I have seen several website and graphic designers with business names, websites, logos, etc that are not creative.  Recently, I was visiting once such website that was very “minimalist”.  There were a lot of portfolio pictures, but few words… a website equivalent of a Flickr album.  It didn’t have a logo and the company name was essentially John Doe Design.  If I’m looking for a graphic designer, I’m looking for someone who is creative.

Creativity starts at your company name, your “identity”.  Jeff Fisher’s article ‘Literally “making a name for yourself”‘ delves into this issue further.  Jeff points out “coming up with a clear, explanatory, clever name is always a challenge, but it can be your most important introduction to the world”.  He’s absolutely right and, in my opinion, anyone in the creative field should have a name that says “hey, I’m creative”.  John Doe Design isn’t going to cut it.

Next up, the website experience.  I see this all the time and I understand the problem.  Website designers will either suffer from not having enough time to put together the site they want OR they can’t agree on what the site should look like (too many creative cooks in the kitchen).  The result is a hastily pulled together site that says what they do and has information about the projects they have done, but is very definitely not their best work (of course, usually meant to be a temporary site). 

Here’s the thing… The consumers (those of us who need websites, but have no earthly idea how you do your magic) don’t know or care why your website is less than stellar.  We’re going to judge you based on what your site looks like.  You can say you have worked on lots of fabulous projects, but (at least to me) the one project that says the most about you is your own.  For all I know, you played a small role in those other projects, so I’m most curious about how you present yourself.  Maybe it’s not fair, but it’s how we think and everybody does it.

I’ve been focusing on graphic and website design because that’s the world I live in most frequently, but I’ll give you simple example that most people can relate to.  The hair salon.  When I walk into a new salon, you know which stylist I want?  The one with great hair!  I know…she probably didn’t cut her own hair, but I don’t care.  If she’s smart enough to get the right cut for herself, so I immediately trust her more with my hair.

It’s absolutely essential to “eat your own dog food”.  I know it’s difficult and you’re busy with other things, but in the long term you’ll be much better off if you take the time to be your own best customer.  Also, if you’re at a mental block with your own project, there’s no shame in seeking an outsider to help.  I think it’s often most difficult to work on your own project and many of us would be wise to utilize our peer network to get some objective advice.  What’s important is what the customer sees, not how you made it happen.

Stepping off the soapbox.

Over the summer, I spent a good amount of time working with Karrie Kohlhass (ThoughtShot Consulting). One of the first things she said was “we have to present your authentic voice”. If your marketing is authentically you, you’ll find the right clients. Interesting.

This week, I attended a webinar by Kent Lewis (of Anvil Media fame). The webinar was “Building Brands and Managing Reputations via Social Media”. One of the things Kent stated was you have to be honest in your communications.

So I’m feeling pretty good that even the marketing peeps think honesty is the best policy. Now, with that in mind, I have to put my money where my mouth is and behave in my business honestly and directly.

I have a client who is having a tough time in the current economy. I’ve been working with them for a couple months and I’ve saved the owner thousands of dollars in taxes this year. I assume he’s happy with my work and paying my fee. However, I’ve been struggling with the client lately because the package they signed up for isn’t the package they need now.

They signed up for a large monthly package and now they really only need a quarterly package. What’s a girl to do? I can keep taking the money and call it compensation for the money I’ve saved them. That’s an okay thing to do; it’s ethical. But is it authentically who I am? No. I struggled with this in the back of my mind for a week. You see, I do have capacity right now, so cutting back my revenue is not a good thing at all.

I met with the owner today. I called the meeting to talk cash conservation (and revenue generation). I honestly expected him to say we should revisit their agreement with me. He didn’t. As we were tying up the meeting, I did it. Honesty came before my bottom line. I told the owner that he isn’t using the full package he originally bought and due to his current circumstances, he should consider moving to a smaller package.

If a client needed a larger package to accomplish their goals, no one would hesitate to upsell. I rationalize that the reverse should be true as well regardless of the impact on my personal bottom line. It really goes back to treating others like you want to be treated. I would certainly value someone who put my needs ahead of their own pocketbook and I assume that’s true of others too.

In this case, the owner was amazed that I offered up this solution. Of course, I took the opportunity to suggest that he refer my great, honest service to all of his friends. Maybe my honesty and authenticity will lead to a better bottom line after all (or at least some good karma).

~Kelly Totten, Top Crackerjack

Jim Cramer was on talking about the current state of the economy. He said that small business owners should swallow their pride, sell their houses, and move in with their parents, if that’s what they need to do to keep their businesses going, “to keep the American Dream alive”. WHAT?!?!?

I find this kind of advice completely irresponsible. Is this the right advice for some businesses? Maybe. For every business as a blanket statement? Hell no!

First of all, your home is an asset and likely one of the very few appreciating assets you own (okay, not appreciating right now, but down the road). So, you can argue that your business also has value and it’s your future. You might be right or you might be dead wrong and guess what happens then? No house or business… you’re working for “the man” and living with your in-laws.

What would I advise? I would never issue a blanket statement at all. I would review your financials, ask about your business plan, your projections and what they are based on, and then I would dispense advice only meant for you (and likely refer you to some other advisors as well).

Here’s the thing…not every business is worth saving.  Just because you have a dream, doesn’t mean you’ll be successful. And just because you have a business, it doesn’t mean it’s the right time or market for that business.

In general, every business owner has flaws. We all have something we aren’t good at and we all need to recognize those weaknesses to be successful. If you’ve reached a point in your business where you need to sell your house to keep the business going, you better have a sure thing on your hands and fully understand why you’ve gotten to this point.

Chances are, it wasn’t just the economy alone that got you to this place.  Businesses survive through bad economies all the time…it takes good management. Figure out your fatal flaws and get an expert in that field to give you some advice. Re-think your business plan, fully analyze your business from all angles, and do some forecasting based on historicals, industry trends, etc. Then take this next step…

Figure out your limit. When do you call it a day? When do you swallow your pride and walk away? It’s easy to keep figuring out ways to put more money into a business, but it’s really hard to swallow your pride and admit defeat. I would advise any business owner or potential owner determine what their limit is. Is selling your house and moving in with family on the “okay” list? It certainly isn’t for me.

~Kelly Totten, CrackerJack Accounting

Balance Sheet

Ask any accountant and they’ll spout off the balance sheet equation (Assets = Liabilities + Owner’s Equity).  Ask most everyone else, and they’ll either look at you blankly or have a hard time remembering what goes where in that equation.  It’s simple, really, if you just picture it.

The balance sheet is nothing more than a pie graph where half is always “assets” and the remaining half is divided between “liabilities” and “equity”.  The proportion of equity to liabilities will change, but the total of the two must be equal to the dollar value of your assets.

Now you know how to visualize the balance sheet.  If you can hang on for a few more minutes of reading, I’ll tell you what it means to your business.  First let’s define the terms:

Assets will be divided between current and long-term assets on your balance sheet.  These are either cash or items you own that have cash value.  Examples include: accounts receivable, investment accounts, inventory, equipment, etc.  You’ll also find things like “prepaids” in your assets.  Prepaids are simply expenses you have paid in advance, so they don’t belong on your income statement yet (theoretically you could get them refunded if you don’t actually use them…hence cash value).

Liabilities are things you owe.  Like assets, liabilities are divided into current and long term liabilities.  The most common liability accounts are: accounts payable, credit card debt, loans, lines of credit, etc.  Similar to prepaids, you’ll also find deferred taxes, deferred wages, accrued payroll, etc.  Customer deposits are also liabilities.  Revenue is recognized when it is earned, not when the customer pays you.  So, if the customer pays in advance, you record it as a liability until you have actually earned the revenue.

Equity is essentially what your business is worth.  Equity is reduced by dividends and distributions and increased by your net profit, capital investments, etc. 

Now that I’ve defined what’s on the balance sheet, let’s review what that means to your business.  Essentially, the balance sheet holds the keys to how well your business has functioned throughout its lifespan.  The income statement covers a period of time, while the balance sheet is an accrual of your business history.  Bankers are more concerned with how your balance sheet looks because it shows how well you’re running your business.

Don’t get me wrong, the income statement is important too.  The balance sheet and income statement together tell the story of your business.  Too often, I see owners concerned only about the profit and loss and there are many problems with that approach.

If you ignore that balance sheet and work under the assumption it is correct, you are setting your business up for failure.  The accuracy of the balance sheet is directly tied to the accuracy of your income statement.  The asset and liability accounts on the balance sheet hold income statement account items until the period they impact the income statement.  If you don’t move things to/from your balance sheet from/to your income statement in a timely manner, then you’re managing an incorrect income statement too.

Once you have an accurate balance sheet and income statement, the next step is to set up a dashboard and monitor your financial ratios (things like debt to equity, current ratio, receivables turnover, etc).  Ideally, you’ll determine the right ratios for your business in your industry and start utilizing all of this data to make decisions. 

Personally, I like to set up visual dashboards for the income statement, ratios, and other trend data.  The whole idea here is to become proactive with your financial data and keep (or make) your business healthy.  I find the easiest way to understand what is happening in a business is to make it visual.

~Kelly Totten, Top CrackerJack

I’m not saying your employees aren’t trustworthy; I don’t know them.  What I can tell you is that’s always the story I hear.  “I thought I could trust her”, “we’ve been friends forever, I can’t believe he did that to me”, “she worked for a bank! I thought I could trust her”.  I’ve heard all of those from owners who were cheated by that “trusted employee”.

I don’t want to scare you and I don’t want you to lose faith in your employees.  I want you to set up some simple internal controls, so you don’t ever have to question your employee’s trustworthiness.

I’m put in positions all the time where the business owner will put me on the checking account or try to leave me a blank signed check.  Each time, I take the opportunity to explain that I would never, ever steal from them, but it’s not a good idea to put anyone in the position of being able to steal.   Then, I advise them in ways we can solve the problem (usually their unavailability to sign a check) and maintain a system of controls that protects their hard earned cash.

Here’s a list of simple controls you can put in place to protect your business and your bookkeeper:

• Open the bank statement yourself (or view them online), review the cleared checks (invest in getting copies of cleared checks if you don’t automatically get them).
• Review the bank account reconciliation with the bank statement. Ensure the bank account is reconciled in a timely manner.
• Require checks to be written sequentially. Review the check register and ask to see any missing check numbers. Voided checks should be kept on file and marked VOID.
• Have someone who doesn’t issue checks or handle cash reconcile the bank account
• Check Signing
  • Do not give signature authority to anyone who reconciles the bank account or issues checks. Require duplicate signatures if you must have one of these persons on the account.
  • NEVER sign blank checks.
  • Do not use signature stamps.
• Request to see invoice copies for checks submitted for your signature, ensure there is a paper trail and know what you are signing.
• Have someone other than the bookkeeper check the mail, open customer payments, and list the receipts.
• Make sure you have a fidelity bond included with your business insurance package that will pay in the event of employee theft.
• Petty cash
  • Set a limit on the petty cash fund and treat it like a bank account (someone who doesn’t have access reconciles it).
  • Use an imprest petty cash system: require signature on a petty cash receipt for taking cash from the till and receipts/change returned to match the petty cash receipt.
• Require vacations and cross train. Have someone else perform the bookkeeping functions while the bookkeeper is on vacation.

While these controls don’t guarantee that you’ll never be the victim of embezzlement, they certainly will reduce your risk. 

~Kelly Totten, Top CrackerJack