Wednesday, April 10, 2013

Tax Day and an Entrepreneur’s Opportunity to Cut the Crap

I’m not one to use “Cut the Crap” kind of language. It’s a little snarky, and I’ve built my businesses on a philosophy of “come on in, the water is warm.” When your business is to get people to look at, talk about, and tell the truth about their numbers, you end up working through a lot of fear, avoidance, self-loathing, or simple vagueness with clients. There are so many of us that don’t like numbers or believe that we aren’t good at math. Layer that with our feelings about our finances, and you have multitudes of people who would rather do anything than look at, or talk about, their numbers. Well, come on in, the water is indeed warm.

There’s nothing like April 15th to focus on your numbers. It’s a golden opportunity many of us only get once a year, even though we should be looking at our income every month. I started riffing on what “Cut the Crap” had to do with numbers because of an upcoming spot on a colleague’s podcast, Powder Keg of Awesome. It’s one of their taglines, and I wanted to be prepared to speak their language for their mostly entrepreneurial audience. So what does cut the crap mean in relation to April 15th? Let’s do the math.

  1. Go grab your tax return.

  2. Get out a blank sheet of paper.

  3. If you’re self-employed, look at Line 12 on your 1040. That’s how much your business made last year. Write it down.

  4. If you’re incorporated or in a partnership, you’ll also need to grab Line 17 and, if paid via payroll, Line 7. Add those up. That’s how much you earned from your business last year.

  5. Now, take those numbers and divide by 12. Write that number down.

  6. That was your monthly income last year. Write “I earned this much each month” next to the number.

  7. Now, divide that number by 173 hours (the full time equivalent hours worked in an average month.) Write that number down. Then write “this was my hourly ‘wage’ next to your number.
Simple. I know. But so few of us ever look at it that way. In fact many small business owners don’t look at their numbers on a monthly basis at all. And even those that do end up looking at lengthy and disorganized Quickbooks reports. The simplicity allows us to connect with our feelings. Or, cut through the crap.

When you write the number down do you feel a sense of pride, gratitude or pleasant surprise? If the feelings that arise from this simple exercise fall on the side of positivity, then you are likely well aligned with how your business is performing and how it’s supporting you and your family.

But if feelings arise that create a pit in your stomach, self-loathing, disappointment or unpleasant surprise, then it’s time to look harder. I know the self-loathing feeling. I did this exercise years ago and realized I hadn’t paid myself much more than my teenage assistant. I could have justified it all over the place; I was transitioning my business transition, blah, blah, blah. Instead, I chose to cut the crap. I chose to embrace the feelings, and the intensity of the feelings spurred me to make a change.

I believe less is more when it comes to numbers. The more numbers you have to read and digest, the less you can connect with your feelings and intuition. Your analytical brain kicks in. There’s nothing wrong with analysis; it’s important too. But equally important is connecting with your business’ numbers and the feelings that they stir. The final part of the exercise: go back to your piece of paper and write some of the feelings that your numbers spurred in you.

And then focus on what your sheet of paper will look like next April 15th. Happy Tax Day.

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