Category Archives: Business & Economy

What goes into my mind?

Last week I was on the road, and I made a huge mistake: I forgot to load my phone up with shows and music. After losing internet connection in the air I was angry at myself, because I didn’t have anything “entertaining” with me to keep myself occupied for a few hours. Luckily I do have Audible with a bunch of business and motivational books, but I’ve heard all of those before… In fact I had listened to some of the books multiple times.

I was traveling for pleasure this time, and I really didn’t feel like listening to business books, but I had no choice, that’s all I had on my phone.

Finally I decided to re-listen one of Zig Ziglar’s recordings. He is somewhat entertaining at least. I had heard his audio recordings multiple times before, but I love his examples and stories.

His story about buying a computer for his business stood out to me this time. He explains how frustrated he was when the “darn thing” didn’t work, and messed up all the billing records of his company. Finally someone offered help to get this machine working, and explained to Zig that all he needs to get the computer working is to “change the input, and with it the output will change”.

After learning about this seemingly easy fix, Zig had a sudden clarity moment, and said that that’s what people need as well. He argues that all we need to change what we are and where we are [in life] is to change what goes into our minds.

In principle I agree whit Zig’s statement. I am self-conscious about what goes into my mind during the day, and sure thing, I consume a lot a crap.

Not too long ago a story broke out about Facebook experimenting with altering some user’s attitude by predominantly feeding them  either positive or negative posts. This experiment, however controversial, seems to validate Zig’s assertion: What goes into my mind will have an effect on what I am and where I am. And guess what? I do have some control over what goes into my mind.

Breaking the stereotype

In the movies an accountant usually is there to portray a dull person. In a few movies you might find an accountant for the mob, whose job might be more interesting, but at the same time illegal.

Stereotypes exist for a reason though. A “typical” accounting position could be boring because of repetitive work, but only because most accounting/CPA firms offer the same exact services: tax preparation, IRS representation and bookkeeping.

A different type of accounting service:

When I went to college I was told that accounting is the language of business and I was excited about it, but I got discouraged when I saw that most people do not use this deep and descriptive language to its full potential.

Recently I was working with Mr. A to help him set up an accounting system that would actually provide him useful information. The old chart of accounts that he got from the internet was good enough for tax preparation purposes, but for nothing else. It wasn’t sufficient to give him a clear picture of his own business. He was afraid to start planning for the expansion of his law firm, because there was no useful information to base the projections on.

First we started by implementing a record keeping system that was much faster to update, so he could get timely and accurate information. Then we had to work on presenting this data in a way that it was easy for him to understand.

Once we had the basics down, only then we could go forward and talk about planning, and actually measuring various things. As they say: what you measure, you can manage.

Measuring, managing, and planning ahead is the exciting part. This is what this weird accounting language is supposed to be about, and I’m happy whenever I’m able to use my “translating” skills to provide useful information that will be used to grow a fellow entrepreneur’s business.

What I Learned from this Controversial Facebook Experiment

You might have heard about the controversial Facebook study designed to measure “emotional contagion” in an environment where nonverbal cues, like facial expressions are missing. Basically Facebook manipulated the timeline of 689,003 people for a week and this is what they concluded:

When positive expressions were reduced, people produced fewer positive posts and more negative posts; when negative expressions were reduced, the opposite pattern occurred. These results indicate that emotions expressed by others on Facebook influence our own emotions, constituting experimental evidence for massive-scale contagion via social networks. “(you can find the full report here)

If you look around in online forums people are outraged because this test that was conducted without the explicit consent or knowledge of the users. Even though the ethics of how this test was conducted is questionable, I would like to focus on the test results, and how that applies to you and me.

This test pretty much demonstrates that what we choose to read throughout the day will have an emotional effect on us. Think about it… the type of content, news articles or Facebook posts you read can alter the way you view your day. It might even impact the result of the decisions you have to make.

We know that surrounding ourselves with happy people will make us happier… yet still the negative articles get my attention first before I turn my head to reading something inspirational in the morning.

Don’t get me wrong, I’m not trying to advocate being oblivious to our environment. What I’m trying to rationalize to myself first, is that I have to balance the type of content I read regularly. Consuming more positive and inspirational stories will have a positive effect on me.

I make a conscientious effort to surround myself with people who sincerely want to help me grow as a person. In books and articles I look for information that helps me, rather than depresses me.

What do you read daily? What type of information you consume before staring your day? Do you believe that your attitude is affected by the media?

Also, do you think that your emotional state can have an effect on your decision making process, the way you manage your business, and talk to clients and employees? If you have a moment, please leave your thoughts in the comment section. I appreciate every input you might have on this topic.

80/20 Rule Is Everywhere

This past weekend I attended a conference for CPAs. Among all the great speakers was Perry Marshall, author of bestseller book “80/20 Sales and Marketing”.

Who is Perry Marshall?

Entrepreneur Magazine says, “Perry Marshall is the number-one author and world’s most-quoted consultant on Google Advertising. He has helped over 100,000 advertisers save literally billions of dollars in AdWords stupidity tax.”

I have always been fascinated with the power of predictive analytics. I wouldn’t call myself a numbers geek, but I like to look for the story behind the numbers. So naturally I was pleased to see Perry on stage talking about his book the “80/20 Sales and Marketing”. I was interested to see how he applies this age-old principle to the art of marketing.

I’ve been aware of this 80/20 rule for a while now; I even looked at some of my own data-sets to “verify” if it applies to me as well. Still, I haven’t really used this principle in my own decision making process. It is too easy to get busy with the familiar day-to-day tasks instead of identifying those ones that are really important and focusing more on those tasks.

During his presentation, Perry demonstrated how the Pareto Principle applies to wealth distribution, talent distribution among people, client value distribution, etc. 80/20 applies to pretty much everything that you can measure.

To use Perry’s own words “Pure 80/20 is depressingly Darwinian, especially when you are on the bottom”. It does seem unfair why roughly 80% of the wealth should belong to 20% of the people. Politicians tried to “fix” this with various legislations, so far it hasn’t worked.

BUT

The good news is that charity is turning 80/20 upside down. Those of us who have more (if you are reading this post using the internet, you have more…) have the privilege of helping others. Generosity starts with me and you, not them…

My personal plan is to star applying this principle in my own life. I think it will be beneficial to me to apply this Pareto rule of thumb when prioritizing tasks.

The Data Effect

I’m sure you have seen the movie “Moneyball”, it is almost unbelievable how much statistics changed the game of baseball. It is almost uncomfortable to think that a winning team can be built based on analyzing data.

Has it ever happened to you that you googled a product, then the next time you went on Facebook the same exact item was advertised in the sidebar?

Certainly major league sports, big trading companies and online retailers have a lot of money to invest in data analysis. So much so, that small business owner often feel disadvantaged, and think they have no chance to make it in today’s economy.

You, as a small business owner have something unique, something that big companies find hard to achieve. You can build personal relationships with your clients.

Just because you don’t have the resources to build custom data mining software doesn’t mean that you should do nothing!

Recently a business owner came to us, and after a short talk we realized he had no idea how his business performed financially over the year before. Basically he’s been flying in the dark for over a year without knowing how much he spent on what. He didn’t even know if he made a profit or not.

Starting a small business doesn’t mean you have to be in a disadvantaged position.

Michael Lewis said “People… operate with beliefs and biases. To the extent you can eliminate both and replace them with data, you gain a clear advantage”

To gain advantage, first you should find a qualified bookkeeper, or CPA, and ask for monthly or biweekly financial statements. Then please spend some time and analyze the information presented to you. Numbers by themselves mean nothing; you have the story that can be built around the data.

You would be surprised how much of a difference this simple exercise makes. This could be the difference between competing with your peers or dominating them!

The Magic of Working Capital

While working with successful (and some not so successful) law firms, I realized the importance of having sufficient working capital in a business. I always knew the theory, but seeing it in action is more convincing.

Cash is King! When you have money, you have options! And having options is the ultimate freedom. It means you get the chance to shape your business into something that you envisioned when you decided to start your business the first place.

Too often I see entrepreneurs starting off with high hopes, than getting disillusioned because they end up a slave to their own “baby”.

A client from the west coast keeps more than sufficient cash around. An investment advisor would say that she misses out on potential investment income, than I saw it in action why she chooses to keep her firm liquid. When a new opportunity presented itself, she was able to take advantage of it immediately, and open up a completely functioning satellite office within days.

I know you don’t get to open up a new office, and expand this visually every day. But don’t ignore the effect of being able to make “smaller” choices every day! For example you can filter you clients, and start leading a happier, more profitable business.

I bet when you started your business, having options was on the top of your list. Don’t give up your ability to make choices!

Don’t be afraid to make plans again. Managing cash flow effectively will give you options you thought you lost a long time ago.

Pick Your Clients!

Pick your clients; don’t just wait to be picked by somebody who wants to work with you!

This post was inspired by the idea promoted by Seth Godin. Seth talks about picking yourself, rather than waiting to be picked by an employer or client. You should not ask for permission from your employer to start initiating your idea. Just start executing, even though it means you have to accept the consequences.

You have the option to pick your clients on multiple levels:

  • Filter your current and prospective clients. According to the Pareto Principle 80% of the value comes from 20% of your clients. “Value” received isn’t limited to just profits, but may include satisfaction, personal growth from challenging work, etc.
  • Also, 80% of complaints come from 20% of your clients. You might want to take a closer look at these people first, and evaluate if it is worth for you to continue the relationship.
  • Literally Pick your clients! Don’t wait for people to just come in to your office, even if you advertise. If you see someone with a question or need that you have a solution for, don’t hesitate to let him/her know that you have a solution for their problem. This way you can specifically target people who have a need for what you offer.

Start by “picking yourself”, give yourself permission to seek out people, who you can build a relationship with. Provide quality and valuable services. Competing on low cost is definitely not the future.

Just a different way to get new clients

Valentine’s Day is almost here! As I was surfing the web over the weekend I found a somewhat funny, maybe a little too stereotypical joke about how one lawyer tried to increase his customer base over this holiday.

A guy walks into a post office one day to see a middle-aged, balding man standing at the counter methodically placing “Love” stamps on bright pink envelopes with hearts all over them.  He then takes out a perfume bottle and starts spraying scent all over them.

His curiosity getting the better of him, he goes up to the balding man and asks him what he is doing.

“I’m sending out 1,000 Valentine cards signed, ‘Guess who?’”

“But why?”

“I’m a divorce lawyer.”

Well the story/joke doesn’t go so far to tell us if this guy’s attempt paid off or not, but certainly he was thinking out of the box 🙂

I wouldn’t suggest you to implement the above mentioned trick just to get a few more clients, but when you have some free time, think about in what different ways you could increase your audience and potential customer list.

Too often we think that the complicated and expensive solutions are the only way to grow a business. Don’t underestimate how far a little ingenuity can go.

Tax Freedom Day® 2013 is April 18, Five Days Later Than Last Year

What is Tax Freedom Day? (The explanation by taxfoundation.org)

“Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. A vivid, calendar based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income. “

For information on your state, take a look at this picture below.

2013_taxfreedomday_bystateIn 2000 Americans paid on average of 33% of their income in taxes, making May 1, 2000 the latest Tax Freedom Day ever.

historic-tax-freedom-day
Source: http://taxfoundation.org

We don’t know yet when will the 2014 Tax Freedom Day be, but I know for sure that the only way to legally minimize your tax liability is through careful planning. We get a lot of tax planning questions in December, and often it is too late to change anything by then.

For example, you only have until March 15th to make an S-Corp election after the beginning of the year, after that you’ll have to wait another year to make this decision, and you could end up paying more in taxes than you need to.

Another way to keep taxes in check is through regular tax projection throughout the year. It will not only save you money, but will also help you better manage your firm!

I encourage you to grab the opportunity early in 2014, and start managing your business using accurate financial information. After all, what you measure, you can manage.