How to Build your own Business

Introduction

I’ll keep it short and sweet. This blog post will give you very good overview of what you will need to start and succeed in your business.

There are different ways of reading these types of posts but here is the best way to read this one (as it is long).

Quickly skim through it and look through the sections. If an idea grabs you go with it and dig deeper down that rabbit hole. (Listen to the podcast if there’s one on that particular topic. → https://wordpress-542923-1738250.cloudwaysapps.com)

You want to keep being excited as this will be a long road.

Once you’re done then get back to the beginning.

Read through the post quickly.

Read again and take notes.

Overhead

Why would I give this term its own section?

It is important.

It also destroys most businesses.

Very easy to allow this one to get out of control.

Overhead consists of rent, insurance, phone/internet bills, utilities, food, paper, ink, other small services, bills, charges, subscriptions, employees and everything else combined that does not look so scary when looked at individually but can add up very fast.

Keep track of it or you will regret it. Always think about how to get this down without hurting the quality of what you are selling.

Which type of business should I set up?

I know you can’t wait to get your hands dirty and start making money but this step is very important. You will need to decide on a business structure. We live in a country ran by lawyers and where people love to sue each other. Due to this, you should separate your personal possessions from your business. If your business goes bust or someone decides to go after you because they walked into a wall and spilled a cup of coffee on themselves it will mean that you are protected and your belongings are safe.

Most magazines recommend a sole proprietorship, a partnership, or an LLC (Limited Liability Company). There other types of corporations that you can set up but for a small business starting out they are overkill so you shouldn’t worry about them now. Those other types will also cause a lot of additional accounting headaches and be more expensive to maintain.

I do not recommend a sole proprietorship. This one is the easiest as you don’t actually need to file anything but gives you zero protection and a 15% self-employment tax.

Partnerships are similar except that you now allow another person into your business. You may be responsible for their mistakes and your personal items are at risk. House, car, TV… you know… the small stuff.

I’m a big fan of LLCs and recommend these the most. You have a small setup and maintenance fee but you are protected from lawsuits. This type of setup also helps with taxes and allows to deduct much more. It’s a basic corporation which means that in the eyes of the law it is its own person. It can buy things, earn credit and borrow money. It is not a real corporation though which means that you can issue stock options or go public and make millions from the stock market.

Remember that the initial choice does not forfeit your rights to change later on. Times change, situations change and you can make choices more beneficial to you later on when you’re good and ready.

Where to set up your business?

If you can run your business online and I recommend you do if possible then set the company up in Wyoming. I did a lot of research on this so you’re good to go. The benefits in privacy and taxes make this the right choice.

For any brick and mortar location you will need to set it up in the state that you are in.

If you are setting up a business in multiple states or live (and also do some business) in a state other than the one where you set up the original business… you might have to submit additional paperwork in that state.

Here’s an example:

Let’s say you setup an LLC in Illinois. You are protected and have limited liability in that state.

Your house is in Wisconsin and you have a couple of clients there. You sometimes meet with them at a coffee shop and do business in Wisconsin. You are no longer protected by the Illinois incorporation and might be breaking some state laws of Wisconsin.

If you’re going to get fancy I recommend to consult with a lawyer.

Accountants and Lawyers

You will need a lawyer to set up your business. We talk about that in a different chapter. Everything else can wait.

It’s true that it is very important to have a great lawyer and a great accountant. However, that is after you’re already running a profitable business and not before. These guys are a supportive team and anything they do or touch will cost you money. That is money that you cannot afford to spend when you are first starting out and trying to grow your business.

Helpful Episode:

LISTEN HERE

Business Cards and Websites

The biggest mistake I see a lot of people doing is getting the business cards and websites done before they even sell anything or get their first client. I understand that we all want to look good, be respected and appreciated…. I really do. The problem with this approach is that in itself it does not make money. It also has you focusing on the wrong things and it costs money and time. Someone will have to design your card and your websites. As someone that has dealt with designers & website builders for a very long time and the clients getting these done… it is a pain and always takes much longer than everyone thinks.

I’d rather spend that money buying ads (whether they’re online or offline), printing out flyers or doing some type of direct mail campaign. The rest of the time should be spend making calls, knocking on doors and networking.

Once you start making money and have people asking you for a business card and/or website than go right ahead. Get them done.

Employees

As soon as you start making any type of money in your business then you need to start getting help. This is the fastest way to become successful. Delegation and management of others does lead to the promise land.

There are a few different ways to go about this:

Partnerships – Although I am completely against partners when it comes to running a business…. this is different. It’s smart to package your work with other complimentary offers and work with other companies to fulfill them. When this is done correctly, it can multiply your sales and theirs as you now have multiple companies selling the same products and helping each other succeed.

Full-Time workers – This sound like a no-brainer but hold on there just for a second professor. Anytime you hire someone full time the government steps in and sets down some pretty serious rules. A lot of it also depends on the number of full-timers but just understand that you will be paying quite a bit of taxes, unemployment insurance and possibly health care. I had a coffee shop where each full time worker cost me double. Their salary and another that went to the government.  The details are beyond the scope of this book but keep this in mind.

Part-Time workers – I like these. Hopefully with systems in place they are replicable. No overtime for part-timers and not much hassle when it comes to making changes. You will pay some taxes but don’t worry about unemployment of healthcare.

Consultants – These can be helpful for some things but not recommended. Some examples of them are Accountants, Lawyers, Marketing companies, SEO companies, Web Designers, Cleaners etc. Use them only when you need to but do not rely on any too much. If the SEO Company is in charge of all your leads… you do not have a business.

Freelancers/Contractors – Good for one of jobs. If you are not a brick and mortar and can work location independent… these guys can be your “full-time” and “part-time” staff (but obviously don’t say that out loud to anyone). This way you give them a 1099 and they are treated as a business expense. Love this.

Interns – If you can get someone to work for a pizza, a dream or a school credit… do it. Keep in mind that they do need extra training and watching over but this is where systems come in.

Outsource – You’ve probably heard about Virtual Staff. The workers in the Philippines, India, Romania that power most of the international companies. They are great and not as expensive as the US workforce. Anything that does not need to be done face-to-face with a customer (and as long as the US law doesn’t disallow it) can be outsourced. Some tasks might be under some kind of a privacy act which does not allow the information to leave your actual office. The payments are usually done via PayPal and can be treated as an expense. Also a win and a topic that is beyond the scope of this book.

Helpful Episode:

LISTEN HERE

Interview Process

Here are some tips that I’ve learned while hiring.

It’s more important to have an honest, punctual and competent person than a skilled applicant. Obviously you will not be hiring someone that doesn’t know anything for a skilled position. However, if you have a group of people applying that pass the minimum requirements then always focus on the personality rather than a fat resume and good recommendations (which can all be faked). Being late and other small negative behavior traits are a good window into the future.

The best way to find out if a person is right for the job is to have them work on something and watch how they do it.

The best interview questions are open-ended. Ask about opinions, why they think a certain way and what they would do in certain situations rather than about their past accomplishments and how they would describe themselves. Keep in mind that there are coaches and books that get people ready for the most common questions. If you ask the things that all other employers ask for… you will see a performance.

In your job ad make sure to put a very small detail that will show if the applicant is actually paying attention or shooting out resumes by the hundreds. Example: Please post the words ‘purple rainbow’ in the header of your e-mail next to your name and position you are applying for. If they can’t do that much… don’t expect a good employee.

Personality Tests

I have found that it is much more important to hire a person with the personality than the best skills. This does not mean that you should not hire someone that has skills. I simply mean that skills can be learned while a personality cannot be changed. Also whenever you have two people applying for the same position with similar skillsets… always chose the better personality.

Some of this can be judged by your gut feeling. Hopefully if you’re not the one doing the interviewing then the person that is doing it looks for the same things you’re looking for.

Payroll

Should you pay people yourself?

It depends.

There are two parts to this and a twist.

Writing a check to an employee or paying in cash is simple. That’s part one.

Calculating all of the taxes and who gets them on what you just paid is not. This is when you would probably want some help. I’ve used a company called ADP before and they were good without being expensive. There are others so shop around. You submit the hours and amounts that the worker is getting and they take care of the rest.

Here’s the twist.

Freelancers, Contractors or Outsourcers have to pay their own taxes and worry about that. You simply pay and mark down how much you paid in your expenses.

Average Salaries

Salaries for employees working in your industry may vary according to skills, working experience, and specialty.

I like to go on here to check for averages by industry: https://www.payscale.com/research/US/Industry

Systems

This is my favorite part and I can’t recommend it enough to start building up systems from day one. A good rule is this: If you can do it and you do it often… and it makes you money than you shouldn’t be doing it yourself.

If you do not take this advice then keep this in mind. You will spend a lot of time working in the business and not on the business. That’s because you will be too tired to do so. You will also have a very hard time managing employees, scaling, and finding new opportunities.

There are thousands of stories out there of people who set out to build a business in order to get money and freedom. Let’s leave aside the startups that you see funded on Shark Tank by Venture Capital. Most of those will never make the owner money and an entire book could be written just on those. To sum it up though… in those types of businesses the founder is looking to make some revenue and grow (might never make profit) and sell to a bigger firm that wants them (either because their business can complement what the larger one is doing, they have an idea how to monetize it better or they want the competition gone).
Back to what you’re building…

The business person quickly finds out that there is simply too much to do. He becomes responsive and becomes very reactive. The hours disappear and he can barely get his work done. The overwhelm and burnout hits him and he realizes that he does nothing more but work. Forget family and friends. Also the money is not there. Then a competitor comes and makes things even harder. Let’s hope he doesn’t go too much into debt. You get the picture.

On the other side of the coin you have a company like McDonalds that has amazing systems. Crappy food but amazing systems.

They know how to find a location. Almost every one of their franchises makes money if not all of them. They can train the new owner quickly. The employees do not need to possess any types of skills and can be replaced easily. Everyone knows their tasks, roles, and exactly what is expected of them.
It’s a much different experience running a business with systems than without.
I recommend some great books on this topic later on.

Helpful Podcast Episode:

LISTEN HERE

Productized Services

I want you to consider the following two scenarios very carefully:

Scenario #1 – A client comes in and asks for you to do a job. You ask them what they want and they start rattling off the different parts and components of the job. You do not want to lose them but know that this type of a custom job will take a lot of planning and be quite expensive. After all, someone has to pay the bills. You agree. After a while you figure that this is more complicated and harder than you previously thought. The couple of hours of research now turn into days and if you were honest with yourself and counted it all… you’d realize that you are starting to match the salary of a fast-food worker. You call the client and say that it will take a bit longer and might cost more but they’re pissed and don’t want to hear it. You finish it, and hand it off to a now disgruntled customer while only making a couple of bucks.

Scenario #2 – A client comes and asks you to do some work for them. You show them a set menu list of the types of things you offer. It always starts with all the bells and whistles included but as they start objecting about the money you simply look at them and say “what would you like for me to take off?” People hate losing things much more than they want to gain and so the customer huffs and puffs but take almost everything. You know exactly how long it takes you to complete these jobs and the margins you have. Easy sale without much thinking involved.

That my friends is the difference between a custom job and a productized service. We have already spoken about systems in a previous chapter and let me ask you “which one do you think will be easier to scale and make money on?”

In order to get ready for Scenario #2, you will have to put in more work. You will have to complete the task and measure the time/cost/materials and write each stop down so that the next person can copy you. Don’t worry. Nobody will steal your business from you… especially not your employee who would never withstand the responsibility of running the show. Even if they do… you can tweak the system, hire new people and leave them behind. This is the road to freedom.

The point here is to not have to think and re-shape the wheel for every customer. If you draw the line in the sand early on there won’t be any whining/changing things/complaining later on.

Location

I assume you’re already aware of this but location is everything. If you don’t have foot traffic or eyeballs that means that you have to find all of your customers. This is normal for large companies who set up offices somewhere in a cheap location and send salespeople on the streets to hit offices door to door or have a team of cold callers.

You can do the sales yourself and there’s nothing wrong with that but do not fall into the trap of making your first hire a salesperson if you don’t know how to sell anything yourself. It will destroy your business. That person will never care as much about your business as you do and will hold too much power over you.

Here is a list of tips to help:

• The city’s zoning laws might allow for your kind of business in that area.
• The existing utilities should be up to code and adequate. Upgrading those on day one is not good.
• The lease/rent needs to be reasonable. It’s a part of your monthly overhead. Don’t underestimate it.
• Employees are willing to come to your neighborhood. Hopefully, you can find them right around the block because they live there. Safety and low crime rates are key.
• Also, check insurance as it varies based on neighborhoods.
• Same with the customers. Rarely will someone drive out of their way to pay for anything? You’re not the DMV, IRS, Welfare, or an Immigration Office. They choose the worst locations on purpose.
• The area shouldn’t depend on seasonal traffic. Vacation towns suck.
• Who is next door? Can you borrow their customers? Are they going to hang in for a while or are looking to run as soon as the lease is over? Introduce yourself and ask some questions. It’s ok. They won’t bite.
• We all drive cars. Look at the parking situation.
• I prefer working from home, co-working spaces or coffee shops. It gives me more control over my time and location and most clients never know the difference. Also it creates a much smaller overhead and that money can stay in my wallet or go into the marketing budget.

Healthcare

Here is how the Affordable Care Act (also called “Obamacare”) impacts an average small business. For the sake of this discussion, a small business has 25 or fewer employees. Anything above would be labeled as a “medium” or a “large” business.

You will need to:

1. Provide the employees with a notice that educates them about the Health Insurance Marketplaces. This will differ depending on the state. Inform that they might get a tax credit if purchasing their insurance through one of these marketplaces. Inform that they may decide to switch from the employer chosen insurance to the one of their choosing.
2. Increase Medicare withholding on the salaries. If you have read the other chapter you will know that I recommend for a 3rd company to take care of the payroll. These changes happen often and it is simply too much to keep track of it and too easy to get in trouble by missing something.
3. The health insurance must be offered within 3 months of the employee joining. Previously some companies made the new hires wait longer until they could sign up for a company plan.

These rules apply to full-time workers and are one of the reasons why so many corporations have been switching to part-time workers, contractors, and freelancers.

Further Reading: https://www.sba.gov/content/employers-with-fewer-25-employees

Audits

Here are the two main reasons for getting the IRS to knock on your door and want to bend you over the table.
These are tips given to me by two different but amazing accountants.

1. Do not write off your home as a business expense. Things get very complicated here and usually throw up a red flag with the IRS. You will need to calculate the square feet used for business. How much time you spend there. The percentage of the utilities etc.

2. The IRS does not have a large workforce and can only handle a small number of cases per year. What usually happens is that when they find someone that has been cheating on their taxes they will then go after the accountant who has completed that paperwork. It’s not that this person will get in too much trouble that should worry you but something bigger. Their book of business. This is what the government wants. It’s a way for them to get a lot of easy wins which they love. Anytime you hear an accountant that is a little too creative walk away. You could be stepping on a land mine.

Marketing

In order to market to a customer, it helps to know who that perfect customer is.
Few sample questions to ask yourself:

• How old are they?
• What are their interests?
• What’s the gender?
• How educated are they?
• Do they have kids?
• Do they own a home?
• What kind of car do they drive?
• What is their average salary?

Answering these questions will give you a better idea of who this person is. Now you can go ahead and craft your message. The more in-tune you are the less your marketing budget needs to be.

Let me explain one more thing. There are two different types of marketing. One is to get a sale and the other is to build brand awareness. Leave the brand building to the big companies for now. If you do have the budget for brand building… initially focus on one channel only.
For example Local newspaper.

It will take weeks, if not months, for a person seeing your ad to even notice it. It will take even longer for them to become familiar with it and to start trusting it. After all, you’re starting to re-appear for a long time so you are not going anywhere. People like that. It will take even longer than that for them to actually remember you and call you. The process could take a year for each person. You never know when they start seeing your ad and whether they have a need for your service. Brand building is hard.

Not all advertising/marketing takes this long.

Here are some examples of marketing on a budget:

Flyers – These can be distributed around the area of your business or on a parking lot of a competitor. I’d say to keep it clean but you could potentially do that. Mailboxes or behind car windows make a good leaving spot. You can also hire a person to hand them out if you have a lot of foot traffic on the block.

Posters – Get them up in windows, on street corners or at the free advertising boards (such as the ones seen at entrances to most supermarkets or coffee shops). If you can offer something free to reel in the potential clients… even better.

Upsells – I already mentioned that it’s a good idea to partner up with other businesses that sell similar products or services. Let me add to that. It is also great to have a free offer such as a consultation after which you can pitch your paid services. You might also have a tripwire which is a very low cost product that establishes trust between you and the customer making it easier to sell to them. It could be a trial offer (for a few dollars), a book, or something else that you’ve seen others doing in your industry. Many of these are actually loss leaders. It’s something worth more than you are selling it for but it hooks the person on wanting more of it from you. Bottom line is that these work great.

Referrals/word of mouth – Other businesses refer you. Customers refer you. This is something you will have to put some work in and build the right relationships. Also whatever you’re selling needs to be good.
Follow-Up – Most companies drop the ball here. The sale is made and no one contacts the same customer again. There’s a saying that your best future customer is your current customer. It costs much more to buy a new customer than it is to sell to a current one. It doesn’t have to be the same offer.

Cold-Calling – This is my least favorite but it works. The problem with it is that you are throwing the net out very wide without a clue on who’s around. It’s a numbers game. Usually, if you try and sell 100 people something then one will end up buying it. Could be that they feel sorry for you but they will. If conversions are any lower than that, you are in trouble.

The Internet – Get me to the number one spot in Google and I will conquer the world. I’ve heard that one before. SEO takes a long time to work and is hard. It’s unstable. It is a strategy that can break at any time. Google cannot be controlled and I like to think that it hates us. After all, they make money through paid advertising only and not the free search. Look into PPC (pay per click) or at least combine it with SEO for quicker results.

It doesn’t matter which of these methods you choose but it does matter that you measure the results. Stop doing things that do not work. I admit that having a show on YouTube is good for the ego but does it make you money?

Networking

Networking is a good way to conduct business with customers and even work with others who are in the same niche as you are. It is a way for many business owners, partners or corporations to exchange ideas with others and vice versa. So before you embark on networking, you need to know a few dos and don’ts so you can avoid future mistakes.

Do:

• Keep your introduction short and sweet. When asked about what it is that you do, make sure to get your audience’s attention immediately. Keep a short but informative intro. This way you don’t have to rehash everything that you just said.
• Be open to the idea of communication. This means you have to keep consistent communication with those who are in your circle of networks. Don’t forget to reply to emails, messages, chats, texts, tweets and likes. This way you can keep that circle running.
• Do keep a friendly approach. This will always give you good points in the networking circle. If you are going to attend a networking event or meeting up with people, it is always a good choice to be friendly. Besides, have you ever heard about people losing friends by being friendly? This could also work with networking.
• Ask questions. Keep in mind that networking is not all about listening but also asking questions. Questions lead to answers and different topics. So don’t be shy and raise your hand. It can help you in the long run.
• Give your advice when needed. This means you also have to give or share your experiences, lessons and the likes to others especially to those who are new to networking.
• Be patient; since not all results come together, you may have to extend your patience a bit longer. Networking is all about building trust and trust doesn’t grow overnight. So if you can, be patient. After all, good things come to those who wait.

Don’t:

• Don’t be late. Make sure to come on time so you don’t lose the important events, topics or discussions.
• Don’t brag about your work. If in case you did accomplish a lot of things in your business then it’s all good however bragging about it does not make it impressive. Keep in mind the humility is still better than anything else.
• Don’t stay in one corner. Be active, go around, shake hands, get to know people’s names and businesses. Keep in mind that networking is all about connections so why not make one?
• Don’t talk about other people behind their back. If in case you have bad experiences with a certain so and so, don’t talk about it. Maybe you can but don’t mention names. This is not only bad for others but for you as well. No one wants to work with someone people cannot trust.
• Don’t forget to check in with the new people you have met. Following up on leads is always helpful. This will also show how committed you are to working with them. So make sure to reply to any inquiries as soon as you can.

Here’s a link for further listening:

LISTEN HERE

Profit

If you can’t make a profit you will go out of business. When looking at income reports on the internet from some of the more known marketers it’s funny that they only speak about revenue. It means nothing. It’s the same on the show called “The Profit”. Many businesses that are making over a million in sales are still in debt. It’s crazy.

Always focus on the bottom line.

One of the worst things to do is to sign up for a ton of monthly services. Carpet cleaning, SEO, forums, magazines etc…

These all look harmless individually but when grouped can really eat into what you will get to keep.

Another piece of the puzzle is the actual cost of production. Whether you’re creating a physical product or performing a service it is crucial to understand the exact cost of it. Whether it’s supplies, electricity, and/or time. They both cost money. If you do not have this part down then you cannot price things properly. It’s impossible to have a healthy margin otherwise.

A margin is a difference between what you make the product for and what you sell it for. It’s the money that you pay for your overhead and that you get to keep.

The overhead would be things such as the building, utilities not used for production, other employees, insurance etc…

It’s also a good idea to break down your overhead into daily chunks. That way you know exactly how much you need to make per day to not go into debt.

Further Watching:

WATCH HERE

cnbc.com/live-tv/the-profit

Public Relations

PR basically means free advertising.

Imagine that you just bought a newspaper. On one page you see an article on a new company that is very inspiring and doing things differently in your town/city. They might be treating the employees differently, paying higher wages, and giving longer vacations, or allow their people to work from home/coffee shops or abroad. You flip a few more pages and you see a huge ad. This one shows that there is a sale at a flower shop. There’s a few words and a nice picture but you barely think of it and move on. Later on, there is another article but it says paid advertising on the bottom or top. It talks about the benefits of a new supplement. The article is very dry and you get bored after one paragraph.

The difference here is that the first one cost that business nothing while the other two were paid for and were most likely not cheap. Getting a full page or two in any newspaper is not cheap. Also most of us have a case of ad blindness and no longer respond well to them. It takes a lot of impressions (times the person views an ad) before they even realize it.

Where the first article could be stuck in your mind because you had an open mind while reading it.
Hiring a PR firm might not be in your budget or worth it. However contacting the local news does make sense if you have something to talk about. Remember that all of them need constant things to talk about.

Helpful podcast episode:

LISTEN HERE

Customer Management

There’s no better client than the one you already have paying the bills. You need to keep track of them, continually communicate with them, and keep them happy.

Here’s a great episode on how to do this:

LISTEN HERE

It also touches on upselling and the tools to use for customer retention management. It also gives some great insights into what you need in place first before even trying to set up a system from which you can manage your existing clients.

MASTERMINDS

This is the closest to a silver bullet or magic sauce that you will get to. One of the ways that I’ve seen businesses grown faster and smarter is when the owner joins a Mastermind.

A mastermind is a group of people from a similar field and with different levels of experience that meet on a regular basis and help each other grow. This is not a referral swap, meet up with a bunch of people trying to sell each other something or some other pyramid scheme. We’ve all attended plenty of those so do not get confused.

The point of the meeting is to address the problems that each member is dealing with at that exact moment. New walls crop up all of the time as we grow. When we’re in the middle of the battle it is nice to get advice from someone that is looking at it from a hill above. Each person has a couple of minutes to explain what they are struggling with and the rest of the group gives suggestions or advice. The process can take 15-20 minutes or the entire mastermind.

I’ve seen it work both ways. Each person gets their problem solved or each week the group goes in-depth into someone’s business.

Another huge component of this is accountability. Not only do we have others around that understand what we are going through but after we commit to an action… during the next meeting the group will question us about it.

The last benefit and most likely the biggest is the friendships formed. Your network can grow very quickly through these types of masterminds. Unfortunately, it’s not that easy to form new ones and some do get stale after a while. The best ones consist of people from different industries so that you can get completely fresh insights and with people that you don’t previously know.

The guys that created the movie “Your Own Way Out” came out with a very interesting idea and I was able to work out a deal with them.

(The movie shows an entire movement of people who are writing their own scripts and regaining freedom while growing their networks and businesses. It’s very cool.)

They are organizing rotating masterminds. This means that every few weeks you join a new group. This gives a ton of eyeballs a shot at your business problems. Your network grows on steroids and the groups never get boring or old.

The offer can be found here: www.yourownwayout.com/special-books-offer/

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