Craig continues to reveal a comprehensive overview of the details to consider in starting a business in the last part of our three part series, Starting a Business. Also, included is a sneak preview of an interview with Attorney McKay Johnson where we discuss types of entities.
From his first job flipping burgers at McDonald’s and delivering The Washington Post, Craig Willett counts only one and a half years of his adult life working for someone else. Welcome to The Biz Sherpa podcast with your host, Craig Willett. Founder of several multimillion-dollar businesses and trusted advisor to other business owners, he’s giving back to help business owners and aspiring entrepreneurs achieve fulfillment, enhance their lives, and create enduring wealth. The Biz Sherpa.
This is Craig Willett, The Biz Sherpa. Welcome to Episode 8. I’m grateful you’ve made it this far; I thought maybe after Episode 7, there might’ve been too much meat or too boring of material. But I hope today we’re able to step back and spend a few minutes talking about how you can create an enduring business. One of the things we have to be aware of is that business owners love to own businesses, but they often find that in the process of owning a business, that the business ends up owning them. There’s a way to free yourself from that, and we’ll talk about it today. Just looking forward, one of those is make sure you take a vacation, have a hobby, and effectively delegate. We’ve talked about those before. But we’re going to spend some time today and I’ll share with you some stories and some examples of what I’ve done that helped me. And hopefully in turn, it will help you.
In fact, that’s what this podcast is all about. It’s about you, not about me. What I care most about is that each one of you have an opportunity to experience the freedom, the flexibility, and the benefits of being a business owner and that as you do so, anything that I might say will contribute to and enhance the success you experience. And give you the emotional rewards you seek, and also add to your wealth. I’m grateful that you would listen to my podcast. And I hope today that we’re able to review some principles from our last two episodes on starting a business in a broad sense that will help you create an enduring business.
So to start out with, we’re going to get into the weeds a little bit, and I apologize, this is the CPA in me, but I’m going to put up a slide here and we’re going to talk through it, a little bit. And this is learning to analyze and project cash flow. And we’ll talk about not only how to do it, but what it means and how to use it to your advantage so that you can plan effectively for your future. So here comes the slide.
You’ll notice that this is a two-year projection, roughly a two-year projection. This was actually derived from a proposed investment I was pitched to make, not too long ago. What we’re going to look at is the cost of—first, you’ll see on the red line, the cost of the debt payment per month for the acquisition of this business, in addition to $3 million of cash down, there was a financing component to it that was carried by the seller. Then you’ll look at the revenue on the blue line, and then on the beige line, we’re going to look at what the cash flow is. And then look at what the running cash balance is, and you’ll see that that’s a negative number. As an accountant, when it has parentheses that means it’s negative. So we’re going to talk about that and see how it grows.
You’ll notice that in the first month, there’s negative cash flow of $564,000. That eventually winds down to positive cash flow, when you get out to February 2021, when there is $6,000 of positive cash flow. But in the meantime, if you look below that item at the end of January, you’ve accumulated a deficit cash balance of $2,053,000. That slowly winds down to finally, in August of 2021, you have positive cash balance. So how do you deal with this? What does this mean to you as you look at your projection for your own business, if this were yours? What it means is that, to me, is that in addition to the seller financing, and in addition to the cash that you spent to buy the business, that you’re going to need a line of credit for the next year, and you’re going to need it to be approximately $2.3 to $2.4 million. You’ll want to add 10 to 20 percent to your projections. Things don’t always go as you plan. When you add the buffer to your projections, it actually ends up giving you credibility with the bank. You don’t want to have to go back and ask for more, unless there’s a positive reason why you did so—that the business is growing so fast and you’re incurring more costs to produce that revenue. You want to make sure that you nail that pretty close to actual.
So one of the things you’ll notice is that the company will eat up a lot of cash in the initial four months to five months of the business. This is typical. And you need to make sure that you have either friends and family, a bank line of credit, an angel investor, and someone that’s aware of the business and knows that this is going to happen upfront. What you don’t want is to find yourself in a position that you weren’t anticipating this and you’re not prepared for it, and you’re going out on an emergency basis trying to raise these funds. Good investors will want time to be able to evaluate the business, ask questions before they fund an emergency.
So will banks. So this needs to be well planned for. That’s what effectively projecting and analyzing cash flow can do for you. How skilled you are at it—hopefully you can get someone to help you unless you have the skills yourself, analyze that and become aware of it. This will make business more enjoyable. You’ll be able to know that you anticipated these needs. You’ll find yourself not putting out a fire, because raising cash in an emergency is hard, and it’s very expensive. You usually end up going with hard money, lenders, or someone who’ll be opportunistic that will take a significant portion of your business in order to keep you alive.
The next area I’d like to talk about is something we referred to in the last episode, and that is: How do you fund your business? In addition to funding the initial startup, you need to figure out how you fund growth. Of course, we all go into business hoping that we’re successful, and the more successful we are, the more opportunity there is for growth. And growth sure adds to profitability, but that profitability to grow it gets consumed by the business, in that it eats up your cash flow. Businesses that grow too quickly can go out of business.
So while you grow quickly, make sure you anticipate those cash needs by using the forecasting method we talked about, just a minute ago. But in addition to that, you need to figure out how to fund your business growth. A lot of people will go out and try to use a bank. And I recommend that. A bank can be the best silent partner you could ever have, in the best of times. In the worst of times, I can tell you the bank can be one of the more difficult partners you can have. I experienced that during the financial crisis. All of a sudden, when the banks were being shut down, and when the FDIC and the government was putting pressure on the banks to shore up their capital, they were looking for ways to get out of the commercial real estate business. They leaned on me pretty heavily on some of my loans and were looking for all kinds of non-monetary ways to default the loans on my business so that I would take them somewhere else and maybe someone else would make the loan, but they didn’t want to end up in trouble someday with the real estate market crashing.
So you can imagine they were great, and they had very low interest rates, way better than any partner I could have had. But once the table turned, they became very difficult. I had to spend time working out with them over a period of three years. In one of our previous episodes, I shared with you that one of them sued me, and it took me three years to defend that lawsuit. Fortunately, we prevailed and they ended up having to pay my attorney’s fees. But that doesn’t sound like a good partner to have, does it? So I’m not trashing banks. I’m just telling you to have your eyes open. In the best of times, they’re great. And they can really help understand your business. As you help them understand your business, they can help you meet your needs by giving you shorter term loans or a bank line of credit.
So I think that’s a great way to build an enduring business. Unfortunately for me, I had a bank that would make a loan for me on any project I wanted to do. And I was able to do a lot of projects. Sadly, they were the second bank in our country to be shut down by the FDIC. So you can imagine where that left me. It left me without a banking relationship. You want to establish a banking relationship with a banker and make sure you keep them involved in your business. You educate them on your business. You invite them to come and see. And the more they understand the business, the more they can advocate for you in their loan committees. And they will help you. They will see ways that they can help you, that you may not be aware of.
Second—the next area I’d like to talk about is building a customer base. We talked about, in our last episode, about getting repeat customers. And if not repeat customers, at least referrals. This is key. This is key to the growth of a business—more than any advertising campaign, you could spend money on, more than any promotions you can give or discounts you can give. It’s finding customers who become your fan, who become your hero. Who understand the value that you give with your product or service, and that they love it so much. And that you’ve gone above and beyond in delivering that product or service that they will recommend their friends and their family to you without question. That’s the best way to build a business.
It’s also one of the best ways to build something valuable to sell someday as a business owner. You may decide to sell your business someday, and one thing that a potential buyer will look at is the consistency of the repeat customer. How often do they come and how much do they spend? Now, you don’t want it all concentrated in one or two customers because if one goes away and they’re 50 percent of your business, the buyer’s going to say they’re going to discount the value of your business, so that’s really a potential problem, if they were to lose that customer. So a nice, broad base—customer base—is important. Diverse, people who have given you testimonials, who can speak to the value of your product will go a long way to you promoting your business, and someday being able to harvest your business by selling it.
The next area I’d like to talk about is reacting to customer changes or market changing events. Look at what happened during the pandemic. We had restaurants all of a sudden not be able to seat customers in their restaurant. Some health departments in some counties in our country required each restaurant to certify with some health standards before they allowed them to do takeout service. I know of one or two, even four or five months later, who are still doing takeout only. Not because they don’t care about the customers in there, but they’re more profitable and have found a whole new customer base on takeout for their business.
So I think we have to be willing to change and react to the different times. That’s the beauty of being a small business owner. As a small business owner, you can pivot and you can react quickly. You’re able to move and turn. Think of a ship and a big business. It takes a long time to turn a cruise ship around to do a 180, versus in a business with 10 to 15 employees, it doesn’t take very long if you’re able to react quickly. So I would look for changing circumstances, changing customer desires. If you’re doing what I recommended in my Biz Sherpa Scorecard—and that is reacting to and setting your goals based on your customer feedback—you will always stay on top, and try to stay ahead of your customers’ needs. Like I said, the best businesses and the best products are those businesses that anticipate people’s needs before they even see them. When they understand what their changing customers’ needs might be and anticipate that and get out ahead of their customer, they have very satisfied customers who will always return and buy their products.
The next area is to focus on a niche market. One of the things that I saw and that I fought constantly in my business was people calling employees in my business saying, “You should do a real estate development over in this part of town.” Or, “You should start building homes.” Or, “You should start doing some other type of development.” I did commercial office buildings. I got so specialized in my niche market that not only would I only do properties that we would buy and that we would design and build, I wouldn’t even take somebody else’s initial design on a property if they went and got it zoned. Because we intentionally developed the elements that made it a successful real estate development, that made it a successful real estate investment for our end users, and that made it a successful place for people to operate. When someone did it to maximize the building coverage on the site, they were missing the point. They were willing to try to sacrifice benefits to the customer in exchange for the profit.
That’s where a niche market is important. You need to understand who your customers are likely to be, and then focus on them and on their needs. And the more, and the better you’re able to articulate that, the more success you’ll have. And you’ll find that the profits will take care of themselves. I promise you, there is no magic to it. It’s truly a fundamental principle of business if you can do that. But stay focused on the niche market. I avoided getting into land speculation. I avoided getting into other types of businesses. I’ve seen them come and go. While I’ve invested in many different businesses, I didn’t operate those businesses. And I believe in having a diverse stream of income, as I’ve told you before. So investing for diversification makes sense. But expanding beyond your niche and your specialty and your expertise can bring a lot of problems along with it. So I recommend staying within your field of expertise and experience.
The other area that I think we should talk about is staying ahead of the competition. When you’re successful, and you’ve developed something that’s unique and that the market is really responding to with an overwhelming demand, you’ll start to find that other people out there will hear about it and they’ll come by—like in my initial projects, people came by and took pictures of them and were trying to copy what I did. And I think I’ve told you this story before, but let me tell you it again. I developed right across the street from another project, sold for 30% more in total dollars per square foot, and sold out twice as fast as they did. That’s not the normal business model from business school. They would tell you that the lower price one would sell out faster, but we understood what our competition was and what it wasn’t. We don’t sell against our competition, nor should you. You need to sell what you are. And that’s how you stay ahead of the competition. You know what’s unique about you, and you know what your specialty is and you articulate that, and that will always separate you from the competition.
You also need to be willing to do what others won’t do. I don’t mean stand on your head at the street corner to get people to come buy from you. But I found in business that a lot of business owners, especially professionals, doctors, dentists, CPAs, a lot of the people that bought our buildings like to take Fridays off. And if not Fridays, at least Friday afternoons. And when they took Friday afternoons off, guess what they do? They intend to go golfing or they intend to go take a family trip or something like that. But guess what happens? They have unfinished business. That’s usually when they’re saying, “I need a new office building. I need to relocate my business.” That’s when they start to pick up the phone and call on something that’s important, like a million dollar acquisition. They’re not going to delegate that. And that’s when they’re available to meet. Of course they’ll want to meet with you at nights and on weekends, and I don’t recommend that. I recommend that if you’re in the commercial business, that you be available during business hours.
So what it led for me is I didn’t take Friday afternoons off. I was at the office. And so was our sales staff. And we were there, and that’s when the calls came. Let me ask you this, how many times have you called someone when you’ve had time in the week when an appointment canceled, or at the end of the week, when you’re trying to get your whole list of things done, that you didn’t get done because business got in the way, but this was an important thing for you to do. And you called, and the person you wanted to talk to wasn’t available. And then they don’t return your call till Monday or Tuesday the next week when you’re busy. The best time to stay ahead of your competition is to be available when they’re not. And if you’re available when they’re not, and you have a live voice answering when they call, you’ll be able to take care of your customer. And your customer will recognize that, because they will call your competition, I guarantee you.
But guess what will happen? They can make a decision with you and your product before your competition can ever get back to them. I would have you think about that. That is one thing that you really need to figure out, do what others are not willing to do. I’m all for taking time. And we’ll talk about that later on, but understand your customer. Understand when they’re working and when they have time to make the major decisions you’re asking them to make and using your product or service. And if you’re available during those times, you will get more than your fair share of the market.
Now, we’re going to talk about something a little more laborious. So I’m going to put up another slide here. I often get asked the question, “What kind of entity should I choose to start my business?” There’s no one-size-fits-all when it comes to answering this question. So I’m going to review what I think are the four major types of entities that you should consider in starting a business. Notice I don’t have on here—well, I do have on here sole proprietorship, and I think that’s an important one. That’s the easiest one to set up because all you do is have to pick a name and start to operate. Now, if you pay employees, you’ll have to get a Federal ID number to pay your payroll and make your payroll tax deposits. But it’s the easiest one to start a business with. I don’t necessarily say that I’m recommending it, I’m just saying it’s the easiest one.
Let’s talk about one of the next ones on the list, and that is C corporation. This is a corporate form. What it’s meant to do is take away—it’s actually called a fictitious way, a fictitious form of doing business. It has shareholders. There’s no sole proprietor or individual, even though you might be the only shareholder. It protects you liability-wise from claims by your customers. That doesn’t mean if you have a faulty product that you shouldn’t, and your company shouldn’t, have to pay for it. But it’s for the instances where there are egregious claims that the liabilities might extend beyond what resources the business has and contains those in a box. We’ll have a guest one day, an attorney friend of mine, McKay Johnson, and he’ll go into this in more detail.
But there’s one tax disadvantage to a C corporation, and that is that it’s taxed twice. It’s taxed when you make a profit, and then when you distribute the profits to you as the business owner, you’re taxed again on those dividends. So you’re faced with double taxation. There are instances where a C corporation or regular corporation benefit, that is if you have to fund it with a lot of losses early on, and you have to bring on a lot of investors—more than 35—you won’t qualify as our next one, the S corporation. And if you plan to go public someday, it’s nice to have an operating history and the legal protection of just a regular corporation. You don’t have to go through some of the tax adjustments that you might have to do if you were an S corporation. Let’s talk about the S corporation. Of course, the benefits to that are you get all the legal protections of a corporation, but you get the tax advantages of only paying tax once. And in today’s environment, it’s one of the ones that I tend to lean to as I talk to my friends and the people that I advise as a CPA and as a business consultant.
The last one is limited liability company. Limited liability companies are great because today you can identify with the IRS how you want to be taxed. You can be taxed as an S corporation, you can be taxed as a corporation as a limited liability company, or you can be taxed as a sole proprietorship. I like it because it can be taxed also as a partnership. And it’s one of the only ones where you can be taxed as a partnership. I like it because it has a lot of flexibility in its capital structure, you bring on some new partners fairly easily, and it’s truly a partnership.
There’s a lot of different ways to divide the capital out, and you can have a different and a more complicated capital structure, such as in a corporation, you’d have to have common stock or preferred stock. And preferred stock is something you usually give investors, so that they get their money plus a rate of return ahead of the regular shareholders, which might be you. And then, in an S corporation, you can only have one class of stock. And so you’re not afforded that opportunity to bring investors in. In an LLC, you have the benefit of both. You have taxation only once, not taxed twice like a corporation, and you get the flow through of an S corporation, and you also have the capital structure that can be any way that you design it. And you can have multiple levels of investors and investor types of returns.
Now, I don’t want to bore you with that much longer. I wanted to expose you to that. And there’s a lot of asset protection implications with the type of entity that you pick, but I’m going to let the expert in one of our future episodes, McKay Johnson, share with you how to pick the right entity for you and what the benefits are for taxation.
Since we’re talking about the type of entities you can choose from to start your business, I’d like to introduce you to an expert on this, McKay Johnson, who is a lawyer with Durham Jones & Pinegar in Salt Lake City, Utah.
So what are some options that you think business owners should consider and under what scenarios should they consider?
Well, the top favorite are limited liability company, followed by corporations. And corporations have two flavors, the so-called C corporation and the so-called S corporation. These letters come from the Internal Revenue Code subchapters. So titled blah, blah, blah, Subchapter C is where all of the tax code on C corporations resides. And then Subchapter S is where the other kinds of corporation tax code is at.
So really, a corporation is a corporation is a corporation in some respects, except for an S and a C distinguish themselves as to how they’re taxed.
Exactly. And they’d file different tax returns—how their tax shows up on the different tax returns, corporations, IBM, et cetera. They file form 1120, 1-1-2-0. But when I was a—I had my own law corporation. It was a professional corporation that made the S election as it’s called. And so for many years, I myself was filing form 1120 S.
So let’s talk about—how do they make the S election and what does it involve? Is it complicated?
Well, it can be tricky because every—I get a daily news tax letter, and every week, there’s somebody getting private letter ruling relief because they botched their S election.
They forgot to do it, or they didn’t do it properly.
Exactly. Exactly. And so it’s been good to see how often the service will be generous in its relief, but it’s an expensive thing to get a private letter ruling. I got to tell you, it’s breathtaking.
So an ounce of prevention is worth a pound of cure.
Yeah. And then some.
So you recommend they go to someone, an attorney or an accountant— certainly an attorney—on the corporation and then not just get a corporation, but also deal with the tax aspects of it. There’s one thing to set up the corporation to get the liability protection.
And let’s say that that’s true, whether it’s an LLC, a corporation, CRS, sometimes a limited partnership is appropriate and the best choice in that list, but those are the four big ones. But the ones that most people should consider examining first would be the limited liability company, followed by S corporation. Now, what we need is something that is a legally recognized entity apart and separate from the people. So in my case, as a sole-shareholder S corporation case, it was really important to go to the state law that says, “In our state, if you want a corporation, this is what you will do. You will file articles of incorporation. These articles of incorporation will contain a checklist of required minimum data.” And you go on to say, “What else do you need to have a corporation?”
So it’s like getting permission from the state, “If you do these things, we will recognize that. And not you as the—we will recognize you as a shareholder, but not the business owner when it comes to liability.”
And it’s the same for a limited liability company. They were first introduced in Wyoming I believe in 1995. Oh a long time ago, 1997 for Utah. And I’m pretty sure all 50 states now have some statute that says, “You have a choice. You can have a corporation, you can have a partnership.” And there’s a long list of other obscure business entities that we will pass on. But in our state, “If you want a limited liability company, here’s the checklist.” In Utah, it’s called “Certificate of Organization.” It has to be created just so, it has to be filed with the state. In Utah, there’s a companion document called “statement of authority.” It has to contain specific information about who’s in charge, who has the power to sign and bind on behalf of the company.
Including opening bank accounts, signing loan documents, buying assets, selling assets.
Yeah exactly. The goal seems to create a public online record that the company exists, is it active? Sometimes states will call it “good standing.” Utah just says active, delinquent, expired, or terminated.
Oh, okay. Terminated, that doesn’t sound very good.
Yeah. So that they’ll say, “Craig set up a business back in 1992, but he failed to file his renewal paperwork.”
So this is more than just, if you’re a sole proprietor, once you’re set up, you just keep going on. But if you’re a corporation or an LLC, there’s some manual work you have to do besides file a tax return to stay recognized as a separate entity.
We’re grateful that McKay would agree to be a guest on our show today, and offer his insights. I hope you found them beneficial. Thanks McKay.
Now let’s get onto some of the more easy and fun things. As I mentioned, we’re now onto the more easy and fun things. One of the greatest lessons that I learned, before I started my business as a CPA was to take a vacation. Now we can all dream of where we’d like to go. Sometimes we’re limited by where we can afford to go. But when I was working for a CPA firm, before I decided to jump out and start on my own, I had somebody come into the office one day and they said to me, as they were picking up their tax return, they said, “Craig, I’m a retired CPA. I’ve learned to delegate, that’s why your firm’s doing my tax returns. But I learned something important in business. When I started my CPA firm, I took my business plan to the bank. And I had done a cash flow projection,” like we’ve talked about today, “and I gave it to the banker. The banker looked at it, and a few weeks later, called me back. And he said, ‘We’re not approving your loan.’” And he said, “Why? What’s wrong?” And he said, “I don’t see in here that you’re taking a vacation. There’s nothing budgeted for you to go out of town and go on vacation.”
So he said, “Give it back to me, let me revise it.” It’s important to take time. And the banker said, “I won’t give you the loan because you need to take time or you’re going to burn out. And I don’t want to be dealing with a burned-out borrower.” You need to take the time. Tax seasons are busy, the accounting world centers around deadlines. And when you have those deadline pressures all the time, people tend to get overburdened. They stop using good judgment, and not be able to effectively grow their business.
So I recommend taking a vacation. I started doing that, in fact, I have two quick stories to tell you on that. One was the IRS came to do a surprise audit one day on April 15th. And guess where I was? My practice was in Utah, I was on a golf course in Arizona. I had been there for two days. I left before the end of the tax season because I had effectively done the work that I could and extended with the permission of my clients, their tax returns that year. I told the IRS, “Go ahead and do the surprise audit with my assistant, who is there in the office.” And I didn’t have to deal with the harassment, and I didn’t have to deal with the hassle and the emotional trauma that maybe was a little bit behind some of the surprise audit that day.
I’m grateful that the banker taught me to take a vacation. When I started the development business, you can imagine taking a business and growing it to several hundred million-dollar business. The demands on my time were very taxing. While I tried to balance it with time with my family and my other commitments to my religion and to my other volunteer efforts in the community, I found that one way to break free and to effectively learn to delegate was to travel to Europe. What I loved about it is during the summertime, it’s hot in Arizona and I could be nine-hour time zone difference in Europe. Which meant, while I was awake, they were asleep in Arizona. And when they were awake, I was asleep. And so no one could reach me.
I was able to conduct the business I needed to effectively, through email and through a few set up conferences during the three-week timeframe that we would schedule as a family to go out of town. But it helped me to recharge my battery and took me out of the flow of every day. And when I came back, I found that I was fresher, I had a clear mind, and I was able to make better decisions. I found that often on the travel—you can imagine nine times zones away—you have time when you’re traveling back on the plane to reflect and to think. And so I had 12-hour flights. I would sit down and after I decompressed for three weeks, I could write down, “What are the major objectives? What are the changes I wanted to make? What are directions I wanted to pick for the business?” It allowed me time to reflect. Remember, I was a sole owner and the sole shareholder of a good-sized business. And what happens is often you have to take time with yourself, and have meetings with yourself. And it allowed me time to decompress and have effective meetings with myself.
The next thing I would like to talk about is having a hobby. Hobbies can be fun, and should be fun. And if they’re not, you need to change yours. I remember early as a CPA, out on the golf course, with a client of mine, and he said to me—he was very successful—and he said to me, “Craig, you need to have a hobby.” And I said, “Well, I know I’m just learning to golf. I may not look very good, so maybe I should consider a different hobby.” He goes, “No, that’s not what I’m saying.” He said, “You’re working a lot. And you take on a lot of clients. And I send a lot of my friends to you because you’re good at taking care of them.” But he said, “You need to take care of yourself.” He said, “I found in business, as a business owner, I have to have a hobby where I have scheduled time each week, where I can go do something that I enjoy, that takes me away from the business.” And I said, “Oh really? So what are yours?” And he said, “Well, bowling.” And he belonged to a bowling league and golf.
And so I’ve taken up golf, I’ve taken up swimming. And I also took up equestrian activities where I became a world champion at the Amateur Fine Harness in the Saddlebred world—very satisfying, very exhilarating. And it has allowed me to focus and practice and do something and accomplish outside the business world. I highly recommend that you, as you start a business or as you develop an enduring business, that you not burn out by taking regular vacations and developing a hobby that you really enjoy, and that brings you satisfaction and a thrill. Because owning a business can bring a lot of satisfaction in emotional ways, and bring you a thrill, especially as you see it becoming more and more rewarding.
I’ll add one thing that’s not on the board today, because I’ve found it to be very effective for me. I’ve told you about my car accident before. And one of the things that I learned from my car accident was that I needed to spend time to take care of my body. Fortunately, I was young and I was healthy. But I found that as I exercise on a daily basis, that I am able to better handle the stress and the rigors of being a business owner. In fact, I think about it so much that I’m adding it to The Biz Sherpa Scorecard. I will be having Zach Gulley, who’s a personal trainer, come and share with us the benefits and how to schedule regular exercise into your routine to make you a more effective business owner.
Now lastly, I want to talk about delegating effectively. This is not something that I’ve always done very well. In fact, I would probably rate myself as probably poor at doing that during a good part of my career. So that makes me an expert at sharing it with you today. I really struggled. Sometimes it seems a lot easier to do it yourself than to spend time teaching someone else. Because sometimes it seems like spending five times as long to teach someone to do something that takes you 10 minutes, it doesn’t seem like a wise investment of one hour. But when you are able to find someone competent, and are able to delegate where they have expertise beyond you, you may spend an hour and they will give you hundreds and hundreds, if not thousands, of hours of more freedom and flexibility to do what you do best.
You’ve heard me talk about it before in my Biz Sherpa Scorecard. And in our first episode, I talked about spending 80 percent of your time doing those things that will make the biggest difference in your business and to your customers. That’s where you need to learn to delegate everything as you measure that on The Biz Sherpa Scorecard. Learn to find somebody in your organization, or outside your organization, you can delegate those tasks or functions that has the expertise and have it take it off your shoulders. At a later stage in my life, because I have a master’s degree in taxation, I’ve been doing my tax returns my whole life, except for a brief period during the business as it got so big, that I couldn’t. But as I wound down the business, I took over doing all of them again. In some cases, I was doing 20 to 30 tax returns just to do all the different investment holdings that I had.
I have finally this year, made a big stride. I’ve been able to have my son Mike help me out, and I’ve been able to delegate some of my personal responsibilities that I’ve taken on for taxes freeing me up to have more time to do my podcast. Now, I’m thoroughly enjoying my podcast and I love the thought of Mike helping me with this. I think that that’s one of the things that will help you have an enduring business, is learning early on how to delegate. I understand why that might seem impractical. You might be saying, “But Craig, how can I effectively delegate? I don’t have the money to hire somebody else.” And that I do understand.
And so do it yourself, but be careful. Don’t go beyond the period of time when you can start to afford to do it. While you may not be hitting all of your income goals, I’ve often said, “You need to take time and look at what is sufficient for your needs.” And while you may not be hitting your top income objective, if you’re hitting and surpassing your income objective, take the time to spread the wealth, hire other people. That’s one of the beauties of the free enterprise system in the United States of America. Small businesses are responsible for creating over 65 percent of the jobs in America each year. You have that opportunity by you delegating to other people.
Now, as I started this episode, I thanked you for being willing to come back again and again. I appreciate your response and your feedback. What’s important to me is that I don’t have any sponsors, I don’t advertise. What’s important to me is that you share this with other people. Not because I want to become popular, actually that’s quite the opposite. That’s what kept me for years from doing it. I always thought you had to go out and promote yourself. What I want from this podcast is for it to make a difference in your life, and that you are able to share it with at least one other person. And that something that I say or something that they feel or something that they think about that might be inspired by one of my guests or something that I might happen to say, makes a big difference in their life. It’s a game changer for them. And it makes their business more successful, and more satisfying to them emotionally, and rewarding financially. That’s what I’m after. It’s a climb to the top. It’s difficult. It’s one of the hardest things you’ll ever do, but one of the most rewarding things you could ever do. I’m here to help you to climb to the top. I’m Craig Willett, The Biz Sherpa. Thanks for joining me today.
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