packed foods and do grow a lot of their own fruits and vegetables, it’s still remarkable. The national average for a family of two is $564, and yes, this includes eating out. Some other interesting food averages are:

  • 43% of our food budget is spent eating away from home;

  • we spend12% of our total income on food;

  • the average for a single person is $373; a family with children is $821; and

  • no, this doesn’t include alcohol; that’s another $34/month.

In my own spending plan, I keep my categories broad and only track about 15 different areas. One is the ratio of groceries to eating out, and when I’m spending more than 35% of my food budget on eating out, I’ve got some realigning to do.

If you want to see where your spending plan lies, the Bureau of Labor Statistics’ Consumer Expenditure Survey publishes annual data of more categories than you’d ever want to see: .

Monday, April 26, 2010

Emotionally Investing in Your Business

I recently had the privilege of working with a client who is opening her own business. It’s rare that entrepreneurs seek financial advice before they leap. Most people, if they looked too hard at the realities of business ownership, wouldn’t do it.

One of the goals in our pre-launch work is to find some financial clarity about what her investment is, and what an acceptable rate of return is. If you buy $10,000 of mutual funds, it’s fairly simple to determine if your investment is earning 10%, 5% or losing 25%. But investing in a business has so many other components to it.

  • The lifestyle component: how much you would be willing to ‘pay’ to do what you absolutely love and be your own boss.

  • The opportunity cost: the difference between the salary and benefits you are leaving behind and the salary and benefits your new business will be paying you.

  • Building a sellable asset: are you creating an asset that can eventually be sold and sold for how much?

If you’re considering opening a business, here are some great questions to ask yourself before you leap. What if things don’t turn out the way you planned? What if your business ends up costing you money? Would you be willing to give up a $70,000 job if you could own your own business and still earn $50,000 with the potential of building a sellable asset? Probably. Would you be willing to do the same if you were only able to earn $20,000, or $10,000?

What if your business actually started costing you money?

In accountant-speak, that’s called “Owners Investment” and it’s hidden in the balance sheet in the equity section. I hate that. What it really means is that your business didn’t earn enough to pay all of its commitments so you’ve drawn from your savings, your spouse’s income, your home equity line or even a retirement fund. When a business owner takes $1,000 from their personal account and puts it in their business account, they aren’t thinking “oh, I’m buying a $1,000 investment that will pay me a good rate of return.” They’re thinking “oh, I have to cover the payroll shortfall today.” Technically it’s an investment, but emotionally, it’s not.

How many of us would run down to the bank to transfer $1,000 of our money to buy more of a mutual fund that wasn’t performing? None. What if the fund manager promised us that it would perform better? There’s a continuum on the scale of emotional investing. It starts with mutual funds, and then specific stocks (and you crazed Apple fans know who you are), then real estate, and then business ownership. The closer we are to the asset, the more emotionally tied we become to the investment, and the less able to make analytical decisions.

Should your investment decisions be purely analytical? Nope. But they shouldn’t be purely emotional either.

Sunday, April 18, 2010

Cost of Manufacturing in China

I love Planet Money, NPR's economics podcasting team. They can make you actually understand what a credit default swap is. And, they make it entertaining. Fun!

This podcast explained exactly how China manipulates their currency, and what that means to everyday Americans, and everyday Chinese. It was fascinating. If you like that kind of stuff, here it is:

But if you just want the cliff note, the part I found so stunning, it is this. They were talking to a small business owner that manufactures his his product in China. No surprise. We all know much of what we buy is manufactured in China. You don't have to be an economist to know it must be way cheaper to manufacture in China. What I didn't know was how much cheaper.

90%. That is stunning. If you were a mattress manufacturer, and could sell a mattress for $1,000, would you pay an American company $500 to produce it, or a Chinese company $50. Duh. I had no idea that it was that much cheaper.

How do we reduce the carbon footprint of global manufacturing when individual business owners are faced with such temptation?

Thursday, April 15, 2010

Our collective moment of financial clarity

Some people think of April 15th as an icky day. I see it as our collective moment of financial clarity. Tax day is the one day that we all know exactly how much our businesses earned, or didn’t earn, last year. Want even more clarity? Take a quiet moment and do this exercise:

Want monthly clarity? Subscribe to our blog and we'll send you a packet of 12 Monthly Clarity Cards. Want even more clarity? Contact us for a 30 minute complimentary session, and we'll walk through the results of your Annual Clarity Card with you.

Some people think of April 15th as an icky day. I see it as our collective moment of financial clarity. Tax day is the one day that we all know exactly how much our businesses earned, or didn’t earn, last year. Would you like even more clarity? Take a quiet moment and do this exercise:

Monday, April 12, 2010

The Power of a Salary Structure

I often begin my speaking engagements to business owners with the following:

“Hey, I have a really great job for you! You are going to be doing exactly what you love to do. You won’t have a boss. You’ll get to set your own hours. Some months I’m going to pay you a whole bunch of money! But, then there’s probably going to be some months that I won’t be able to pay you. Well, maybe a little, but not a lot. But I’m sure I’ll be able to catch up eventually. ---- Will you come work for me?”

Did I just describe the salary structure you have in your business? If you laughed,  I’m guessing: yes, it is. If so, read on.

I was working with a client of mine who has a goal of a $200,000 annual salary. She works in a field where it’s possible; it will take some hard work, but it’s possible. What kind of salary would that be? $16,666 per month. Her business will need to generate well over that to produce a net profit of $16,666 on a monthly basis.

So why would I advise her, for now, to pay herself a $1,000/month salary, no more, no less? Because it is an amount that she can successfully practice doing. She’d been paying herself big chunks of money when money came in, and then barely any at all for weeks, sometimes months. You don’t get into shape by exercising a whole bunch in one week and then not at all for another several weeks. When our businesses pay us large amounts during one good month, and then don’t pay us enough to meet our monthly needs in other months, we get out of shape, out of sorts, out of hope. Knowing what your monthly salary is, and sticking to it, no matter what, gets you and your business into shape.

She kind of thought I was crazy, or stupid, when I gave her the assignment. She did it imperfectly at first, and then she started doing it perfectly, and then, all of the sudden, she got it. It all became clear to her. It is the simple and mindful acts, taken consistently, that propel us forward in our lives, and in our businesses.

Monday, April 5, 2010

On the Honesty Muscle and Financial Boot Camp

Lisa Nichols, in No Matter What, refers to the honesty muscle as a critical component of moving forward in our lives. To get to where we really want to be, we have to know where we are; we have to be honest with ourselves. When it comes to our finances, this can be extremely challenging on many levels. To know where we truly are means that we have to discuss money, a very private, personal, and sometimes painful subject. Where exactly do we do that?

A success of Financial Boot Camp is that it gives people a forum where they get to - and have to - talk about their own money. In the first few sessions, it’s a challenge to convince the group that its not only ok to talk about their own money, but also to ask each other direct questions. We’re raised in a society that frowns on open discussions about money, yet we’re expected to know how to manage it. In the Boot Camp group we’re working with now, honesty has appeared in a number of ways:
  • Some have been honest with themselves and the group that they really don’t like how they are earning money;
  • Some have been honest with themselves and the group that how they have invested money makes them unhappy and discontent; and
  • Some have been honest about their lack of clarity with their monthly spending.

Some of the group, if they had listened to their own little voices, knew these things before Boot Camp. With some, you could see the light bulb of honesty and realization come on right before our very eyes. To get to where we really want to be, we have to know where we are; we have to be honest with ourselves, and sometimes others. Each one of the Boot Camp group has used that honesty to make movement in their lives, movement toward where they really want to be.

-Stacey Powell

Wednesday, March 31, 2010

A successful small business

What is success in a small business? I’ve been reading Small Giants, a book focusing on great companies who aren’t focused on growth for growth’s sake, or giant revenues, for giant revenues sakes. Most of the business owners I work with have their eye on a million, or a few million. One of the points he poses is what’s better, to have a highly profitable 10 million dollar company, or a mega 100 million dollar company. I think a lot of people assume that a 100 million dollar company must be profitable, but I think that is not always true; in fact I think that is often not true. To reach 100 million in sales, you most certainly will have had to leverage a lot, both in money, time and soul. Is it worth it?

Some of the questions we like to ask clients are:

  • What’s your ultimate goal?

  • Why are you doing this business?

  • What makes you truly happy?

Knowing what your core beliefs in business are can help guide your growth. Rarely do I come across a business owner who is just in it for the money. Most got into it for a way of life, or a love of the game of business growth, or because they had a passion to share their gifts and talents with others.

Is that profitable? It definitely can be; but profitability takes work, analysis, focus and a willingness to keep your knees bent. One of the CEOs in Small Giants talks about the Groundhog Day syndrome; doing the same thing over and over, expecting different results. As small business owners, we have to keep our knees bent and be willing to shift, adjust and sometimes even do some stuff we don’t want to do.

The end result? Well, the goal is a happy life, a happy business and of course, profitability.

Sunday, March 28, 2010

Date night with your finances?

Have you ever noticed that most people follow the statement “I have to pay bills tonight” with the word “ugh” or “yuck” or, something that rhymes with “yuck”? Those are often the same people that will sheepishly tell you they haven’t reconciled their checkbook any time in the past decade. And those same people probably couldn’t tell you how much they spend on groceries every month, or eating out, or healthcare.

When you look at the order in which our personal or business finances are done, it’s really no surprise most people consider it drudgery or despise it all. First, hunt and peck and gather everything we need to pay our bills. Second, pay the bills (i.e. give some or most of our money to others). Third, well, there is no third, because by then, we are physically and/or emotionally done with the monthly finances. Many aspire to continue on to: third, update their account balances, fourth, reconcile, and fifth, look at the totals of spending categories. But there’s no time or energy left to do the third, fourth or fifth steps.
My advice: try, just try, to make it fun.

Make it a date night; schedule time every month to just focus on your spending plan and financial goals. Light a candle, open a special bottle of wine, or go to your favorite cafĂ©. Divorce the bill paying monotony from the important work: providing yourself clarity about your finances by keeping your numbers, looking at your numbers, and planning for the next month. It doesn’t have to be drudgery! Numbers can be fun, when you allow your mind to open to the possibility.

Finance meetings every month?? What would we talk about??

I was having a frank conversation with a prospect the other day. He loved our business model, especially the concept of having someone take more than an accountant or bookkeeper’s interest in his business. He loved that there would be another person looking at his financials, his marketing activities, and his human resource management. He loved that he would have someone available so that he could just pick up the phone and ask a financial question.

His biggest concern, though, was that we require monthly meetings. “What on earth would we talk about every month?” I hope I didn’t offend him when I laughed.

What was so funny? He just filed bankruptcy on his last rather large business. And not to be outdone, it was a rather spectacular bankruptcy. Of course, it’s not funny that he had to file bankruptcy. I'm certain that for most, bankruptcy is a devastating financial and emotional experience. But it is funny that he didn’t see the correlation between that business’ downward spiral and how it might have looked different if he had hired us four years ago.

Businesses are closing down for a lot of reasons right now. The economy is certainly one of them, but it's the rare business that can say 100% of the reason lies with the economy. If you have had a financial person watching your back, they’ve steered you to put aside reserves, to lay off employees, to trim the fat, to raise your prices, to market more, not less, and most importantly, to not leverage your business to the point of no return.

If you’re talking to your accountant once a year, or once a quarter, that’s not enough. They are seeing what is happening to your business, but they probably aren’t helping you make better decisions. Ask them what it would look like if they talked to you more frequently.
Bankruptcy is expensive; monthly financial meetings, priceless.