By Matt Andersen, CPA, Founder, MD Andersen CPA PA
In our multi-part series on the Business of the Lifestyle Entrepreneur, we are covering some of the common characteristics of a business that successfully balances growth and a higher quality of life. This is a continuation of our discussion on the importance of running lean and some basic rules to help you spend money smarter, particularly as you are growing your business.
Our first edition covered the importance of understanding the timing of marketing and office expenses. This article will cover expenses related to people that can frequently pile up.
Contract Outside Help to Start
One of the biggest investments any entrepreneur will make is in other people. It is a huge responsibility and no entrepreneur should take the decision lightly. Generally speaking, if you are earning a reliable stream of income and have an opportunity to offload work to another capable professional, take it! However, just as with your product or service, testing and experimentation are a critical part of building your team. This is why we recommend contracting outside help to determine exactly what skills and expertise add value to your business. Document this experience, develop standard processes, procedures, and job descriptions and you can later determine when, who, and for how much a full-time employee will add value to your business.
These days, opportunities abound to hire gig workers and contract help online and in local job boards. However, as a CPA I feel compelled to remind everyone to make sure they understand the employment rules and regulations in their respective states. The IRS and state departments of revenue look very closely at how you pay and classify people who work for you. Make sure you consult with a human resources professional or a CPA before you take the step of hiring contractors and/or regular employees. You can also refer to our blog series on the proper classification of employees and contractors.
Spend More Time On Your Relationships
Whether you are 100% remote or own a local brick-and-mortar business, relationships matter. In the age of COVID, this becomes particularly challenging as we are missing a critical human element to our interactions with employees, potential partners, and prospects. No matter how we are forced to interact, thoughtfulness goes a long way and taking time to remind someone how important they are to you matters.
Email, videoconferencing, social media, and other telecommunications platforms provide a convenient and inexpensive way to communicate, but in the age of COVID, we have been forced to rethink how to invest in relationships. What’s more, neither meals nor entertainment carry the tax saving advantages they did before. So how do we adjust and continue to run lean? The first step is to get help. Free up time by offloading work to others. THEN, begin investing more time and effort into your relationships, transforming casual messages to real, meaningful conversations. Sharing an occasional meal can go a long way, but depending on what you are limited to, your attention is what is most important in this case. A small, meaningful gesture such as a 20-minute phone call can go much further than an expensive fruit basket.
Don’t Get Burdened by Personal Debt
Lifestyle Entrepreneurs hold themselves accountable to prioritizing their lifestyle in relation to their business. This often means there are others who depend on this prioritization including spouses, children, parents, etc. A single entrepreneur may be perfectly fine coming home to a box of Mac and Cheese and severely limiting their expenses to invest back into their company. Others may have financial responsibilities that require them to bring home a larger monthly income.
No matter what your personal situation, make sure you are either earning enough regular income to cover your basic needs or saving extra when you are flush with cash to cover anticipated downturns. Part of running lean is avoiding the pitfalls of personal debt. Using a personal credit card to help float your business may seem like a quick and easy solution, but it often takes a long time to undo the damage and get a true read on how your business is performing in the future. Excess personal debt not only robs you of your freedom as an entrepreneur, it impacts all those who depend on you at home.
Matt Andersen, CPA loves analyzing data, people, and businesses. He is passionate about helping entrepreneurial-minded clients achieve their goals, keep more money in their pockets, and live a higher quality of life. In addition to tax and accounting services, Matt provides one-on-one coaching for various topics including lifestyle entrepreneurship, advanced tax planning, and new business creation.