One of the specific areas of budgeting I’ve been thinking about is the differences between budgeting at various stages of a business – from start-up to big business. I was really happy to find this series of posts by venture capitalist Fred Wilson.

The first post I wanted to bring to your attention from him is the difference between projections, budgets, and forecasts. In short, projections are long-term, multi-year “what could be” numbers; budgets are one year plans; and forecasts are intrayear estimations. Read Fred’s full article for more details.

Now, here’s the really hands-on part: Over a series of 3 posts, Fred writes the step-by-step way for small, medium, and large businesses to budget:

An early-stage company – with about 10 people – is his first example in the blog post “Budgeting in an Early Stage Start-Up Company“. In this post, he outlines what business owners at this stage need to think about, including people costs and building up some cash.

A growth company, according to Fred, in his article “Budgeting in a Growing Company“  has between 10 and 75 employees and is in a constant state of flux. It’s not a bad thing but you need to make some adjustments. One of the first adjustments is to start budgeting earlier in the year for the next year. Another adjustment is to take the sales managers’ budget and dial it back because it is usually optimistic. Fred rightly points out that companies of this size rarely hit their budgets because things are always changing.

In his article about “Budgeting in a Large Company“, Fred talks about the challenges of budgeting in a company over 150 employees. It’s similar in process to a growing company, he says, but far more involved. And another step companies can do at this size is start benchmarking their budget against others in the industry.

These blogs are a great read for any size of business looking to grow. Take the time and read them!

Jessica Routier, IAC-EZ

This can happen a lot: People take their businesses very seriously and apply good financial practices but their personal finances don’t get the same attention. But it doesn’t have to be that way. With some simple, sensible personal financial principles in place, you can enjoy a stable lifestyle that doesn’t cost a fortune.

Some of my favorite personal financial advice has been nicely summarized in this article: “8 Money Missteps that can really hurt you financially” and in a related article about getting out of credit card debt called “Seven steps to get out of debt“. Between these two articles, 95% of personal financial issues can be resolved. And when your personal financial issues are resolved and your finances are stable, you’ll be able to focus more effectively on your business and invest that money into growing a significant and successful, long-lasting operation.

So, check out those two articles and see if there’s a way to get your personal finances in order.

Jessica Routier, IAC-EZ

In retrospect, though, I didn’t give enough attention to “tomorrow” in my earliest business ventures. I was too focused on now to think of later. It’s an easy habit to get into as a business owner because you’re just starting up and just trying to make sales and all you can do is make right now count for something.

But there does a come a point (and it’s different for every entrepreneur, I’ve found), when you realize you’re on a bit of a treadmill. Yes, you might be building a strong foundation of good “todays” but every day starts at zero and you try to do something significant and never quite finish everything you’d like to do. And, by focusing on “today”, it’s harder to make investment decisions for your business for the long term.

Everyone might start by thinking about “today” but eventually smart business owners make the switch to thinking about “tomorrow”. They go from building the foundation of the business to building the future of the business. They make decisions that might slightly increase short-term expenses but ultimately improve long-term profitability.

I just read an interesting (but perhaps controversial) article called “What Every Entrepreneur Can Learn from Mark Zuckerberg“. Zuckerberg, the founder of Facebook, has received a lot of bad press from the privacy-related missteps he’s made in recent months, but you do have to credit him with building such a game-changing site. The article talks about Zuckerberg’s vision for his company and the web, which the article’s author says is measured in decades, not weeks or months.

I think this is a great step to work towards, although I also recognize that it’s not going to be easy for entrepreneurs who are busy focusing on “today”. So, start with this: Why not take a few minutes to write down your vision for the rest of this year. Let it percolate for a couple of days then take a few minutes to write down your vision for next year. Let that percolate for a couple of days. Then take a few minutes to write down your vision for the next 2-3 years. Then the next 5 years. Then the next decade. Give some time between each exercise so you can think it and live with it for a while. And don’t be afraid to be bold. We live in a world that changes fast and we may be using resources in 5 years that we can’t even conceive of today.

This isn’t a technique that will change how you think overnight, but it can change how you think (and how your business grows) over the long-term.

Jessica Routier, IAC-EZ

• Happier employees are more productive employees. They get work done because they believe in the bigger picture of the business and they’re not just there to warm a desk until retirement. And, they’re not spending their workday complaining about the boss and gossiping to fellow staffers. (In fact, Zwilling quotes a statistic that says employees spend 10 to 20 hours per month complaining or listening to others complain).
• Happier employees make for positive customer experiences, which tends to encourage customers to feel good about their purchase and make them more likely to return.
• Happier employees stick around longer, which drives down training costs. (I don’t have an exact figure in front of me but I’ve heard that it costs about 1.5 times their annual wage to train an employee).
• Happier employees care, which means they take a moment longer to make sure that the products and services your business is sending out the door are actually of the quality you profess them to be.
• Happier employees talk up the company to family and friends, which has a positive, grassroots public relations impact as well as eases the costs of recruitment.
• Happier employees steal less. Workplace theft costs companies billions of dollars per year and a major driver is the sense of entitlement, that the employer “owes” the employee something extra.

When you list those benefits, it’s obvious just how important it is to have happy employees. Now, not every employee is going to be joyous every single day. There are different factors that will contribute to a happy employee and you, as a boss, don’t have control over all of them. But what you can control should be controlled to create a positive workplace. Check out Zwilling’s article to find 5 really practical ways to minimize the negative and maximize the positive in your business.

Jessica Routier, IAC-EZ

For that reason, business owners invest in horizontal solutions – from accounting services to payroll services to delivery services, and so on. The business owner just buys solutions that they think will do the job. However, as the company grows, their real needs become more apparent. Industry specific requirements arise and a more targeted (or “vertical”) solution becomes necessary. Those businesses then tend to shed their horizontal solution for a vertical solution at some point along their growth trajectory.

Years ago, that transition from horizontal solution to vertical solution happened as businesses got into the millions of dollars of revenue. But, thanks to a variety of consumer trends and technologies, vertical solutions are moving down the price ladder and becoming more and more available to smaller businesses, too.

Take us, for example. We don’t try to be all things to all businesses. We’re a great solution for small businesses and especially for freelancers, entrepreneurs, and coaches. Or consider a solution like Freshbooks, which offers really easy and useful invoicing for a similar market. A giant bricks-and-mortar company with zero online presence but thousands of employees and millions in revenue might not find us or Freshbooks very valuable. We’re both vertical solutions for a specific market at a fairly small-business level.

And we’re not alone. Many other vertical solutions – from accounting solutions to payroll to delivery and fulfillment solutions are moving down the price ladder to become accessible to smaller and smaller companies.

So what does that mean for the horizontal solutions market? It’s shrinking. There are still plenty of providers in that market but they are starting to realize that vertical solutions are the answer to keeping business owners who started with them (but have grown to the point where a horizontal solution is no longer meeting their needs). Take a company like SAP which has traditionally provided vertical solutions to REALLY big companies. They’ve introduced services for small businesses, too, leveraging their vertical solutions into mid-markets.

There are a few reasons for this shift and if you want to read more information about horizontal accounting and what the trends are, check out this article from Accounting Software Advice blogger Austin Merritt: “Is Horizontal Accounting Software Dead?”

Jessica Routier, IAC-EZ

In this blog post I want to talk about how and why 10 extra minutes a day might make a huge difference in your business’ financials.

• Rather than just entering data (which can be delegated!), you spend more time thinking about what’s going on in your business.
• With a few extra minutes each day, you’ll become deeply aware of your expenses and the impact they have on your business. Do you really need every item you actually have? A careful look at what you’ve bought and how you’re using it will tell you. And if you’re not going to use something that you’re currently paying for, get rid of it so it’s not an expense.
• With a few extra minutes each day, you’ll see how income comes into your business and is distributed through the various parts of your business that need the income to operate, and you’ll see how minor adjustments in that income (i.e., by increasing sales or raising prices) can make a big impact.
• With a few extra minutes each day, you’ll be able to give just a little more attention to payables, paying bills on time rather than potentially incurring late charges and interest.
• With a few extra minutes each day, you’ll be able to give a lot more attention to your receivables, calling people who owe you money to see how and when they will pay, thereby improving cash flow.

Schedule this additional ten minutes of financial review per day. It won’t seem like much more time but you’ll dig into your finances and, over the weeks and months that follow, you’ll have a deep understanding of your finances and their impact on your business.

Jessica Routier, IAC-EZ

Yet I would argue that your business’ financials are critical. They make sure that your sales will actually turn into profit. They make sure that your taxes are paid and you won’t be hit with tax liens and fines.

Wherever I see businesses fail, it’s often in the area of financials. Sure, some businesses fail because they don’t sell enough product and other businesses fail because they are poorly managed, but many businesses simply have to shut down because their financials weren’t in order: Expenses were too high, prices were too low, there was never enough money to fund operations, there was never enough money to invest a little on growth.

One business I know of struggled for long time before finally deciding to do something about its financials. A quick look revealed that its expenses were keeping up with income. As soon as the business owner knew that, she raised her prices slightly and got control of her expenses, and completely transformed her business.

Another business I know of was really successful, selling a lot. But at the end of the year, they were hit with a tax bill that was higher than they anticipated and it took them years to pay it off. Had they used better financial management, their tax issue would have been minimized considerably.

Yet another business I know does fairly well, even through the most recent recession. The owner couldn’t understand why he was barely getting by. A quick look at his financials revealed, however, that his receivables were a mess and he may have been earning an on-paper income and paying taxes on it, but few customers were paying him.

So, what should you do in your business?

Step 1: Get your finances in order! Presumably that’s why you’re even at IAC-EZ. Bring some order to your finances and get that aspect of your business under control.

Step 2: Spend more time than you currently are on finances. Yes, I realize no one really wants to spend a lot of time on their finances but it will make a huge difference in your business. (Check back next week because I’ve got an entire blog post just on this topic!)

Jessica Routier, IAC-EZ

Although there are many gurus with programs and ideas that do make sense, the only program or process or strategy or plan that an aspiring entrepreneur really needs can be found on one webpage at SCORE.org.

In SCORE’s article “6 Steps to Small Business Success“, the author lists six steps that every entrepreneur should take when starting their business. I’ll summarize them here for you:

1. Start smart: Identify a niche, solve a problem, be unique.
2. Set up systems: Create a business that is consistent and automated.
3. See out sales: This is huge. Business is about selling, not just marketing.
4. Aim for growth: This isn’t about survival, it’s about building something bigger.
5. Leverage opportunities: Build off of your core methodically.
6. Plan your exit: Work toward a goal – perhaps winding up your business or selling it.

Reading these steps sounds simple; no real surprises. But they’re exactly the kind of steps that aspiring entrepreneurs need to hear. Rather than spending money on high priced programs, an entrepreneur should just sit down and master every step, then go back and tweak each step, and they’ll be running a successful business in no time.

Jessica Routier, IAC-EZ

Her article (which you can read here) focused more on inspiration than on practical application but she has some good things to say that business owners should pay attention to. To summarize her post, we need to not only become masters over our money but we need to transcend its power in our lives.

Yeah, that might sound a little metaphysical but I think the point makes sense. It can be so easy for business owners who are sitting at home, working in front of their computers all day, to become focused on what they are earning that hour or how much money they made that day. While that is good to think about, Grainger rightly points us back to something more important: What is the money you’re making allowing you to do in life?

Making money for money’s sake can become an all-consuming effort… and a futile one. However, making money to enrich other aspects of our lives is the superior way to approach money.

Okay, so that sounds a little more “Tony Robbins” than I usually post online. But I think it’s a helpful mental reset for all of us to remember, especially as we double our effort to push through the struggling economic situation.

Jessica Routier, IAC-EZ

So, if you run a business, how can you find a good credit card to use? In an article posted at BusinessInsider.com, article writer Shira Levine gives 8 things to consider when you get a credit card for your business. It’s a good list, even if there are no surprises here. You should read the full article but basically she advises that you think about:

1. Reward programs
2. Fees
3. Fraud Protection
4. Time
5. Online Access
6. Credit Unions
7. Signature vs. PIN
8. Acceptance

From my own experience, I would also suggest the following:

• Look for just one credit card; don’t get a big stack of cards.
• Keep the credit limit low. A thousand might be sufficient for most businesses, or if you travel, maybe a couple thousand.
• Put a little money onto your card even if you don’t owe anything. A small “bank” of a couple hundred is sometimes a nice cushion to add during good times and can help out when things get tight.
• Don’t just use your personal credit card, even if you are a sole proprietor. Keep things nice and simple and separate. It’s easier to monitor.
• Schedule 5 minutes every month to double-check your purchases: Make sure you got what you paid for and make sure that it’s providing you the value you want it to provide.

Jessica Routier, IAC-EZ