Seven years ago, almost exactly, I became a small business owner. Oh my goodness! I had no idea what I was really getting myself into, and I’m an accountant! Except, I was no longer just an accountant. I was a salesperson. I was an administrator. I was a HR person. I was a process engineer. Somewhere in between all of that, I actually was an accountant, too. I was everything my business needed me to be and it was overwhelming.
Why did you go into business?
Before I decided to start my own business I worked as a corporate accountant for a large engineering firm. Part of my job entailed working with the project managers to manage the financial health of their projects. Often, it was like pulling teeth. I’m serious!? If you ever want to see someone stomp their feet like a two-year-old, ask an engineer to do any kind of accounting function, perceived or real. These engineers had to be taught, by me, some basics in accounting. I didn’t become an engineer to be an accountant, was a common complaint! When I opened my business, that resonated very strongly for me because I did not start my business to be anything but an accountant. I didn’t become an accountant to be a marketing person, or HR person, or IT person. Yet, there I was, doing it all. I found that I was spending more time doing everything else and not as much time as I should have been doing actual accounting. Translated into a pie chart, my time budget would have looked like this:
Do you know what all those other activities are for me?? They are non-income producing activities! I do not make any money being an IT person or HR person. This is just a guess, but I assume, unless you opened your own accounting firm, you did not open your business to do accounting. Or IT. Or sales. Or insert any activity that does not make you money here.
What is the problem?
I had created a serious bottleneck for myself. Like all small business owners, I had to be careful with my cash and everything always looked expensive and like a straight cash outflow. I could do it myself. I just had to put more time in. Or, so I kept telling myself. After I had missed the umpteenth soccer game, another dinner with my family, another swim meet, I realized I had to change the way I looked at those expenses. Furthermore, I had forgotten that my time had a value associated with it, as well! I had to stop looking at those expenses as simple cash outflows. I had to start seeing them for the investments they were. For every hour I was spending on my non-income producing activities, I was losing money. That was an hour I didn’t get a contract signed. That was an hour I could have completed a set of books. That was an hour I could have done one or two tax returns. I started to ask myself this one simple question: Could I make up for the expense of hiring someone to handle those non-income producing activities with income-producing activities? Was there a return on that investment? In most cases, the answer was hands down, “YES!!!” Once I came to that realization and made the appropriate, albeit scary, adjustments, my time budget looked more like this:
And my income did this:
And I stopped missing most of the important moments with my family. Let’s face it. Many of us became small business owners for the promise of more flexibility to spend more time with our families.
What does this all mean, Basil? (Austin Power’s reference for those young millennials out there.)
We’ve all heard the phrase, “Work smarter, not harder,” and, in the beginning, I was definitely NOT following that very key piece of wisdom. I just figured if I worked harder I could save some money. Unfortunately, saving money cost me in sales and income-producing activities. As a small business owner, it’s important to know when to do it yourself and when to hand it off to someone else. Professionals I recommend all small business owners to budget for are attorneys, payroll service professionals, financial planners, CPAs, bookkeepers, managerial accountants, and tax professionals. These are all professional services that, ultimately, pay for themselves by making sure your business is running the way it should and that your time is used in the manner in which you intended. The next time you feel the dread of doing some work activity that doesn’t help you make money but is essential to the business, stop and think. Very often, it’s more expensive in opportunity costs than actual costs if you are working on tasks that do not ultimately bring money into your bank account!