ASR Blog

The Squeaky Wheel Gets the Check

Having your own business is great. You make your own hours, report to yourself and you get all the credit for your hard work. So why do most professionals (whether contractors, writers, web developers, photographers or lawyers) wind up going back to work for The Man after a year or so on their own?

Because it takes forever to get paid.

I meet these people all the time. They used to have consulting businesses but they couldn't wait the six weeks it normall takes to get paid by their clients. And I'm thinking: six weeks? That's brutal. It's a wonder most people are able to stay in business at all.

For the sake of small businesses everywhere it's imperative that this pay schedule improves, especially since bills and other business expenses always arrive on-the-dot. But you have to strike a delicate balance. You don't want to annoy your clients or seem pushy. Entrepreneur has Five Expert Tips for getting paid fast. And they all seem to make sense. The most important one, I believe, is to "make some noise."

This is not to say you should hassle the companies you're doing business with (or their controllers), it just means you should stay in touch and send them reminders. They all intend to pay you--or at least we hope they do--but if you're quiet as a mouse it's your own fault if you wind up waiting six, seven or even eight weeks for payment.

So, to all the small business owners out there: Share your tips on how to get paid faster without annoying your clients. We will all be the better for it.

Retirement Savings: 'Just Do It'

I'm a young guy. I've got, let's see ... 30, maybe even 40, years of work left in me. It's a sobering thought. Even more sobering, though, was the recent realization that as an independent business owner, I no longer have access to a cushy 401(k) account. And with social security dying an almost certain death, that means there should be two words sticking to the tip of my tongue: "retirement" and "savings."

Small business owners do a terrible job with their personal finances. As Rich Whittle points out via an Associated Press article at Dane Carlson's Business Opportunities Weblog, they often neglect their own portfolio while they're busy building up their business. Everything's tied up in their company, and if things go south, well, so does their chance for a worry-free retirement.

Not wanting to spend my golden years in a sub-par home eating lunch off the children's menu to save cash, I decided it was time to do some serious financial planning. I therefore rolled over the 401(k) from my last office job into a Rollover IRA. Months later, I'm finally getting around to investing it. So I called up my financial planner today and said, a little more tactfully, "Um, help."

Help he did. He advised me to keep my cash in my Rollover account — a traditional IRA — in order to take advantage of more immediate tax savings. As an independent contractor, I'm terrified of being robbed poor by the IRS. So keeping my retirement savings in a traditional IRA means that I can deduct contributions to it — up to $4,000 a year — from my tax return. I love the "D" word, so I signed off on his suggestion. He then helped me identify some high-yield mutual funds in which to invest, and I feel a million times better today about my future than I did yesterday. Not because my investments are guaranteed — they're not — but because I took 30 minutes to actually invest them.

I suggest you do the same. Just because you're working for yourself doesn't mean you don't deserve the benefits — including a retirement plan — that you'd receive if you were working for somebody else.

Take an hour to research your options — I like the IRA, and there's a great article up this week at The IRA Expert blog about the pros and cons of Traditional IRAs and Roth IRAs — and then commit to setting aside as much as you can every month toward your future. It's hard when you're a cash-strapped entrepreneur to put cash aside, but I figure it will be many times harder when you're a cash-strapped senior.

Take Nike's advice and "Just do it" already.

Entrepreneurs Can't Be 'Big Spenders'

I was channel surfing this morning, trying to take advantage of a rare moment of downtime, when I came across a show on A&E called Big Spender. In it, host Larry Winget, who calls himself the "Pitbull of Personal Development," councils folks who have gotten themselves trapped under insurmountable hills of debt. In this morning's episode, two women — Cassandra and Malasia — have started their own business making and selling lip gloss. Their business, however, is failing and floundering thanks to their personal spending habits.

"A dream that doesn't make any money isn't a business," Winget tells the ladies. "A business makes money."

I can be pretty cheap sometimes. I shop "Buy One, Get One Free" deals at the grocery store. I make a fuss when my boyfriend spends money on something he doesn't really need. I take the bus everywhere I go just to save a couple bucks. I feel like a miser — frugal, parsimonious, tightfisted to the core.

Wathcing Cassandra and Malasia, however, reminded me that it's OK — good, even — to be cheap sometimes. Especially when you're running a business. These ladies were spending $4,545 a month, but making only $350. Their business philosophy: "Fake it 'til you make it."

Are you kidding me?

Winget put the girls on a budget — no eating out, no buying new clothes, no swiping their credit cards — and asked them to put their business on hold while they repaid all of their debt and pursued some business education to learn how to properly fund, start and manage a business.

Winget had some really good lessons for new business owners — though I doubt very much that his thick-headed pupils digested them:

• Don't spend what you don't have. If your business isn't making money, neither are you.
• Separate church and state. Don't use your personal finances to fund your business. In most cases, it's best to have separate accounts and separate lines of credit.
• Learn from others' mistakes. You shouldn't start a business blind. Read books. Talk to other business owners. Do some homework before you put your own money on the line.
• Earn your rewards. Be thrifty — that is, until you've earned the right to indulge. What fun is owning your own business, after all, if you can't buy yourself a present every now and then? You can. But you've got to work for the right to do it, first.

When it comes to finances, business owners remind me of college students. There are some who get their first credit card and use it responsibly — only for emergencies, for example, or to build good credit with one small purchase every month. Others, however, get their first credit card and see it as a license to spend. Only one kind of student will finish college with a financial head start; the other kind falls perpetually behind. Business owners are the same. Do yourself a favor, then, and be the head-start kind.