Having a perfect business idea. Having a perfect business plan. Having a perfect business. All of which are never found because perfectionism will find a way to defeat that idea, defeat that plan, defeat that business.
You have to just start. You have to just muddle through, and get it done. There are so many times when I keep on trying to get it just perfect, but there is no such thing. You will never have perfect books. You will never hear a CRA auditor say "congratulations, you are the first business where I did not find an issue"! There is always an issue. There is always an expense that might be misposted to the wrong account. There is always something.
Done is Better than Perfect - Sheryl Sandberg
Don't get me wrong. This is not to say mediocre is best. Mediocre is mediocre. Constantly trying to fix what you start will also produce mediocre as you will never finish. There comes a time when to finish IS the accomplishment.
So stop getting in your own way. Stop letting perfectionism control your path. You will always find something wrong. So start finding something right.
Start. Right. Now.
Because when you start, you have the choice to get it done, or make it perfect. Your Choice.
When you start your business, it is you who is making all of the calls. You who is doing the marketing. You who is doing the work. At some point, you realize that you need help. So you start to hire employees. Next to cash flow management, your human capital is the next biggest component to the success or failure of your business.
Hiring the right employees takes time. Sometimes you will get it right. Sometimes you will get it very wrong. You will find out pretty quickly if you have hired the right person when you look to download responsibilities. Empowering your employees gives you the opportunity on building your business. Simply doing everything yourself will get you stuck in a rut.
I was talking to a client recently. He had been sick, and his employees had to pick up the slack. They succeeded in that they realized they could make decisions. The Owner learned what responsibilities he could hand over. As well, he learned what jobs he wanted to do, and what jobs he wanted his employees to do. Now he can move on getting more new business, building relationships with current clients, and giving increased responsibilities to his good employees.
I hear many Owner's wondering when they should stop doing all of the work, and handing it down to employees. I say start small, and figure out what you are comfortable with handing over. You can still provide oversight. It does not mean you are giving up complete control. But as one of my University professors used to say, always have somebody else be able to do your job, otherwise you will never be able to move up. I think this is true for business owners as well. If you never empower your employees, you will never empower your business to move onwards. Take that first step, and you may be surprised at the freedom empowered employees can provide.
It is hard to believe that 7 months ago this company was started, and that I am continuing to get new clients each month. As I sit here today, I think the greatest value from my business would be time. Time to work. Time to go drop off and pick up my kids from school. Time to look up to the sky and say "Thank You".
It is Easter long weekend and for some, it is religious celebrations, Easter Egg Hunts, family turkey dinners, or for most accountants, tax season. For me, I look at Easter as a time of reflection. A time when a year ago today, I had a medical scare that brought me to realize I had to make a change in my career. I had to find the balance between work and family, that I had to put more emphasis on time, rather than money.
Time is more value than money. You can get more money, but you cannot get more time. Jim Rohn
The road has not been easy, and I would say to anyone that is contemplating starting your own business, that you need at least 6 months to really get started. You are going to knock on a lot of doors. You are going to have a lot of people tell you that your business needs to be different to be successful. You are going to have some people who will tell you that you are charging too much, while others will tell that you are not charging enough. You are going to question yourself every single day. Most importantly, you are going to fight back the fear of failure.
I have come to realize that I really enjoy advising companies on how they can make their business better. My years of playing competitive sports, and all of the coaches who inspired me, are the voices I hear when I coach my clients. When I get the goose bumps on my arms, I know I am onto a good idea. Gut instinct is my first instinct, and I take pride in knowing that just one small suggestion, can make a big impact to a small business.
The thing is, you have to keep the big picture in mind. You have to think about right now, but also about what is right for the future. Think BIG, no matter what. You have the opportunity to make your business great. You need to look at the road that you have travelled, as well as the road ahead. Keep driving. You are going to hit obstacles. You are going to stop and hit various crossroads, but you just need to keep going. Keep trying. Keep the faith, as the road ahead is Your life. Your choices. Your story.
Your time is limited, so don't waste it living someone else's life. Steve Jobs
I read this great article today by Jonathan Fields [great podcast as well called "Good Life Project"], titled "The Content Delusion (Or, Why You Still Need to Hustle)". I realized I had become guilty of this conundrum. You get some clients and you get comfortable. You put your sales and marketing on hold because you knocked on so many doors for so long, and now you want to enjoy the fruits of your labour, and just do the work. The thing is - you can't stop selling as an entrepreneur. The minute you stop the hustle, is the minute you stop the possibility of new business coming in. Seems simple enough. You always have to put yourself out there. I depended on facebook, my website, and passing out a few business cards for a while because I had some successes. The fact is - if I want new business, I have to stay on the radar. I have to make the emails, the phone calls, attend the networking events, and anything else that is outside of my introverted self. Getting business from doing nothing is the anomaly, not the norm. Time to step up to the plate. Time to find new business. Time to hustle.
We have all been a part of that organization. Where the old way, is the only way. No matter how many questions you have, or ideas to make it better, the resistance to change is headstrong on the best of days.
Remember that the six most expensive words in business are: "We've Always Done It That Way" - Catherine DeVrye
So I am going to put a challenge out to you. Take a moment to look at a particular process in your business and ask yourself - is this the best way we can do this? My best guess is no. Change can only come about if leadership and all involved are willing to make the change work. Sometimes it will be for the better. Other times, you will just go back to the old way. At the end of the day, make the effort to try.
If you are looking for a place to start, use the concept of Kaizen - the Japanese word for "improvement". Kaizen is not about finding ONE solution for that massive problem that has been plaguing your business since the beginning of time. Kaizen is finding the small, simple improvements to make a process better. You can even use the Kaizen concept in every day life. An example of Kaizen is using an email signature in your email. This way, you don't have to constantly write your name, company, and contact information for every single email that you send, every single day. Simple improvement for a repetitive process.
Give yourself and your employees the opportunity to find these simple improvements. Be willing to make the changes. Be willing to provide a culture that welcomes innovation. Having a bunch of people who just follow what has always been done, will not make your business better. Break the bad, and find the improvements that can be made today.
The letter that every business owner can't wait to open - You are Getting Audited by the CRA. Not to fear. Today I am going to give you a quick list of the common areas CRA will ding (AKA assess) you in an audit. This is not to say that you should start losing sleep over these items, but, you should think about how aggressive you want to be in your claims. All of these items are guaranteed to be questioned in any CRA audit.
Meals and Entertainment
Billing the business for every single meal, every single day, may not be the right way to go. As well, this expense is only 50% deductible, and this includes only a 50% deductibility for the GST that you paid on that meal/entertainment. In general, meal and entertainment expenses should be incurred to earn business or property income. Be reasonable and your reason will go a long way.
If you are going to claim you drive your vehicle 100% for business, you will need an auto log to back that up. In fact, you need an auto log for any claim that you make. I know of a story of a small business that was audited; auditor came to their house to review the business auto claim of 100% for the business; looked in the work truck which housed two car seats for their young children; small business was assessed significantly as could no longer substantiate 100% business auto claim. I will say this time and again - Just. Not. Worth. It.
Technology is a wonderful friend for auto logs. I use an app on my cell phone that tracks my business mileage. Obviously, you have to remember to punch in your coordinates, but, get in the habit of every time you get in your car, you enter the date, your mileage, and purpose of the trip. At the beginning of the year, you record your mileage, and at the end of the year, you record your mileage. This will help with the calculation that is made as to the amount of business mileage you have driven during the year.
Claiming 100% for auto is an automatic red flag. Unless you have a vehicle for business and a separate vehicle for personal activities, you MIGHT be able to substantiate the 100% claim, but that is a big assumption to make. Be smart. Be moderate. Be reasonable.
Office in Home
Any time I tell somebody that I have my own business, the automatic statement is "You can write everything off". Ummmm...no. This is not the case, and especially with business-use-of-home expenses. Before you start deducting your office in home expenses, you need to meet ONE of the following conditions:
More importantly, you cannot use these expenses to increase or create a business loss. The remainder that is not claimed is carried forward to the next year. So, amassing a huge amount of office in home expenses is not going to put you anywhere ahead. Claiming that kitchen renovation as part of your office, has a good chance of rejection. As always, be reasonable.
CRA is a great resource for what you can claim as Business expenses. If the only thing you take home today is the following:
Everything in Moderation. Be Reasonable.
So if you get that certain special letter over this joyful season, there is no reason to become a Scrooged individual. You can't change what you have done in the past, but you can change what you will do moving forward. Choose what you expense wisely, and you will not have to worry about that CRA audit.
Today we'll focus on the use of dividends being paid to you through the ownership of shares in your incorporated business. As my husband said to me the other day "What is this dividend that you speak of, and how do I get me some?"
Definition of a Dividend
A dividend is defined as "a payment made by a corporation to its shareholders". You don't have to buy stock in a Fortune 500 company to get a dividend. If you have incorporated, you will hold shares in your Company, and are now a shareholder of your Company. Thereby, your Company can issue dividends to you.
Also, for the purposes of this blog post, I am talking about non-eligible dividends, as that is generally what you are going to see issued from your Company.
When Dividend Talk Comes Alive
Typically, dividends are issued because you owe the Company money. As well, you did not treat yourself as an employee with a wage and monthly source deductions being remitted, or accrued a bonus at year end, or you are doing a combination of wages and dividends [another discussion for another day]. How is this? Well, throughout the year, if your business has money coming in, you will pull money out of the business so you can pay your own personal bills. This creates what we Accountants term as a shareholder loan. This loan can go up and down. If you are pulling money OUT for personal use, shareholder loan from the business will go UP (e.g. you owe more to the Company). If you are putting your own money IN the business, shareholder loan will go DOWN (e.g. you owe less to the Company). Simple, right?
Why Can't I Owe Money to my Company?
In a word - Canada Revenue Agency (AKA CRA). If you owe money to the Company, CRA views this as a loan from the Company. With any loan, interest needs to be charged. If you are getting a loan from the Company, and no interest is being charged, it is deemed by CRA as a benefit to you in the form of an interest free loan. More importantly, you do not want your shareholder loan to become a significant receivable, or AKA asset on the balance sheet, where you no longer are a qualified small business corporation. Significant Shareholder Loan Asset = Significant Problems. Check out this discussion about Shareholder Loans by taxtips.ca. There are always other options, but again, let's keep this simple.
Ok, A Dividend has Been Decided, Now What?
You have worked with your Accountant, and a dividend will be issued. Your lawyer will provide a Dividend Resolution that you will sign, and retain in your Corporate Minute Book. Your Accountant will issue a T5 from the Company to you personally. T5's are due to be remitted by the Company to CRA by the end of February, following your year end. So for 2015, if your year end falls during 2015, your T5 needs to be filed by the Company by February 29, 2016. [AKA the most wonderful time of the year for Accountants, but I digress].
Effect on Corporate Tax Return
The dividend will be recorded on your T2 Corporate Tax Return. For accounting purposes, the actual dividend will not appear as an expense on your Income Statement, it will be a deduction on your Retained Earnings statement. For tax purposes, in 2015, the actual dividend (e.g. the accounting dividend amount your Company recorded) is grossed-up by 118% for tax purposes, and taxes payable are charged on this grossed-up amount. The benefit of issuing non-eligible dividends, is the dividend tax credit. This tax credit reduces the amount of corporate taxes payable by the Company. In BC, for 2015, the dividend tax credit is a combination of the Federal 11.017% and BC 2.59% on the grossed-up dividend amount.
Effect on Personal Tax Return
This T5 will be reported as income on your T1 Personal Income Tax Return. You will pay tax on the grossed-up amount (e.g. Box 11 for non-eligible dividends, at 118% gross-up for 2015). Depending on the amount of the grossed-up dividend, here is BC's marginal tax rates for non-eligible dividends [focus on the second table, last column for rates at different levels of grossed-up non-eligible dividend income].
I'm pretty sure if you have read to this point, I have reached official glaze-over-eyes status and that's ok, I get it. If you take away anything, the more knowledge you have, the more power you have to understand why decisions are made to issue a dividend. Have the discussion, and you will see the benefits.
Although this may not specifically be about running a business, I think it is important to remember when making choices in your life to make your business fit into the life you want to lead.
We are all told when we are kids that we can have it all if we set our minds to it and work really hard. So we pursue our education, careers, get married, have kids and so on because that is what you are supposed to do. For me, after I had children, nobody talked about the constant emotional struggle of having my career and having my children. The guilt in leaving my kids at daycare with my Mom, who sacrificed her early retirement to help us, was enormous at the best of times. Even with a very supportive husband, the constant stress of getting kids dressed and out the door, stress of tunnel traffic, stress of work, stress of getting home at dinner time, stress of trying to help with homework, and so on, was exhausting. Needless to say, I was one stress away from a stroke/heart attack/cancer/ [insert grave illness here] and knew it was time to make a change.
Recently I read a blog post by Tim Ferriss, about his decision to take a vacation from investing in startups. In this post, he referred to a blog post by Derek Sivers and his "hell yeah ! or no" essay. This resonated with me as I think we all need to stop and ask the question - is this what I REALLY want to do? I know we all have financial obligations, but if we operate in a place of "hell yeah", there is a better chance we will make the choice that aligns with what WE determine to be SUCCESS, not what somebody else determines as success.
So choices need to be made. Choices that determine the importance of what you want to HAVE because to HAVE it ALL is a myth. For me, a few "hell yeah"s that I have put in place in my life:
Maybe you have some decisions to make; some may be easy, and some may be more difficult. What is most important is that YOU make the choice to what it is that you want to HAVE, not anybody else.
Cash flow - simply stated is how much money you have coming in and how much you have going out. When you are trying to assess your cash flow situation, it can take a lot of time or a short review, depending on what factors have to be considered.
Use Financing to Your Advantage
Credit cards, lines of credit, personal funds, are all places where you can find additional financing, or money coming in, for your business. The key is to use them to your advantage. Credit cards usually come with high interest rates, and should be paid in full on their due date. However, sometimes you need that extra time for payment to be made, so you end up making the minimum payment, and paying in full later. Let's face it - we all have debt, it is a matter of how we manage this debt. Interest is an expense and cuts into your bottom line, so use it wisely. But, more importantly, you need to spend money to make money, so make that expense count!
Make Your Receivables Collectible
It's great if you have clients and are invoicing for your products or services, but if you are not getting paid, you are no further ahead then when you did not have clients. Set your terms of payment on your invoice (typically 30 days, but can be less) and as soon as that term has come up, send an email, or make a phone call and ask when you should be receiving payment. Sometimes you might have to not provide further products or services unless the account is brought up to date. You will usually see a pattern emerge with your customers, in which who will pay early, on time or late. Adjust your reminders accordingly, so the customer knows you have not forgotten about them, and hopefully they will improve their payment habits. More importantly - make it easy for payment using credit cards, paypal, e transfer, and any other electronic payment options.
Negotiate Your Terms for Payables
If you are able to carry an account with your suppliers, negotiating 45 day terms for payment will help to smooth out the timing between getting money from your customers and paying your suppliers. You don't want to be that business where the cheque is always in the mail, and you are always late. You want to build a relationship with your suppliers where they are willing to help you out when times are tight. If a supplier requires immediate payment, then use a business credit card, on the basis you will be paying off the balance on time (as discussed above).
These are just a few of the common cash flow items that can help keep the money coming in more than going out. What tips and tricks do you use in your business for better cash flow? Leave me a comment and pass on the wealth of knowledge!
As any Owner knows, sometimes doing it yourself (DIY) is easier than finding someone else to do it. However, here are some areas where you might consider contacting someone in your network or paying somebody else to do the job:
If you have decided to incorporate, there are options online to DIY setting up your Company. But, this is an area that if it is not done right, you will have to fix it later. The old adage of "Pay me Now or Pay me Later" comes to mind. When your Company starts to make money, you want to be able to distribute the wealth and get the maximum tax benefits. This might include having other shareholders such as your spouse, kids (using a family trust), or others be involved in the share structure of the Company. All of these considerations are not completely obvious when you DIY the set up of your Company. A Corporate Lawyer does this on a daily basis, and can answer questions from you in the initial consultation of how you want to structure the shares of the Company. Do lawyers cost money? Yes, but considering the possible consequences in the future, better to do it right the first time, then trying to fix it later.
Technology can be your friend or your foe. Recently I was hooking up my new printer, and after hours of trying to get the wireless printer to connect with the WiFi, it was time to call in an IT expert - my brother in law. Within 15 minutes, he had the printer connected. The time value of money comes to mind. Where I should have just stopped and realized somebody else can do this better than me, was the time I should have brought in the IT expert, and moved on to more important business. There are so many options nowadays with IT consultants, you have the choice as to how much IT you want to bring into your business. As with anything, ask your network if they know of a good IT expert - likely there will be at least one. Because when IT is happy, everybody is happy!
Websites, business cards, and most importantly you, are the marketing expert in your business. Specifically, designing your website is where a little or a lot of money can be spent. At the end of the day, you need to know what you want your website to say, and you need to have the time to make it happen. There are lots of options to DIY your website through Weebly, Square Space, Go Daddy, and any other number of websites that you can find. You will need to have the time to write, gather the pictures, design the pages, and ensuring all of your buttons are connected to where you want your user to go. Most importantly, all of your marketing should be consistent with the brand you want to create for your Company. Therefore, consulting with a marketing expert who can bring the creativity required to get your Company noticed from the rest of the pack, is well worth the investment.
You need to ask yourself one question: If you don't know where you are, how do you know where you are going? Not having a handle on your numbers, can at times, be detrimental to your business. Anybody can enter receipts into a program; however, not being consistent in how those receipts are entered, taking too long to invoice your clients, filing your own Corporate Tax Return, are all areas where money can be left on the table. Even if you decide that you or your significant other is doing the bookkeeping, have somebody take an overview of the numbers on a consistent basis (e.g. monthly, quarterly, yearly) to see if there is cash flow coming in or out that can be improved. Do I have a biased opinion? Absolutely! But, at the end of the day, collaborating with an Accountant, and seeking their knowledge and expertise with numbers can only help your business improve.
These are just a few areas where you need to decide if you will DIY or bring in an expert. When you start considering some of these expenses as an investment in your business, the choice that needs to be made will be very clear.
Entrepreneur, bike spinner, and resident of beautiful Steveston, BC.