The Starbucks we visited had an outdoor patio that the staff sprays down and cleans every night at 9:00. I know because I've been there several times while they've done it. At night it seems like overkill but in the morning when you walk onto that beautifully clean and sparkling patio it's genius. Outdoor areas are some of the most neglected for small businesses. What does your parking lot or sidewalk look like? You're numb to it because you see it everyday, but your customers get their first impression before they even step foot through the door.

The pediatricians office was spectacular. Forget about the vintage 80's arcade games in the lobby (Lance is surprisingly good at Frogger). What was impressive to me was the examination room. It was brightly painted with a 360 degree animal mural, but very sparsely furnished. There were two chairs, a custom examination table with a cabinet in one pedestal leg and a wastebasket in the other and a wooden puzzle mounted to the wall. This may not seem like a big deal until you experience it from the perspective of a 3-year-old gifted by God with an ability to cause trouble. There were no trash cans to get into. No toys to knock off tables. No glass jars full of cotton balls. No blinds to tangle. Just one tactile puzzle that got his attention and kept it until the doctor arrived. And the entire space, being easy to clean, was unsurprisingly spotless.

Target did one simple thing that made me want to kiss the person that came up with it. On the top of each hanger they've placed a little plastic tag with the pants size. No more digging through clothing racks, knocking stuff off the hanger and contorting to see the tag on a back of a pair of pants. The whole effect is one of complete order making it easy to find what you want before frustration sets in.

Chic-fil-A might as well be called "Pre-schooler Land" between 11:30 and 1:00. As we sat down to eat an employee followed us to the table, unwrapped a hermetically sealed placemat and stuck it to the table in front of Lance. For dad's like me this is no big deal, but for all you wet-wipe-toting, hand-sanitizer-squirting clean freaks out there this is huge. As soon as we were done with lunch our table was sprayed down and wiped clean, ready for the next parent staggering in for fifteen minutes of peace and quiet.

Cleanliness has been next to godliness since Poor Richard, but I think it might also be fairly acquainted with profits. Each of the three national chains mentioned above is well noted for above average profits and customer loyalty. Cleanliness and order are results of business processes that are carried out as a discipline everyday. Understand, cleanliness and order are not market differentiators in and of themselves. They are hallmarks of businesses that follow processes for everything from cleaning patios to greeting customers. Within process lies the ability to create a consistent experience for your customers. I know I need to get better at this as a business owner, and yesterday it was good to see things from the other side of the counter. Love your customers enough to build processes around their experience. They will thank you for it. I did.

Nothing really bores you-Disagree. I think this applies to private accountants who work for one company, but it definitely doesn't apply to public accountants, those that are hired by multiple clients. One of the most attractive aspects of public accounting is the constant variety of clients, problems and scenarios. If you are the kind of person that likes routine public accounting probably isn't the place for you.

You've always embraced technology-Agree. But then again, if you don't like tech you probably aren't interested in anything in the business world. Saying you are technology averse today is kind of like saying you dislike transportation. OK, but get over it because the reality you live in requires that you take advantage of it.

You've always loved dealing with numbers-Disagree. Some of the best accountants I know are wizards at addition, subtraction, multiplication and division. But so are some of the brightest fifth graders in the world. Math is not so important as a desire for semi-hard edges. If you like measurable, quantifiable results accounting is a world you will find comforting. If you love math become an engineer, statistician, or actuary. Accounting will bore you to tears.

You have an abnormal passion for tax law-Disagree. If you are passionate about tax law become a tax attorney. Accountants are great compliance experts but the attorneys are the ones who see all the action when it comes to architecting complex transactions. There are many frustrated tax CPA's who wish they would have spent another three years attending law school.

You always sweated the details-Maybe. There is a need for accountants who won't sleep until the bank account reconciles to the penny. But these people are easy to find, train and duplicate. Thus, they are not the top income earners in the field. Much more valuable to clients are accountants who can draw the line where information gathering and reconciliation should stop and decision making should begin. Business owners (your eventual clients) never have the luxury of making decisions with 100% of the information and analysis possible. Knowing when 80% is good enough takes experience and skill, but it also requires taking a little risk, something accountants are not known to embrace. If you can balance the two you will do well by your clients.

You've always welcomed the challenge of solving a problem-Agree. Your clients will bring them to you in spades so you better like it. Enough said.

You've always been conservative with your time-Maybe. True, accountants must juggle multiple projects and rarely get the luxury of working an assignment from start to finish without interruption. However, the world is changing. Accountants accustomed to measuring their time in tenths of an hour are finding themselves behind the curve. Clients care about what you accomplish, not how long it takes. Should you be able to handle multiple projects? Yes. Should you become dominated by a time clock mentality? Definitely not.

You've always been a people person-Maybe. The best accountants have this trait. But they also put in years behind the desk before they spend most of their days on client factory floors and in their conference rooms. The experience gathering or "seasoning" required to get to this level often stifles young accountants to the point they choose to do something else. However, business models are changing, and we are starting to see young accountants enjoy more client contact, earlier, in much more collaborative accountant-client relationships. Just beware. If you are an extrovert think hard before joining an "old school" firm where junior associates are expected to pay their dues before stepping foot into a client meeting. 

You've always had a conservative appearance-Disagree. You need to make appearance a non-issue for your clients. It's not about a dress code. I've worn a suite and tie to meetings and I've met clients in shorts and flip flops. In both cases I wore what I wore because I wanted the issue at hand to be the focus, not my choice of wardrobe.

Your integrity has always been of the utmost importance to you-Agree. This is kind of like the technology point. Imagine a "10 Ways You Know You Were Born to be a _______________" article where one of the bullet points said "You're a no good scum ball people can't trust and integrity is not important to you." Integrity is important no matter what you do in life. Accountants are often vested with more integrity than other professions but the best clients will measure the integrity of the professional, not the profession.

I enjoyed reading the article from Best Online Colleges, but I felt it relied too heavily on stereotypes of accountants that do not ring true after fifteen years in the profession. There is a new breed of accounting professional that is emerging. Newcomers to the field have extraordinary access to leaders like @taxgirl @michellegolden @CPA_Trendlines @evenanerd @JodyPadarCPA @BillSheridan @DianeKennedyCPA @cfarmand @taxman45 @cpamom @DeepSkyAcc and @JasonMBlumer. If you think you are being called into the accounting field spend some time following these folks, read their blogs, ask them questions. Pretty soon you'll find out if you belong to this exciting community.

Yesterday I attended a memorial service for Lela Steele. Grandma Steele as we all called her was probably the closest personification of Jesus Christ's love that I have ever encountered. I grew up in a church where she was a founding member and she became my spiritual grandmother, someone who loved me more deeply than I would have ever imagined. In her 70's Lela became a missionary to the Ukraine where she rescued scores of orphans from a miserable, corrupt, state run system that literally turned kids out on the street on their sixteenth birthday. She single handedly raised $250,000 to build a home for these kids. She was successful in getting scores of them adopted. And it was there in the Ukraine that she came to be known as "Babushka Lela", a term of endearment used by orphans, community leaders and city officials. It was only after she broke her hip that she was forced to return to the states. Last Friday morning sixteen years of missionary service drew to a close as Lela went home. And yesterday I witnessed something far more compelling than vision. In a church packed to the gills with hundreds of fellow "grandchildren" I experienced Legacy. Lela's legacy was a love for Jesus Christ that infected everyone around her. One of her "real" granddaughters shared how Lela had prayed early on that God would make her heart "big enough to love as Jesus loved." That love lead to legacy.

What does this have to do with business? A better question might be "what does business have to do with life?" When we as business owners find something to serve besides our bottom line we begin to create legacy. When we follow a path regardless of what others might think prudent or timely we create legacy. When business becomes ministry we create legacy. Vision is a powerful tool, but I'm afraid that if Grandma Steele had simply had great vision, she might have been too busy to notice a 14 year-old kid, to tell him he was handsome, to tell him that she loved him, and to tell him that Jesus loved him too. Vision can build an orphanage. Vision can build a successful business. Vision can build churches. But vision alone can't change the lives of those who encounter it. The life changing part...that's legacy.

1. Homegrown is best. I get all types of newsletters from all types of professional businesses. Most are purchased content where the small business owner buys a pre-written newsletter from a company that sells that same content to hundreds or thousands of business owners. Al writes his own stuff and it shows. When you read Al's newsletter you're reading it for the content and you're reading it because Al wrote it. Self written newsletters are personal. They build relationships. Purchased content may give you insight, but it lacks the personal touch.


2. Substance matters. Al's newsletter has hard data in it that readers can use. Further, it demonstrates his competency. It's obvious that Al spends time compiling his facts and figures. But he doesn't stop there. Al offers commentary that shows he not only compiled the raw data, but he is also paying attention to it. If I send someone to Al after giving them a newsletter they understand that he knows his stuff. 


3. Stay on topic. You know what I love about Al's newsletter? It's about real estate. Not cookie recipes, or crafts for the kids or trivia. Al talks about things that are relevant to real estate. In his July newsletter he covers the gulf oil spill and provides links to related web sites. That's relavent to those of us who live here and it's relevant to potential buyers and sellers. It doesn't have to be all facts and figures, but it does need to be relevant. Nothing against cookie recipes, but I know where to find those when I want them.


4. Give your opinion. Al knows infinitely more about real estate than I do. His opinion matters to me, and I know that when I read his newsletter he is going to make some predictions about things like inventory levels and price trends. I appreciate that Al is willing to offer his professional opinion because if I hire him that is exactly what I am paying for. The fact that he will share it with me beforehand builds trust.


5. Reward your readers. I love that Al tells newsletter readers about featured properties BEFORE he has put them in the MLS. Chances are most readers won't call to inquire, but all of us feel like we are on the inside track. We feel special. We feel like Al is sharing stuff with us that the general public doesn't get. It's genius for building community and relationships.

If you publish your own newsletter see how well it stacks up against Al's. If you consume newsletters and you come across one as good as Al's do the author a favor and drop a note expressing your appreciation. 

Hilliard and Jacobs owned a business together and as-is common they purchased life insurance policies on each other's lives. This is done so that if one partner dies the other will receive life insurance proceeds to buy the deceased's interest from his family. The only problem here is that Hilliard and Jacobs sold the business and no one did anything about the insurance policies.

We don't know the exact details, but it sounds like Hilliard's health started failing and, sensing the inevitable, Jacobs refused to exchange policies with Hilliard and kept paying the premiums. Hilliard sued, died, and his widow later lost the case. Jacobs collected $2,500,000 of life insurance. Fair? No. Legal? According to the court, yes. Indiana does not have an insurable interest requirement. Therefor Jacobs did not need to justify having an insurance policy on someone with whom he had no real ties, at least none that would indicate the need for an insurance policy.

The court told Hilliard's widow that there were two opportunities to do the right thing with the life insurance policies. First, the partners could have addressed the disposition of insurance policies in the buy-sell agreement. Second, there was a settlement agreement between the two partners at the time the business sold. Neither document made mention of what should be done with the policies once the business relationship terminated.

The lesson here is that we spend a lot of time encouraging owners to draft and fund buy-sell agreements, but rarely do we talk about what will happen to things like funded insurance policies if the relationship ends. It is easy to do at the outset, but as Hilliard proves it can be very difficult to fix later.

1. IRS is watching. S corporation owners are required to pay themselves a reasonable salary for personal services they perform for the business. If you don't IRS can come back and re-characterize distributions as wage payments. A host of underpayment and late penalties may follow. This is an area IRS has increasingly targeted for enforcement and even Congress is getting in on the act with recent legislative changes. It's better to have a well thought out and defensible compensation plan for the shareholders.


2. You may limit the amount you can contribute to retirement. Both defined benefit and defined contribution retirement plans are limited by the amounts you earn in wages. If your wages are too low you may be precluded from making contributions at the level that would be best for your financial plan.


3. You may sabotage your exit strategy. When someone looks at buying your business one of the first things they will use to torpedo your asking price is inadequate owner compensation. You at least want to have a debatable position rather than a scenario that is clearly flawed and gives the purchaser a clear point of leverage in the negotiations.


4. Inadequate officer compensation makes profit sharing muddy and confusing. The best profit sharing and incentive compensation plans use bottom line numbers from the financial statements. If you have to jump through hoops and explain why additional "below the line" adjustments are needed before you can communicate company profits you lose credibility with employees and make things more complicated than they should be.


5. Benchmarking becomes a black art. Similar to the problems created with profit sharing the presence of inadequate owner compensation in your financial statements makes it hard to compare your performance to peers or industry standards.

In the end inadequate shareholder compensation proves to be a nearsighted way to save a few tax dollars at the expense of sound business strategy.

Recently my wife handed me some documents that she wanted me to take to the office, scan and email back to her. Instead I pulled out my iPhone, snapped four pictures, created two pdf documents and emailed them back to her, all in about 3 minutes. The quality is not great, but it is OK. CPA's and other professionals might find Scanner Pro invaluable in use cases where document information capture rather than document duplication is the goal. For instance, I had lunch with a client this week where he asked me to review his last pay stub for withholding sufficiency. Rather than bring the stub back with me I could have created a pdf on the spot and let him retain the original.

I would like to see how Scanner Pro works with the new iPhone's 5 megapixel camera. If anyone wants to try it out and link to a review in the comments I would be greatful.

1. Valuations are expensive. Depending on the complexity of the organization valuations for small businesses can range from $5,000 to $30,000. CPA's will typically perform a calculation engagement or a valuation. In a calculation engagement the client brings all the variables and assumptions to the table and the CPA pretties them up in a nice report. Not very impressive. A valuation on the other hand examines the business from many angles to assess things like expected cash flow, risk and required ongoing investment. It is a lot of work and not surprisingly we like to get paid for it. So before you spend the money make sure it is going to fit the need you have.


2. Valuations are subjective. Something is only worth what someone else is willing to pay for it. A valuation is a third party's opinion about what someone else might be willing to pay. But until someone actually pays no one can really know what the business is worth. In other words, what I think about the value of the business is irrelevant if the investor has a different opinion.


3. Investors do their own valuations. Do you really think that someone is going to just take your word for it before they hand over a couple of hundred thousand or especially several million dollars? Don't get me wrong. They'll use your valuation...for scratch paper. Investors worth having will perform their own due diligence. They will build their own valuation models and they will test their assumptions against documents you provide. Why spend the money on something they will never use?


4. Valuations age quickly. One significant shift in your business, the loss of one major account, the departure of a single key employee can have dramatic effects on the value of your business and could invalidate a previously completed valuation. Negotiations with investors, however, can drag on for months or they can be over before your CPA cracks the file folder on your valuation engagement.

My suggestion for this client and others is this: learn how to fish. Have your CPA sit down with you at the whiteboard and run you through several valuation scenarios. The most difficult part of any valuation is assessing the risk, or "cap rate" that will be used. In the end the cap rate is less important than the required rate of return for the investor. If you can sit down with your advisor and forecast cash flows under multiple scenarios you can then have a meaningful discussion with your investor regarding the required ROI. Together you and your respective advisors can evaluate the business and the likelihood that the money the investor stands to give you will enable the company to deliver a return the investor can live with. And that is much more valuable than a valuation.

I am excited for you, I really am. I want you to succeed. It's just that I have been down this road before and experience has taught me to be reserved and analytical rather than enthusiastic and passionate. I don't want you to make some of the same mistakes I've seen repeated dozens of times by people with great ideas, some better than yours. I can almost see it coming so I want to warn you. I want to give you some advice. Take it or leave it, but please understand I only offer it because I care about you and I want to see your idea come to life in a magnificent way. There is a lot I would like to tell you and maybe we can talk at length some other time. But for now there are only two things I want to share because if you forget these two things you won't have a chance. 

1. Don't count on your idea for a paycheck. If you need a paycheck get a job. Your idea and dream to build a business is an investment. By definition that means you are going to give up some things now (time, money, freedom) in order to get rewards later. This is the biggest mistake I have seen your predecessors make. They need a check so they rush to market, or they appear desperate in front of customers or they beg others to invest in their new venture so they can keep paying their mortgage. Your startup is not supposed to provide you with a paycheck. It is supposed to develop a product that you can convince others to buy. All of its dollars need to be spent developing that product. If you take a paycheck you will be starving your product of the dollars it needs to grow into a business.


2. Sell something. Don't ask for money from investors or family members. Don't go out and rent space or design letterhead. Don't do anything until you have sold something to someone who doesn't know you and does not care about your family. Until you can sell something to a stranger you don't have a sellable product. Selling to friends and family is receiving charity. You might say, "But I need money to build my product." Bill Gates and Paul Allen did not have a product when they sold their idea for a product to IBM. If you cannot sell your product or your idea nothing else matters.

The world is full of people with great ideas who sit around designing their logos and floor planning their office space. They build beautiful web sites, spend money on nice business cards and network with their new peer group of "entreprenuers." Don't be them. Do the hard stuff. Go out and sell and do it because you love the product, not because you need a paycheck. If you do this I PROMISE I'll be jumping up and down with a smile on my face the next time we see each other.

Best,
Joey

For instance, executives have always wanted integrated systems but when SAP was the only game in town and it took six figures to play ball they learned to live with stand-alone solutions.

IT buyers have always wanted unique solutions because they think they're special. But now the cost of new software is the cost of it's development. There are literally zero distribution costs for software developers today. The cost to customize or add a needed feature is the cost it takes a designer and programmer to change the code. One great advantage of SaaS models is their ability to iterate every day at midnight if the developer so desires.

So I do think Austin is on to something. Generic packages like Quickbooks are being abandoned in favor of so called "customized" solutions. But in most cases Quickbooks is abandoned prematurely after a sales rep from a competitor promises that their software will make life so much easier. Before you make the jump consider the following. 

1. Customization is now a feature. "Generic" software manufacturers have built in at least a limited ability for users to "customize" the package themselves. Defining custom fields, changing the layout and structure of forms and input screens and exporting data to spreadsheets are all common features of leading generic accounting programs (yes, I'm talking primarily about QuickBooks). But most businesses don't take advantage of these features. They don't even know they exist.


2. Accounting software features won't fix workflow process deficiencies. If it takes you three days after shipment to issue an invoice or if closing the month is a week long process guess what? Accounting software is not your problem. Fix the processes first then decide how the software should record, track and possibly automate or shorten part of the process.


3. You are rarely, if ever, special. We have a tendency to think that our problems are world changing, never before seen phenomena and that the solutions must be developed by individuals possessing equal parts genius and divine revelation. Rest assured that most of the time one, or two, or five thousand users have gone before you and had to solve that same or a very similar problem. Before you jump to a completely new software package see if there is an add-on, work around or third party plug-in to help you out.

Of course all of this costs money. It will either cost you money in terms of the time you sacrifice or the dollars you pay someone else whose time is sacrificed. And this is why vertical/integrated/customized packages are picked up by companies once they pass the $1 million mark. They have money to spend. They could spend it on the three ideas above. But it's more fun to spend it on something shiny and new than it is to make the most out of that boring old software package you have been using since day one.

Don't misunderstand me. I think businesses can definitely outgrow QuickBooks. It is just that I have seen very few businesses do so in a logical and planned progression as they exhausted their options to customize features, improve workflow and use add-ons to make the most of their original purchase. 

We usually see growing companies upgrade to a new "stand-alone" system. They do this to keep up with higher transaction volume, to take advantage of a true SQL back-end, and to achieve better security and internal controls.