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While everyone is talking about taxes being the defining factor of small business in 2018, there’s more to success than your filing status. Small business expert Gene Marks talks about outsourcing, staying on top of your financials, data breach prevention and staying organized. In addition to tax reform, big trends of 2018 include finding and retaining top talent in a 50% millennial workforce with a low unemployment rate.
In 2018, small business owners should focus their time and energy on what they are best at and outsource the rest.
Greg Corombos: Hi, I’m Greg Corombos. Our guest this week is speaker, columnist, and small business expert Gene Marks. We’ve asked him to join us here at the start of 2018 to share some of his insights for the year ahead for business owners. And Gene, thanks so much for being with us. Happy new year.
Gene Marks: Thanks, Greg. Thanks for having me on. Still getting over the hangover of the holiday season. Let’s try and stay focused here!
GC: Exactly! And that’s kind of the same challenge for small business owners and medium business owners as well. Like a lot of the rest of us, business owners make resolutions in the new year. They search for even better ways to run their businesses. Let’s start with the most important commodity of all, and that’s time. Where should owners be focusing their time and energy most?
GM: I get this question a lot. People call me a small business expert. In reality, I’m a small business owner myself. I run a 10-person company outside of Philadelphia, and I’ve been doing this for 20 years. I sign paychecks every week, and time management is a big issue for me. I’ve learned the hard way—and this is in good times or even in bad times—that time is your most valuable asset. I’ve learned also that my smartest clients, the people that run successful businesses, they spend their time doing the things that they do best. If you’re going to start up a business this year, or if you’re planning on expanding your business, or doing new things, that’s all very well and good. What you want to do is focus on what you’re strongest skills are, and you do your very best to outsource the rest. I’m a CPA myself. I’m not a very good CPA. For me it’s always been if it’s good enough, it’s close enough—that’s not the way you want to be if you’re a CPA. So I don’t do a lot of tax returns anymore. I learned early on, for example, I wasn’t very good with payroll, which is kind of an anomaly if you’re a CPA. Early on in my business, I decided to outsource my payroll system, and I did that because I thought, “This is crazy spending time doing something that’s not generating revenue. It’s costing me.” So, long answer to a short question, the answer is, best time management, do what you do best. Outsource as much as you can, or have others do it for you.
GC: So, do what you do best. Some people are good at figuring that out; other people need a little bit of help. What are the some often most neglected areas, because people don’t understand them, or people don’t like to do them?
GM: I guess I’m putting my accounting hat on again. The number one most neglected area is financials. Not that I’m some genius. I’ve learned from a lot of smart business people. The smartest, most successful clients that I have have been around for years, decades even—they’re pretty good at math. And even if they’re not that good at math, they work hard to become good at math. Because in the end, when you’re running a business, business is all about numbers. It’s the ability to buy something for a buck and sell it for three. It’s the ability to manage your overhead. It’s the ability to read your financial statements, understand a cash flow statement, be able to make forecasts, calculate your margins. A lot of business owners, particularly when they start up businesses, they get caught up in the romance of an entrepreneur, when really there’s a lot of roll-up-your-sleeves dirty work to understand how the numbers in your business our working. You need to make sure you understand basic accounting and how to read a financial statement if you want to successfully run a business. Ultimately you can outsource that to somebody, but in the end, you’re still going to be reading your financials because they’re your financials.
GC: Gene, as long as we’re on the topic of money, you are an expert as well—you speak a lot on this, at least—cash flow. And as you mention, having a healthy bottom line is the name of the game. You can’t stay in business too long if you don’t. So what are the critical things to keep in mind if a business owner is struggling to comprehend this or the business itself is struggling?
GM: Cash flow, obviously, is extremely important. It’s the name of the game when you’re running a business. Cash should be driving your business. Some advice for any business owner. People that I know that run successful businesses are well in tune with what their numbers are. If you’re not getting a daily flash report in your business, you should be doing that. I’ve learned that. What is a flash report? It’s key critical metrics about your business that you’re monitoring every day. For example, it’s not uncommon for a business owner to come in in the morning, and on his or her desk is what the cash balance is at the end of the day yesterday, what the receivables are, what their payables are, what their year-to-date revenues are, all compared to the same point last year so you’ve got a benchmark to follow. How else can you manage your cash, unless you know how your business stands? That’s number one.
Number two, people who are in touch with their cash read the details of the general ledger. Your general ledger to your business is really your sort of diary of your business; it’s your financial diary. So once a month, print out that general ledger. Go through it. Read the transactions that are in their—it’s not the most exciting thing in the world. But I guarantee you, you’ll find some things that will raise your eyebrows or give you some questions or things you want to get answers for. And in the end, it all comes down to cash.
The final piece of advice I can give to manage your cash better is to try and do a little forecasting. No one says you have to have ESP or a crystal ball. But again, the smart managers I meet, they're always looking 90 days ahead. And it’s not that hard to sit there once a month or once every other month, look at where you are year-to-date, and do like a pro forma cash flow or income statement for the next 60 to 90 days. Because, when you want to manage your cash, you want to avoid surprises. The smartest business owners I know—most of them know what’s coming down the pike at least the next two or three months.
GC: Gene, let me go back to neglected areas for one more issue, because over the past several years, often with big companies, but sometimes with smaller ones as well—data breaches have become increasingly a concern. How well are most business owners doing in keeping up with cybersecurity?
GM: We’re all pretty bad at it, myself included. We don’t have enough time to pay attention to it. We all think that it’s not going to happen to us. And it does. Many many small businesses are breached for their data, and a lot of them are exposed to things like ransomware, which is the first virus where now the bad guys out there can really make money. They can breach your systems and lock everything up, encrypt your files, and demand a ransom $50 or $100 in bitcoin or some type of digital currency before they unlock your files. It’s a big big issue and will continue to be in 2018.
So how do you protect yourself from something like that? Well, the more stuff you have in the cloud—believe it or not—the better. Because although no cloud service provider, including the Department of Defence and large companies, can guarantee that it’s 100 percent secure. But let’s face it, these guys—Microsoft, Google, Apple, Amazon web services. They have way more resources and smarter people and better people doing security than I could ever hire in my business. The more that you move to the cloud, the more you increase your chances of having your data that more secure. That’s one.
Better training for your people to identify malicious software or programs that they might download or bad phishing sites—that’s very helpful. Staying up-to-date on security software. Very very important. But, I tell you, Greg, there’s one big trend that I’m seeing this year as well. A lot of my clients are getting online backup software. Mozy, Carbonite, there’s a bunch of them. Barracuda. There’s a bunch of them out there. What they do is they’re continuingly taking backups—whether they are in the cloud or locally based throughout the day. So if you ever have a data breach, or if you ever have a ransomware attack, you could always wipe everything clean and restore from your last database, and be back up to work. Try that this year, and you’ll at least minimize your exposure.
GC: A critical quality also for business owners to have is to be organized. I know your latest book is The Manufacturer’s Book of Lists. So explain why lists can be such an advantage, and what type of lists you have found to be the most helpful.
GM: I love talking about lists. When I was a kid—this is dating me—there was a book called The Book of Lists. I remember it was a huge bestseller back in the 70s, and because of that book I wrote a couple of book of lists very similar like The Manufacturer’s Book of Lists and another one called The Small Business Owner’s Book of Lists.
Lists are great for small businesses. First of all, I don’t want to say you that you should do a manual thing, or if you should do it on a mobile app, or your own applications—it’s whatever works for you. But everybody should have list. I carry around a little composition book, which we used to have in fifth grade. And I keep a manual list on it of big things I need to do. And in my CRM, my customer relationship management system, I’ve got a list of follow-ups and calls that need to be made and emails that need to be done. I believe everybody should be list-driven. I think that you have to find the tool that most appeals to the way that you work. So if you’re a mobile app person, and you like to keep a list on your iPhone, that’s completely cool. If you’re more old school, and you’d rather keep it in a composition book like me, it’s completely fine as well.
But it amazes me when I go to meetings, or when I’m talking to other people, and there are things—there’s always actions that need to be done and things to be remembered. People aren’t writing them down or making notes of them. We can’t all be like that person who comes to your table and seems to remember every order when you’re ordering at that restaurant. I’m not like that, and most people aren’t like that. You should have a system for writing everything down, and keeping a list of things to do.
GC: Yeah, those waiters and waitresses always make me nervous. They often get it right!
GM: They’re unbelievable, the way they can remember that stuff. It’s like this gift from God or something.
GC: No doubt. Just a couple minutes left here, Gene. In our conversation, you mention the emerging trend that you’ve seen in terms of backup software. What other trends do you think business owners ought to be aware of in the coming year, and any other tips you want to share with them in what appears to be an improving economy.
GM: There’s a lot of trends, and probably a lot more than we can talk about in just a few minutes. I’ll have to come back and talk a little bit more, but taxes are a big trend. We’re having this conversation at the very beginning of the year. Tax reform just took place. People are still trying to figure out how it’s going to affect them. So I’m telling you, don’t see me, because I’m not a very good accountant, but see your accountant as soon as you possibly can this year. Try and figure out if you should still be an S corporation, a pass-through, or a C corporation. You might want to change your corporate structure based on this new tax reform legislation. There are some new deductions and rates you might want to be aware of to take advantage of. Possibly writing off fixed assets— there are increased limits [so] that you can do that. The research and development tax credit—a lot of changes.
A big trend this year, and what I’m pushing, the first quarter of 2018, sit down with your CPA or your accountant and plan out what changes you need to make during the year so you can take full advantage of tax reform. That’s number one.
The second biggest trend I have to tell you about is your employees. It’s a low unemployment environment, a growing economy, all good problems to have. Finding good people is really really tough. Millennials—the millennial generation, the 18 to 30-year-olds—are 50 percent of the workforce now, Greg. You don’t complain about this generation because, trust me, your parents complained about you and me, and your grandparents complained about them. Stop complaining, and deal with the fact that this is the generation that will be your biggest asset in your business. This generation wants flexibility, independence, mobility. You’ve got to make sure you’re up-to-date on your technology, and you really want to readdress certain things like discrimination, sexual harassment. These policies are important to everybody, including this generation, as well as paid time off. It’s a big big issue. So if you haven’t revisited your paid time off rules and what those policies are, this is a good time you want to do that as well, if you want to attract the best people to your business.
GC: Gene, excellent advice, all the way across the board. Happy new year, again, and we look forward to chatting with you down the line. Thanks for being with us today.
GM: Thanks for having me on, Greg. Happy new year.
GC: Happy new year to you. Gene Marks is a small business expert. He’s a speaker and a columnist. I’m Greg Corombos.
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