I hope you all are doing great today, and the year is getting off to a fantastic start.
(If not, what are you doing to change tomorrow?)

In Michael Gerber’s classic book “The E-Myth Revisited” (if you haven’t read it, you are in for a treat), he asks the simple question… Do you have a Business or do you have a JOB?

The E-Myth, or entrepreneurial myth is given two definitions by Gerber:

1. the myth that most people who start small businesses are entrepreneurs, and
2. the fatal assumption that the person who understands the technical work of a business can successfully run a business that does the technical work.

Many technician types decide to start a business because they love doing the work of the business, but they have no idea what they are doing otherwise.  Gerber explains that you need to step back from the technical delivery of the product and look at your business as separate from you.  In order for it to be a real “business” it should be able to operate without you personally doing the technical work.  These people are the ones doing the “jobs” in the business.   

Now, of course in many cases a small business owner is going to be one of the ones working at a Job in the business as well as running the business.  In my case, I have two businesses and I have “jobs” in both of them in addition to my responsibilities as the owner of the business… 

But the fact that I choose to take on some of these jobs in my business doesn’t mean that I shouldn’t step back from those jobs and look at the business from a more strategic point of view—the 40,000 foot view—and devise systems and tactics to make the business more profitable, and better able to serve the markets.  In this higher level role is where you also look at trends and market realities to decide when change is needed and in which direction to move.  And, in some cases when you are up in the cockpit at 40,000 feet looking at the business, you might even decide to fire yourself from some of the “JOBS” you are doing in the business and either bring on someone else to do the work, or outsource it.

The book E-Myth is highly recommended and it will give you a much brighter picture than I could ever do in a short blog post of how to grow a small entrepreneurial business.  I try to re-read it at least every couple of years and I am overdue.  Get a copy today…

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It

Thanks for reading, and see you tomorrow!

Rob

Insurance is something that most people consider extremely boring.  Policies, coverage, riders, exclusions, blah, blah, blah…

Until an accident or other event occurs…

and then we dive into the small print of our policy with gusto.    

First off, what is insurance?  In the big picture, we are trying to protect ourselves from a reasonably low-probability event that we could not easily handle on our own financially.  We make a payment to the insurance company, and so do many other people, and the ones that have the unfortunate event happen get reimbursed for all or part of their loss.  So, there are two factors that determine what the insurance company is going to charge us—1) what is the amount of the loss we are trying to protect, and 2) what is the probability of the event occurring.

Just as a simple example, you have Homeowners insurance… let’s say your house and contents are worth $400,000 (not including the land which will still be there no matter what).  In a given year, if there is a 0.25% chance of you having a fire or other cataclysmic event that would cost the insurance company that $400,000, then they would charge you about $1000 a year plus their overhead plus a profit for themselves to take this burden.  As long as they made proper guesses about the probability, then they will do well, and the 0.25% of people that suffer the huge damage will be able to recover.  The lucky 99.75% paid their $1200 safe in the knowledge that a disaster wouldn’t ruin them.

Some things are not big enough to worry about insuring against—when you are able to handle the risk yourself and afford the cost of the event, then this is called being self-insured.  Many people with cars that are paid off do not insure their cars against collision (relatively small bucks), but only against the liability claims of someone who might be injured (could be big bucks if death or serious injury occurs)…

In business there are a number of key insurance areas that need to be looked into…

• Automobile Liability
• Home Office
• Business Interruption
• Professional Liability
• And many others…

If you have an Insurance Agent, they are a vital part of your team and you need to schedule a time to review your coverages.  Another new concept is what is called a Business Insurance consultant, and these professionals will review all your risk areas, and help you get the right coverages without any bias towards particular insurance companies.  This is a great way to proceed if you don’t already have coverage.  I would recommend you to contact Sunny Carlson to discuss your needs.

Also, one of the Bonuses in my Corporate Records system is an awesome report on Insurance called the Business Insurance Blueprint, and it also includes two audio conversations between Sunny and myself on the topic of Business Insurance….  I highly recommend this program…

Thanks for reading, and see you tomorrow!

PS: I thought about doing “I” is for Income and decided to do Insurance instead. Here is the twenty five cent version of Income… It is easier to improve your situation in life by increasing the ways you make Income than by reducing Expenses.  Of course you don’t want to waste money, but money spent wisely in the pursuit of more income is a good investment… How can you find new streams of Income?  How can you increase your income from your present streams?  Are you investing money in things that will return you more Income?

First, a reminder… Don’t forget to organize all your “G” files today (as described in the Alphabet Strategy post a few days ago).   Now on to our next letter…

Dec 7.  “G” is for Google Alerts…

Google Alerts is an amazing Free Tool that uses the power of the Google search engine to watch 24/7 for information that is of value and importance to you.

How much would it cost to have an employee search the Internet continuously for new information related to your business? Google Alerts will do it for free and never whines or asks for a personal day off… 

Here are some uses where you can setup Google Alerts:

Here is a link to a simple two-page step-by-step instructions I put together on how to setup Google Alerts so you can put the power of the Google Spiders to work for your business…

Google Alerts Action Instructions…

Everyone go there now and setup a Google Alert on the term “Kevin Hogan” and also on your own name, and one keyword topic of interest to you. Do it now and you’ll see how this amazing tool can help you…

Next, we will move to “H” and we will be discussing the how you can use “Habits” are vital to your business and personal success…

First, a reminder… Don’t forget to organize all your “C” files today (as described in the Alphabet Strategy post a few days ago).   Now on to our next letter…

Dec 3.  “C” is for Cashflow

In any business Cash is King… the cause of most business failures is running out of cash.

For big companies that have large staffs of financial people to stay on top of cashflow, this can get to be a complicated subject, but for our small business purposes we can simplify this…

Cashflow in the timing of your income and expenses over time.  In a nutshell, cashflow is your bank balance projected into the future.  If you have an accounting system and you enter in future income (receivables) and future expenses (payables) on the dates that you expect to see the money or pay the money, then you will have a rudimentary idea if you have cash flow problems in the future.

I use Intuit’s Quicken program for keeping up with this.  Everything up to today is my actual bank account transactions and balance.  It  includes any other bank accounts like credit cards, lines of credit etc.  But there is more than just past transactions and reconciled amounts.

Future Banking…

There are entries in my Quicken account for the next twelve months into the future as well. 

For all income that is due to my business in the future, I have a planned deposit shown on the day that I expect to receive the money.  As things happen to change either the date that I expect to receive the money, or the amount, I change them in the Quicken account.  This also gives me a quick heads-up every month of what I expect to be paid in the near future so I can start asking about it and checking to make sure there are no surprises.

For all expenses that I know about, I have a planned withdrawal from that account on the day that the money is going to be due.  I put my Payroll expenses (salaries and taxes) into the account for the next twelve months. I also know what my approximate monthly expenses are, so I have a placeholder entry on the 3^rd of every month that shows just as Monthly Expenses and it is for the average amount of our expenses. 

Action tip for those reading this: Figure out a good estimate of exactly what your expenses are per month and keep up with this in a spreadsheet. You might be surprised at what you learn.  Question each expense at least once a year to see if there are ways to reduce it.  Even a little thing like changing your cell phone plan to one that is $60 a month cheaper saves $720 a year.  And bundling your phone, DSL, etc could save 10%… be on the lookout for potential savings…

Having all the future income and expenses in this account allows me to project my cash balance into the future as far as I want.  Note: I do not enter forecasted income amounts only those I know are real income.   This keeps me from fooling myself with rosy projections of income that may or may not happen.   This allows me to look and see where any shortfalls in cash are going to occur, how deep they are and how long they are likely to last.

If there is a major cash crunch at some future time, I can start doing everything possible to generate new income before the crunch occurs, or to speed up some receivables to earlier dates, or to reduce short-term expenses, or to defer some payables into the future.  If you can see into the future 6-12 months it is a lot easier to take small steps now to avert the cash crunch.  If you wait till it is too late, then you need to take much more severe actions.

One other thing… we have a business credit line attached to our account, and we use this for one purpose only.  If we have a temporary cash crunch, we can take money out of the credit line on a short-term basis to cover the required shortfall.  Whenever I access the credit line, I also put the payable into the account at the earliest time when the cash will be available to pay back the short-term loan.  Usually this is within 15-30 days tops, sometimes it is only for a day or two.

In changing times, it is important to have an accurate picture of our Cashflow projected into the future.  It allows you to manage this vital resource, and it allows you to concentrate on other things knowing that this issue is taken care of…

Tomorrow, we will move to “D” and we will be discussing your “Desk”…