Nail Your Small Business Accounting

Small business accounting is like staying healthy. Everyone knows the importance but few enjoy it. Although important, usually only a crisis makes it urgent. Staying reasonably healthy only requires that you understand (and follow) a few basic principles. For example, excess sugar and processed foods are bad for your health. Walking 10,000 steps per day and elevating your heart rate for 20 minutes, 2-3 times per week is a good exercise plan.

Likewise, you only need to know a few basic principles to maintain a good accounting system.

At a minimum, you need to understand the accounting roles needing to be filled and then assign people to fill those roles. You may not even need to hire anyone. Think of your accounting team as a collection of roles that need to be filled and not necessarily a collection of people.

Your accounting may be so simple that you fill the roles to start with. You may have another team member who can handle a few extra duties. You may hire a part-time bookkeeper for a few hours per month. It doesn’t matter how. What matters is that these roles get filled from the beginning (before a crisis).

Getting your accounting done doesn’t have to be complicated or expensive. You just have to know what to do.

The followings are accounting roles that need to be filled in most businesses:

Chief Financial Officer (CFO). Don’t be intimidated by this title. It takes a fairly large company to need a full-time CFO, and it may be a while before you formally give this title to anyone. The title simply describes a role that needs to be filled.

Someone needs to oversee the accounting. Someone needs to make sure the accounting roles are filled effectively. Someone needs to make sure the books stay clean. Someone needs to make sure the data provided by the books is both accurate and interpreted correctly. Someone needs to use the numbers to advise other leaders on decisions. Someone needs to make sure you are complaint with tax, labor, and other laws.

In the beginning, this role may be filled by you as the business owner, ideally with help from a CPA or contract CFO. Someone needs to make sure the rest of the accounting function is operating effectively.

I’ve written other posts about why a startup needs a CFO and what your CFO should do for you.

Bookkeeper. This function makes sure the books are accurate at least monthly. The bookkeeper should follow a month-end checklist to make sure all transactions get into the accounting software and the bank accounts are reconciled. Depending on the nature of the business, they may handle other transactions such as fixed asset purchase/disposal/depreciation, inventory adjustments, loan and investment schedules, etc.

Once the books are accurate for the month, they can run financial statements and other reports helpful to management.

Accounts Receivable. This function is responsible for the process from customer order to customer payment. This role is simple in a retail store with only point of sale transactions. However, in many businesses customers get billed for products or services and then pay on agreed terms. Someone needs to make sure customers get billed accurately and pay on time. They also need to make sure payments get entered in accounting software so customer accounts remain accurate.

You won’t be in business long if you don’t pay attention to this role. Customers will be frustrated by inaccurate billing and statements. Failing to invoice a customer means lost revenue. Cash flow will suffer if customers don’t pay on time.

Accounts Payable. This function is responsible for the process from making a purchase to paying for that purchase (the mirror of Accounts Receivable). This usually involves receiving bills, verifying they are legitimate, entering them into accounting software, and making sure payments are on time and accurately entered. Even point of sale purchases require the receipt to be tracked and the transaction to be categorized accurately in the books.

HR/Payroll. The function handles hiring and compensating employees. It makes sure new employee paperwork is complete. It makes sure working conditions and practices comply with labor laws. It makes sure employees are paid accurately and on time. It administers employee benefits. Perhaps most importantly, it makes sure payroll tax is remitted accurately and on time.

This function can be completely outsourced to a professional employer organization (PEO). At a minimum, every company should outsource payroll. An abundance of service providers make payroll extremely cheap and easy. You shouldn’t spend more than a $100 and a few minutes per month on payroll if you have a small team. Company like Zen Payroll and Intuit do everything from calculating taxes to direct depositing pay into employee bank accounts to submitting payroll taxes.

Putting it all together

If these roles' workload doesn’t justify new full-time employees, how do you fill them?

I’m biased because this is the work I specialize in, but I recommend hiring a contract CFO to help you set up accounting systems and plug your existing team into the necessary roles. The future headaches you’ll avoid is well worth the hourly rate you’ll pay for an experienced CFO. It shouldn’t take very many hours.

For example, many businesses already have some kind of administrative assistant. A CFO can set up a system simple enough to be run by someone not training in accounting. The admin can handle 99% of the work, and the CFO can be available as needed to answer questions and handle the more complicated transactions. A contract CFO combined with low-cost administrative staff can inexpensively handle the accounting for most small businesses.

That said, there is no one-size-fits-all approach to accounting. Business owners must first recognize that a good accounting system is important, and then they must understand the roles that need to be filled. From there they can build a team to make it happen.

Question: What tips do you have for running small business accounting?

Why You Should Create Systems to Automate Your Business

In my last post, I wrote about why it’s important to keep your business books clean. Accounting is one of those mundane details that most business owners don’t like to deal with. They would rather spend time building and selling their product or service. However, it is important to invest some time, attention, and money in keeping your books clean. This will allow you to make better decisions and help you avoid costly and distracting tax nightmares and clean-up projects.

Hopefully I’ve convinced you that it’s important to invest in clean books.

Now where do you start? Unless you have an accounting background or lots of business experience, getting started may be intimidating.

The answer is to start by creating systems. Creating a system begins with defining roles that need to be filled and then building a team to fill those roles.

Before diving into accounting systems specifically, I want to talk about the importance of creating systems in all areas of your business.

In business and life, the key to creating order out of chaos is systems. Systems allow us to automate the mundane so we can focus our greatest efforts on fine tuning rather than cleaning up messes.

It doesn’t mean smart and skilled people aren’t required to carry out the system. It means these smart people don’t have to waste their brainpower trying to figure out the process each time. Instead, they can use their valuable mind to work on the business rather than in the business.

Those familiar with with The E-Myth will recognize the principle of working ON your business rather than IN your business. The author encourages business owners to look at a business like a system. That system needs various roles to be performed to operate smoothly. You start by defining what roles need to be filled and then plug people into those roles. The roles should be so well-defined that they can be performed by almost anyone (within the parameters of certain skills sets).

No role should be completely dependent on a specific person. People should be interchangeable. This may sound cold, but the reality is people come and go. Turnover is always somewhat disruptive, but having well-defined roles and systems will minimize the disruption.

Hopefully I’ve convinced you that you should create systems in all areas of your business, including accounting.

In my next post I will get into more detail about how to create accounting systems specifically.

Question: How have systems helped your business? 

Why Your Business Should Invest in Clean Books

Most business owners prefer to focus on building and selling their product or service rather than being bothered with the many mundane details that go along with running a business. I’ve written before about how nothing else matters until a business has a product or service to sell and customers to sell it to. However, many of these mundane details can hinder or even kill a business if not tended to.

Business books (accounting records) are often an afterthought, but having clean books is one of those important details.

I started writing a post about how to keep clean books, but I realized that you won’t care how to keep clean books until you understand why it’s worth your precious attention.

I’ll save the how for next week. For now, I’ll try to convince you of why you should make clean books a priority.

First, what does it mean to have clean books? 

Clean can mean different things to different businesses, but in general clean means having accurate, up-to-date, and understandable financial information. You should be able to rely on the financial information in your books to make decisions.

To get specific, for many businesses clean means having accounts receivable (money owed to you) and accounts payable (money you owe) records  always up to date. Otherwise, you hurt your cash flow by being slow to invoice customers and follow up on late payments. You hurt vendor relationships by being late on bills.

Clean also means having an accurate income statement and balance sheet soon after the end of each month. Having accurate financial statements usually means bank accounts are reconciled, revenue and expenses are matched in the correct period, inventory is accurate, and depending on the nature of the business, other accounts are up to date.

Now, why should you make clean books a priority? 

1. To help you make the best decisions possible

You are never going to have enough information to make a decision. But you can at least make sure you have all the information possible. The primary reason to have clean books is to give yourself as much accurate information as possible for decision making.

Do you have enough cash to invest in that new piece of equipment? How will you know unless you have a current picture of cash in the bank, money owed to you (receivables), and money you owe (payables)? An accurate income statement showing a history of healthy profit can give you confidence that cash will keep coming in.

Often business owners make decisions based on cash in the bank, but cash by itself is not a good indicator of business health.

A high bank balance might give you a false sense of security if you don’t realize that your overdue payables are more than cash available. This problem is common for businesses, such as retail stores, that collect money up front from customers but pay their suppliers on terms.

A low cash balance might keep you up at night, but accurate receivables might show that you would have plenty of cash if could collect overdue balances from customers. A simple collections effort might solve your cash problems.

Clean books will show you really how well your business is doing regardless of cash levels.

2. To help you avoid tax nightmares

You may think it will never happen to you, but government agencies and insurance companies do perform audits. Income tax, sales tax, payroll tax, worker’s compensation and liability insurance, are examples of potential audits.

Many businesses have gone down, bringing the personal lives of the owners with them, for failure to accurately report and pay taxes.

Even if you have nothing to hide, messy books will make audits time-consuming and expensive. Clean books make audits quick and simple.

It’s better to preempt these problems by investing in clean books up front.

3. Books are expensive to clean up, and you will have to clean them up

You will eventually need to clean up your books. It may be forced a government agency. It may be driven by your own desire for better information. It may be required by capital sources, such as banks or investors.

Like many other messes in life, messy books are much less expensive to avoid than to clean up.

Cleaning up books takes a different, and more expensive, skill set than maintaining books.

For a small up-front investment, an experienced accountant can help you set up accounting systems that low-cost bookkeepers or clerks can maintain. Periodic informal reviews by this accountant, such as quarterly or annually, can ensure those systems are operating properly.

In contrast, an experienced accountant will have to do most of the work to clean up your books. The clean-up can’t be done using simple systems that low-cost staff can perform.

I’ll write more in my next post about how to set up systems and people for keeping your books clean.

Keeping clean books is not the most exciting part of running a business (unless your business is an accounting firm). However, clean books will help the more exciting aspects of your business run more smoothly. Clean books can also help you avoid distracting audits and clean-up projects in the future.

Question: Why do you think it’s important to keep your books clean? 

How to Use Evernote As Your Digital Brain

Evernote is my digital brain. I dump almost everything digital I need to know or keep into Evernote. I take notes, jot down ideas, and keep a journal, for example. Evernote has saved me significant time, cost, and headache many times by giving me instant access to my entire life from anywhere. I was once clearing customs at an airport and realized I had forgotten something important for my visa. I would have been turned away without it, wasting the trip. Luckily, I had a picture of the document in Evernote, which I was able to show customs officials on my phone.

Evernote stores your data securely online and allows you to access it using a website and apps on almost every possible platform. I mostly use the Mac app (in which I’m writing this post now) and the iPhone app.

It would be impossible to cover in one post every way I use Evernote, but here are some of the highlights:

Get rid of paper

All the paper I keep fits in one small expanding file folder (birth certificates, passports, etc). Every other piece of paper from utility bills to receipts to kids’ report cards and drawings goes into a drawer for periodic scanning with my lightening fast Fujitsu ScanSnap iX500 Scanner. After scanning, the paper goes into the trash or shredder.

I drag every scanned PDF file into Evernote, which automatically creates a separate note for each file. I don’t do much tagging or file naming because Evernote can search text within PDFs and images (even handwritten text).

I do tag some things to make a group of related notes easier to find later, such as car maintenance invoices. This allows me to quickly put together maintenance records when I sell a vehicle.

Store information 

I record anything in Evernote that I think I’ll ever need to refer to again. I keep passport and drivers license pictures, account numbers, etc. I take care of the finances in my family, so I have a note called "Instructions for Jacki if Dave Dies” with anything my wife would need to know. That reminds me, I need to update it…

It may make you nervous to store sensitive information online, which is a legitimate concern. I set up two-factor authentication, meaning someone would need both my password and my phone (for a text verification code) to log into my account.

Anything stored on Evernote servers is encrypted (even Evernote employees can’t get into your data). You can also encrypt specific notes and parts of notes. If someone gets into your account (for example, you leave your computer open), they would need a separate password to decrypt those notes.

I also enabled Touch ID on the iPhone app. Even if someone gets into my phone, they would need my passcode or thumb to get into the Evernote app.

Take notes

Last, but not least, I use Evernote to take notes (funny thing, given the service name). I rarely write notes on paper. Any time I start a phone call or meeting, I open a new note in Evernote just in case I need to take notes. I often refer to past conversations and meetings using a simple search, which would be difficult using note pads.

I also keep track of the status of projects. I work with several different companies, and each one has a lot going on. Evernote is the only way I can keep it all straight.

I could fill several blog posts with how I use Evernote, but suffice to say, it’s awesome! I can access my entire life in seconds from anywhere.

Question: How do you use Evernote? 

How to Lead a Virtual Team

Using a virtual team to carry out at least part of your business can provide greater flexibility, cost savings, and access to talent when compared to an on-site team. My last two posts have been about why you should consider building a virtual team and how to build a virtual team to take advantage of these benefits.

I will continue on that theme in this post by writing about how to lead a virtual team.

Leading a virtual team isn’t much different from leading a traditional on-site team. However, some leadership and management principles can be implemented a little differently.

The following are some thoughts about how these principles can be applied to leading a virtual team.

Invest in documentation and training

Business owners and managers build a team so they can leverage their time. As their businesses grow, they can’t do everything themselves. They need to hire and train people who can take some of the workload.

The best-run businesses have well-defined roles that need to be filled and operating procedures for carrying out those roles. The E-Myth is a great book about building a company that relies on roles and procedures rather than specific people.

Having well-defined roles and procedures may be even more important for a virtual team compared to a local team.

When business owners are in the same location as the rest of the team, the owner can model correct performance, observe team members directly, and provide training and feedback in person.

These dynamics are different for a virtual team. Clear written procedures are important for virtual teams. Team members can primarily learn how to do their job by reading and following these procedures. Owners can monitor results and provide feedback.

Good documentation also makes turnover less disruptive. A virtual team gives you more flexibility to grow and shrink your team as needed, but that flexibility goes both ways. You may have more turnover with a virtual team than a traditional team. Having written procedures makes it much easier to insert someone else into that role.

I just started using a combination of Sweet Process and Snag It for documenting procedures, and I am happy with the results so far. I can write out steps and attach screen shot images and videos with annotations.

Track status and review promptly 

On site, you can check the status of a project by walking around. If revisions are needed, it’s easy to pass the work back for quick edits. It’s not that easy with a virtual team.

With a virtual team it can be tempting to do the work or make revisions yourself rather than incur the overhead of status updates and revision cycles. Especially if your team is on the other side of the world, the revision cycle can take 24 hours.

However, you can handle status updates and revisions easily easily with technology tools.

Email is not a good tool for managing tasks and projects. Files, status updates, and instructions can get scattered across several email strings, and it can be time-consuming and difficult to stay organized.

I prefer to use Basecamp and Google Sheets checklists for managing tasks and projects.

With Basecamp you can create projects, task list categories, and individual tasks. When I need something done, I will assign a task in Basecamp to a team member and add instructions and files to the task. The team member can make comments on the task with questions. When they are done, they assign the task back to me so I know it’s ready for my review.

For recurring and multi-step tasks, such as month-end accounting procedures, I use Google Sheets checklists. This allows me to check the status at any time.

As you assign tasks, it’s important to review and provide feedback quickly. I’m guilty of not reviewing tasks right away, and sometimes mistakes get repeated if I don’t catch them early.

Communicate regularly and clearly

Since a virtual team is out of sight, it’s easy for them to be out of mind. To be an effective leader, you need to keep them in mind just as much as an in-person team.

If team members are working on a long project or if their duties only require periodic action, it’s easy to neglect them. Just like a good in-person leader, check in regularly, even for no reason other than to see how they’re doing.

Don’t just dump tasks on them and expect them to figure it out. Provide clear instructions along with prompt and patient responses to questions.

Provide regular feedback, preferably using the sandwich approach. Start with something positive, provide constructive feedback, and then end on a positive note. People are people everywhere in the world, but some people and cultures are especially sensitive to negative feedback.

An effective method for maintaining morale can be to frame mistakes as your fault. “I’m sorry, I must not have given very good instructions” or phrases like that.

Summary

Principles of leadership are the same whether those you lead are in the same room or on the other side of the world. However, it’s important to adapt your leadership practices to effectively manage a virtual team. As you lead effectively, you can take advantage of the flexibility, cost savings, and access to talent possible with virtual teams.

Question: What practices have you found helpful in leading a virtual team? 

How to Build a Virtual Team

In my last post, I wrote about why you should consider building a virtual team to grow your business. In this post I’ll cover how to actually build a virtual team.

Technology has made building and leading a virtual team easier than ever. Many websites connect available talent with those who can use it, and free or inexpensive tools make virtual collaboration easy.

The following are steps you can work through as you build your virtual team.

1. Decide what kind of team will work for you

There are many different ways to to build a virtual team. Full time or part time. National or international. Specialists or generalists.

If part time, do you want the same people consistently or would you hire for specific projects?

National team members give you the benefit of native language skills and similar time zones. International team members are usually less expensive and can get work done while you sleep.

Of course, your team can be a mix depending on the needs for each role.

You can do some research to help you think through your options.

Chris Drucker is a prominent thought leader around building a business with virtual teams. He wrote a book, Virtual Freedom : How to Work with Virtual Staff to Buy More Time, Become More Productive and Build Your Dream Business, and a weekly New Business Podcast.

Michael Hyatt also writes about building virtual teams, including his book The Virtual Assistant Solution.

2. Find and hire

Once you decide what kind of team member you are looking for, it’s time to find the right person. Many online services can help.

eaHELP specializes in helping you find US-based virtual assistants.

onlinejobs.ph specializes in matching employers to full and part time Filipinos. You can hire full-time, skilled people for $200-$1000 USD per month.

Freelancer sites like Upwork (created by the merger between oDesk and Elance) help you find a variety of skills from all over the world.

Sparehire specializes in high-end finance and consulting projects that range from $50 to $300 per hour.

3. Train and delegate

Once you find the right person, you need to effectively train them to do their job and then delegate tasks to them.

Collaboration software like Slack and project management software like Basecamp make it easy to communicate and assign tasks.

It may be tempting to throw a bunch of tasks at them and expect them to figure it out. However, it may take time to gauge their skill level and how they work best. Expect to spend a lot of time with them up front to make sure they understand your expectations.

4. Lead effectively

Sometimes out of sight means out of mind, but it’s important to remember that these people are part of  your team. To help them feel good about doing their best work for you, you need to build a relationship with them just like you would with an on-site team.

Praise them for good work. Find out about their family, interests, and future goals. Acknowledge and celebrate life events, such as birthdays and the birth of children. Let them know how important they are to your team.

Building a business with a virtual team can be cost-effective and give you access to a large talent pool. However, it can take just as much work as an on-site team to find, hire, train, delegate to, and lead your virtual team.

As you invest the time and effort required, your virtual team can help you build a successful business.

Question: How have you gone about building a virtual team? 

Why You Should Consider Building a Virtual Team

Are you a business owner or manager who needs help to grow your business? Are you hesitating because you’re not ready for or can’t afford a full-time person sitting in your office? Hiring full-time employees to sit in an office you rent is not your only option for building a team.  In fact, before even thinking about local full-time employees, you should consider whether or not a virtual team would work for you.

“Virtual team" can describe a broad range of structures, but in short it refers to a team of people who work together from different locations and possibly at different times. Communication is facilitated by technology rather than face-to-face contact.

Many prominent organizations have been successful with virtual teams.

37Signals, now Basecamp, is an extremely successful software company with a team mostly working remotely throughout the world.

Michael Hyatt left the CEO post at Thomas Nelson Publishers to pursue writing and speaking full-time. Over the last few years he has built a virtual team to support his expanding product line.

The benefits of a virtual team include: 

Flexibility. You can start by hiring part-time contractors to help as needed, and you can quickly expand or contract as your needs change.

Cost. If you hire contractors, you don’t have the costs and obligations of employees. You don’t have the overhead of maintaining office space. You will also have access to areas of the world with lower cost of living, which translates to lower required pay. The Philippines and India are popular places to hire for virtual teams because of their skilled and low-cost labor.

Access to talent. Building a virtual team gives you access to a worldwide talent pool. This is especially beneficial for businesses based in rural areas, where the talent pool is small, and highly competitive markets, such as the San Francisco Bay Area, where talent is expensive and difficult to attract and retain.

Of course, building a virtual team is not for everyone and all situations.

Drawbacks of a virtual team include: 

Compatibility with the business. Some businesses simply require employees on site. You can’t build a virtual food services or landscaping team.

Communication. Technology makes virtual communication more effective than ever, but technology isn’t as good as face-to-face conversations for reading body language, for example. Also, casual conversations in the office can lead to breakthroughs.

Relationships. Related to communication, it’s easier to build strong team bonds while working side by side, day after day.

Oversight. You are not able to see when people arrive at and leave the office, and you can’t see what they’re working on. You will have to be more concerned about the end result than how your team gets there. In my opinion, that’s a better way to lead anyway, but it’s a different mindset than the traditional model.

The teams I have worked with over the last few years have have been mostly virtual. Most team members are in the US and Canada, and we also use overseas bookkeepers. It is more difficult to communicate and build strong relationships with team members in other locations, but in our case the benefits outweigh the drawbacks.

Business owners and managers should at least consider whether or not a virtual team would work for them.

Question: How have you been successful building virtual team? 

3 Lessons Ragnar Taught Me About Pushing to the Limit

I recently ran the Ragnar Wasatch Back 200(ish)-mile relay race with 11 friends. We started at 7 am on Friday in Logan, Utah and ended at about 6 pm on Saturday in Midway, Utah. A few months ago my wife convinced me to join the team. Although I enjoy running, I wasn’t excited about spending two days and a night with little sleep, taking turns running almost a marathon distance.

However, I have to admit: It was more fun and rewarding than I could have imagined. I’ve been bit by the Ragnar bug, and we’re already planning for next year.

One of the benefits of being pushed to your limit is the lessons you learn. Here are three of the lessons my Ragnar experience taught me:

1. Prepare under conditions similar to performance

I ran a lot to prepare for Ragnar. I followed a half marathon training plan, and I was well prepared to cover my assigned legs at my expected pace.

However, I had two problems. I don’t like running in the heat, and I don’t like running hills. I mostly skipped both in my training. Unfortunately, two of my three legs were in 90+ degree heat, and two of my three legs had over four times the elevation gain than any of my training runs (my longest run was up a hill in the heat).

It was a good reminder to prepare under conditions similar to performance.

It’s easier said than done. Preparation under realistic conditions is difficult.

Giving a speech is a good example. Writing and practicing can be tedious and boring. It’s good to run through the finished product a few times in your head to make sure you know the material and can speak without notes. It’s good to video yourself giving the speech. It’s better to give the speech to a friend or family member who will pretend to be a real audience and will give you honest feedback.

I recently gave a speech I thought I was prepared for, but I hadn’t practiced it under real conditions. I got distracted and lost my train of thought when someone came in late and whispered to a few people as they tried to find a seat. I should have been prepared for real-world conditions.

2. Leave no regrets

Athletic performance in particular can be painful, but other performances can also be physically, emotionally, and mentally taxing. Examples Intense negotiations, international business travel, and video shoots.

In these situations it’s tempting to back down before you’ve really given it your all. However, our bodies and minds can take much more than we think they can.

As long you're not causing long-term damage, such as by running on an injury, you shouldn’t stop just because you think you've reached your limits. If you give up prematurely, once you’ve had a chance to recover you’ll know you could have done better.

There are times at Ragnar (remember the hills and heat) when I held back and told myself that I was just there to have fun without pushing myself too much. As I look back on my pace, I regret that I didn’t push myself harder.  Not that my Ragnar pace is all that significant, but athletic performance is good practice for doing my best in other areas of life.

Of course, I’m talking about temporarily pushing yourselves to your limit. Pushing your limits day after day without recovery will take a long-term toll. But don’t be afraid to push yourself to the limit for a day, a week, or even a month, as long as you build in sufficient recovery in between.

My biggest fear about Ragnar was not getting enough sleep. I value my 7-8 hours of sleep every night, and I don’t think I function well on less. However, I really only got about 1 hour of sleep during Ragnar (from 5-6 am on Saturday), and I felt fine until Saturday night. I felt even better after sleeping 13 hours that night to recover!

The experience was a good reminder that I shouldn’t be afraid to push myself outside of my comfort zone.

3. Keep good company 

Having good company makes pushing yourself to the limit a much more pleasant experience. You can push each other to do better, support each other when having a hard time, and have fun in general.

We had six people in our vehicle, and our 38 hours together flew by. We had a great time.

Life’s too short to spend time with people you don’t enjoy being around. As you look for a job, hire people, start a company, or participant in events like Ragnar, make sure you choose good company.

Athletic events that push you to the limit are a good to learn about life and business. Ragnar taught me that I can push myself to the limit by preparing under conditions similar to performance, leaving no regrets, and keeping good company.

Question: What have you learned about pushing yourself to the limit? 

5 Essential Software Tools for Your Personal Life

I love using software to boost my productivity and effectiveness. Innovative developers have created software solutions for almost any problem you can think of. Any time I have to do a repetitive task, I search for software to make it easier.

In my last post I wrote about software for your business life. In this post I’ll describe 5 essential tools for your personal life.

1. News and educational content (read) 

All of us face information overload. How do we consume as much content as possible without getting overwhelming and spending too much time?

I use Flipboard to stay on top of the latest news and blog articles. It allows you to combine your Facebook, Twitter, LinkedIn, Google+ and other social media accounts into one feed. The interface looks like a magazine and allows you to quickly flip through a lot of updates and read more in depth anything that catches your eye.

I also use the Kindle app for reading books.

2. News and educational content (listen)

I enjoy sitting down to read, but I consume more content by listening while I do other things. I can educate myself while driving, running, or cleaning out the garage.

I use the Downcast app to listen to podcasts and the Audible app to listen to books.

3. Social media

It’s good to consume content, but it’s also good to be a content creator. As you create and curate content, you serve those around you and build your reputation for expertise.

I use the Buffer app to post to social media. You can set a schedule for posting to each account and then send content to Buffer. Buffer will take care of the posting so you can create the content in batches but spread out the posts for your followers.

For example, when I find interest articles while flipping through Flipboard, I forward them to Buffer for posting on my social media accounts. This allows me to be a content curator without spending any extra time.

4. Personal finance

Budgeting and tracking your spending is important, but it’s not fun (unless you’re a nerd like me). Even though I enjoy it, I don’t want to spend a lot of time on it. Software allows you to automate managing your personal finances.

I use Mint.com to track all of my financial accounts, transactions, and budgets. It connects to all my accounts and automatically download transactions. I spend some time at the beginning of the year setting up my budgets, and then it only takes a few minutes every few days to categorize the latest transactions.

I monitor my actual spending vs budget every week or so, and I take a little longer at the end of each month to review how I did that month.

5. Fitness

Software can be used to improve your fitness in a variety of ways, such as tracking steps, recording runs or bike rides, watching what you eat, and watching your weight.

I recently started using my phone to keep track of my steps every day, and it has motivated me be more active. If I don’t have my 10,000 steps near the end of a day, I’ll go for a walk. I consciously do things throughout the day to make myself walk more, such as parking further away from the store or taking the stairs instead of the elevator.

On an iPhone, the Health app tracks steps, but I don’t like the interface. Several apps use the Health data to display steps in a more useful format. I use the Withing app to both track steps and record my weight (using the Withings wireless scale).

I use the Nike Running app to record runs, and myfitnesspal for tracking calories.

Question: What software do you find essential for your personal life? 

5 Essential Software Tools for Your Business Life

I love using software to boost my productivity and effectiveness. Innovative developers have created software solutions for almost any problem you can think of. Any time I have to do a repetitive task, I search for software to make it easier.

I recently had to convert almost 100 Word files to PDF. It would have taken me at least an hour of mind-numbing work to convert them one at a time. Instead, I searched Google for “convert Word document to PDF,” and the first result was a website that converts multiple uploaded Word files to PDF. Less than 5 minutes later I had 100 PDFs.

Besides automating one-time jobs, software can make your daily routine much more efficient.

Here are 5 essential software tools for your business life.

1. Task list

You have a lot on your plate, and you can let important tasks fall through the cracks if you don’t have a good system for keeping track of to-dos. Sticky notes and scraps of paper may work fine for luddites, but paper gets lost, and you waste time rewriting prioritized lists. I recommend task management software that syncs between a website and mobile app and has good keyboard shortcuts.

My favorite task manager is Remember the Milk. The interface is clean and easy to use with an abundance of shortcuts for quick updates. It syncs reliably between the apps on various platforms. I use the web app for heavy lifting while I’m working at my computer and the iPhone app while on the go.

I have tried several l other programs, such as Omnifocus and Nozbe, but I keep coming back to RTM. I find its simplicity, effectiveness, and efficiency hard to beat.

2. Notes

You need to keep track of a lot of information, and that information needs to be available anytime, anywhere. You don’t have time to search through papers for that account number or utility bill or copy of your drivers license.

My favorite tool for keeping track of notes is Evernote. Its easy-to-use apps for any platform sync seamlessly so you have access to all of your information on your phone, tablet, or computer. Evernote is my digital brain, and I don’t know how I would function without it. Any piece of information I need is a quick search away.

3. Email 

If you’re reading this you probably use email, but are you using email in the most effective way?

I use Google Apps for all of my business email accounts. Google Apps combines email (Gmail), document storage (Drive), office applications (Docs, Sheets, etc), Calendar, and many other tools. It allows you to use your own domain name instead of gmail.com, giving your business a more professional presence. It’s inexpensive and easy to set up.

Whether or not you use Google Apps, I recommend using email right in your web browser. I gave up Outlook a long time ago, and I haven’t missed it one bit. Keyboard shortcuts and powerful search capabilities make using email in the browser much more effective (in my opinion) than managing a separate piece of software that stores data on your computer.

4. Online document storage

I store online every document I need access to. I only keep paper if original documents are important.

I use Google Drive for archiving files that need to be structured into folders. For example, I have folders in my personal Google Drive for each year of tax documents.

I use Dropbox or Google Docs/Sheets for files I am actively working on. I use Google as much as possible because I can quickly access and edit on any device, I can easily share and collaborate, and I never have to worry about version control. For example, I use Google Sheets for cash flow projections and expense reports.

I dump into Evernote everything that doesn’t need to be in a structured file system. I use the Fujitsu ScanSnap iX500 Scanner to scan everything from utility bills to kids’ report cards.

5. Business finance

It’s important to keep your business and personal finances separate, and business financial software makes it easy to track the business side. Most businesses I work with use Xero, but I’ve also used Freshbooks, Quickbooks Online, and Netsuite.

Question: What software do you find essential for your business life?

3 Important Details When Starting a Business

In a previous post  I wrote about how to get started on building a business. My main point was this: nothing else matters until you have a product to sell and customers to sell to. In my last post I wrote about how to stay on the government’s good side as you start selling your product.

In this post I’ll briefly describe the 3 other important details to take care of as you start a business. The timing depends on the nature and complexity of your business, but most of these details don't matter much until you actually start selling a product.

1. Set up business bank accounts

This is a must! Your bookkeeping will be a nightmare if you pay expenses from and receive payments into your personal bank account. This is called co-mingling funds, and it’s never a good idea.

Co-mingling funds will make it difficult to figure out how much money your business is making, and your tax return will be difficult to prepare after the end of the year.

Setting up a business bank account is easy, and your bank will tell you what documents they require.

I recommend setting up both checking and savings accounts. The savings account is where you regularly transfer estimated taxes so you’re not tempted to use the funds elsewhere.

2. Set up an accounting system

An accounting system is a way of tracking revenue coming in and expenses going out. As often as is helpful, and at least monthly, you need to look carefully at your net income (revenue minus expenses).

An accounting system does not have to be complicated. For simple businesses, an Excel spreadsheet or even a notebook might be sufficient.

However, I recommend online accounting software for most businesses. Software like FreshBooks, Xero, and Quickbooks Online are inexpensive and easy for non-accountants to use. They will connect to your bank account and automatically download transactions. You can also enter your vendor bills and payments to keep track of what you owe (payables) and invoice customers and record payments to keep track of what you are owed (receivables). You can run reports to track your business performance.

Setting up an accounting system and keeping it up to date daily or weekly is easy. Trying to do all your bookkeeping for the year at tax time is not so easy (and doesn’t give you critical information you need to make good business decisions).

3. Make sure you are adequately insured

In your personal life, you should carry several types of insurance: life, homeowner/renter, health, and auto for example.

Your business life adds additional insurance requirements. Needs vary by business type, but here are some possibilities to get you thinking:

Auto. Obviously a vehicle owned by your business needs to be insured, but check with your auto insurance provider if you use your personal vehicle for your business. You may need to adjust your policy.

Property. If you rent space for your business, you’ll need tenant insurance for liability and belongings. If you work out of your home, check with your home insurance provider to see if that affects your policy.

General and product liability. These are often bundled into the same policy, but make sure you have both. General liability insurance covers a wide range of potential claims against your business. Product liability is important because anyone who sells a product can be liable for defects, even resellers.

Professional liability. This is also known as errors and omissions insurance and is applicable to some professions, such as accountants, attorneys, doctors, and financial advisors.

This is just a sampling of the common types of business insurance. You should do some research to make sure you are adequately covered, and an insurance broker would be happy to help as well. This page on the SBA website is a good place to start.

Final thoughts

My goal is to focus you on the most important tasks required to get a business going (besides products and customers). Hopefully this puts your mind at ease by making the administrative requirements seem less intimidating.

Question: What are other important details to address when starting a business? 

3 Ways to Keep Government Happy As You Start a Business

In my last post I wrote about how to get started on building a business. My main point was this: until you have a product to sell and customers to buy the product, nothing else matters. Anything else that may intimidate you about running a business doesn’t matter until you start selling a product to a customer.

Offering a product that customers are willing to spend money on is the hard part about running business. Comparatively, the other details are a piece of cake. They should not hold you back from starting a business.

One the most intimidating aspects of starting a business is the fear of failing to meet government requirements. No one wants to get in trouble with the IRS (or equivalent) or other government agencies.

In this post I’ll hopefully put your mind at ease by briefly describing the 3 main ways to keep the government happy as you start your business. The timing depends on the nature and complexity of your business, but in most cases these actions don't matter much until you actually start soliciting sales.

1. Decide on a legal structure 

Businesses can operate under several different legal structures. The terminology and details may vary by country, but the main ideas should be the same anywhere in the world. Two of the simplest structures in the United States are sole proprietorship and LLC.

Sole proprietorship. This is the simplest way to get started. You don’t even need to take any action besides accept payment for a product or service. If someone pays you to mow their lawn, you’re a sole proprietor.

The disadvantage of a sole proprietorship is that you are fully liable for all debts and obligations of the business, including actions of employees. Your personal assets are at risk. This may not be a big deal at first, but it’s something to be aware of as you grow.

Limited Liability Companies (LLC). In the US, many small businesses use this structure. LLC's are simple and inexpensive to form (for example, $70 in Utah if you file the one required form yourself), and they provide some liability protection from your business.

2. Complete necessary registrations, licenses, and permits

Once you decide on your legal structure, you need to obtain the necessary government licenses and permits. Typically, your local government will require a business license and your state will require registration to do business (including reserving your business name). Some industries require permits, such as food services.

State and local governments desperately want businesses in their jurisdictions, and they try (as best as governments can) to make it easy for you to start. Why? Among other altruistic reasons, they want to collect more tax revenue!

All state and local governments that I’m aware of have sections on their websites dedicated to doing business in their area. They should outline exactly what you need to do to register your business and meet other legal requirements.

3. Understand your tax obligations

Getting behind on taxes is one of the best ways to get in trouble with governments. They will make your life miserable.

Understanding and keeping up on your tax obligations is not difficult, but it’s incredibly important. I recommend finding a good CPA to do your annual tax return, and this CPA can also advise you on other tax obligations. The details I mention are specific to the United States, but the same principles apply to most countries.

All businesses have to deal with income tax, which I’ll focus on here. Some businesses also have sales tax, property tax, payroll tax, and industry-specific taxes.

Employees don’t have to think much about taxes. Their payroll and estimated income tax is withheld from their paycheck, and after they file their tax returns they pay or get refunded the difference based on their actual tax owed.

In contrast, business owners must pay 1/4 of their estimated annual taxes each quarter (usually 15 days after the end of each quarter). In addition to regular income tax, you must pay self-employment tax (Social Security and Medicare). The 2014 rate was 15.3% (I know - it’s a lot).

Your CPA can help you estimate your quarterly taxes, but a good rule of thumb for many small businesses is 25% of net income (15% for self-employment tax and 10% for income tax). Until you build some history and have a CPA help you with better estimates, I recommend you transfer 25% of your estimated net income into a separate bank account as often as practical.

For example, if you're a freelance programmer with limited expenses, immediately move 25% of every client payment into your savings account.

When it comes time to submit your quarterly estimates to the IRS, you can simply transfer the funds from your savings account rather than scrambling to come up with the money.

Final thoughts

I did not intend to make this a detailed guide. You can find more detail on any of these topics from many sources. The SBA, for example, has many great resources, including this section on starting a business.

My goal is to focus you on the most important tasks required to keep the government happy while you get your business going. Hopefully this puts your mind at ease by making government requirements seem less intimidating.

Question: What are other ways to make sure the government is happy as you start a business? 

How do I get started on building a business?

Have you ever avoided doing something because you didn’t know how to get started? It happens to me all the time. For example, I have a goal this year to get involved in some sort of industry organization, but I haven’t done anything yet because I don’t know where to start.

A few years ago I saw the need to bring Dave Ramsey’s Financial Peace University (FPU) to the area I lived in Canada. I had been a huge Dave Ramsey fan for a long time, and he wasn’t well known in Canada. I thought about it for a long time but didn’t know where to start.

It only took a push from a friend and a small amount of research to get started. I found a sponsor, figured out how to order class materials, and did a small trial class with some close friends and family. With that momentum I recruited some volunteers to help, and we ended up taking about 150 families through the course in several sessions over two years.

Usually the hardest part of any endeavor is taking the first step, even if you don’t know where the next steps are going to lead you. As you start stepping, you gain momentum. With that momentum, future obstacles are easier to overcome than resistance to the first step.

In my last post, I asked if you are ready financial, emotionally, and mentally to start a business.

If you are ready, here is where to start:

1. Find a product to sell

2. Find customers to sell the product to

It’s as simple as that. Until you have a product and customers, nothing else matters. You don’t need to worry about bank accounts or bookkeeping or taxes or insurance or legal entities or other details that you might feel anxiety about.

Just get started by figuring out what you are going to sell and who you are going to sell to.

Find a product to sell

A product to sell can take many forms, and there are too many possibilities to list in this post.

If you’re not sure where to start, your product can simply be your time and expertise offered to multiple customers. Examples include bookkeeping, writing, graphic designing, lawn care, and even dog walking.

Selling your time and expertise is a good way to get started, but usually your impact (and therefore income) will be limited by the number of hours in your day. You might see an opportunity to package your expertise into some kind of digital or physical product. You might write an ebook or build an online course.

Find customers to sell to

It might seem logical to first figure out a product and then find customers to sell that product to. However, the reverse can also work.

Building an audience (or platform) is a way to find customers before having a specific product to sell. Through social media and blogging, you can position yourself as an expert in your field. As you generously give free and valuable content, you can build a loyal following.

Email subscribers to your blog are especially valuable. As you find your voice and build your following, you can ask your followers what they need help with. You can create products to meet their needs, and then you’ll have both a product and customers to sell to!

There are many resources to help you build your audience. Michael Hyatt is one of my favorite.

Then worry about the details

You can start thinking about the administrative details that go into running a business once you having paying customers.

This post is targeted to individuals with the entrepreneurial bug who want to strike out on their own. Not all businesses are this simple. Some companies raise investment capital, hire employees, and go through years of product development before taking their first customer payment.

However, the same principles apply. Every business needs to start with a solid product concept to sell and customers to sell to. Until then, nothing else matters.

Question: Business owners, how did you get started with your business?

Is it time to start your own business?

Are you an employee with an entrepreneurial bug? Do you want to have the freedom, fulfillment, thrill, and potential financial rewards of building your own business? If so, how do you know if it’s time to make the leap?

Of course, there is no one size fits all answer, but here are some questions to ask yourself.

Am I financially ready?

Building your own business can give you an almost unlimited financial upside. However, many businesses fail, especially in the early stages. Many business who don’t fail struggle along for a long time without making much money.

It’s important to be financially prepared for a slower start than you expect.

If possible, start to build your business while employed full time (as long as it doesn’t violate employment agreements). Ideally, build your business until it brings in close to as much income as your job. As long as your business is growing and future prospects seem promising, quitting your job to focus on your business will be a no-brainer.

However, this perfect scenario may not be feasible. You will probably find it difficult to replace your full-time income with part-time attention.

I still recommend starting your business while enjoying a steady paycheck. Don’t step off the dock unless a boat is waiting, even if it’s a leaky old boat.  Once your business starts generating income and appears to have the potential of exceeding your employment income, it may be time to make the jump. The boat only has to keep you from drowning while you work to improve it.

If you make the jump before the revenue from your business covers all your business and personal expenses, I recommend having savings sufficient to cover the shortfall for at least 6 months and preferably 12 months.

6 to 12 months will give you some cushion as you start growing more aggressively. Without much in savings you may be forced to bail from your business prematurely or give up control to bankers or investors.

Don't use debt to start your business! Using your own savings forces you to use more discipline. And if your business fails, you've only lost some savings. Banks won’t be threatening to take your house.

Am I emotionally ready?

Building a successful business requires a tremendous amount of grit.

I've written before about the emotional roller coaster most business owners go through. I’ve also written about the importance of resilience.

Are you emotionally prepared to handle the daily ups and downs? Can you stay the course without giving up when you experience a serious setback? Can you push through periods of self-doubt when you wonder if you have what it takes?

Running a business can be incredibly rewarding, but it will probably take some emotional pain to get there.

Am I mentally ready?

Starting a business requires tremendous self discipline and focus.

Most employees are forced to have discipline to some extent. Some are expected to show up to work at a certain time and stay until a given time. Most are given rather than choosing certain responsibilities. Some have performance reviews and a structured path to promotions.

Business owners have none of this forced discipline. You must create your own discipline.

Of course, you must serve your customers (or you won’t have any). But in most cases your customers won’t know or care what time you show up for work. The freedom to choose the hours you work is wonderful, but building a successful business usually means working many more hours than an employee.

Are you ready? 

It’s important to be as ready as possible, but no one is perfectly ready, and there is no perfect timing. You will always have doubts and worries, and the earlier you can be prepared to start, the better.

If you spend another 10 years wondering if you should do it, you’ll wish you had spent the last 10 years building your business.

If you think you can handle the financial, emotional, and mental demands of starting a business, go for it!

Question: Business owners, how did you know when it was time to start your business? 

4 Ways to Become More Resilient

Have you ever wanted to give up? I have. Many times. Any time I face challenges and the end result is unclear, I am tempted to quit. Any time I am tempted to quit, I think about the importance of resilience.

No business, no family, no cause, nothing worthwhile is easy. All worthwhile endeavors have periods of challenge that make us wonder if it’s worth it. We won’t accomplish anything worthwhile without resilience.

I’m blessed to be surrounded by incredible examples of resilience. Many of my colleagues have faced and continue to face incredible resistance to their goals. But they don’t give up. They keep pushing. They inspire me to keep pushing.

Like any character trait, resilience comes more easily to some than others, but it can be learned.  Chances are, the most resilient people you’ve observed built their resilience over time as they faced and overcame challenges.

Here are 4 ways to become more resilient:

1. Gain experience over time (and start young)

You can build resilience at any stage of your life, but it helps to start young. Over time, whether or not you’ve always been a model of resilience, you will recognize patterns. You will notice good things only come into people’s lives after pushing through challenges.

Why do many parents spend so much time and money on youth sports? Only a small percentage of athletes get college sports scholarships, and an even smaller percentage are able to retire on pro earnings.

Sports give kids something fun to do and keep them out of trouble, but I believe building resilience is one of the biggest benefits of youth sports. This resilience can benefit the rest of their lives.

I distinctly remember being at the end of close high school basketball and football games. I’m so exhausted I can hardly see straight. I want it to be over, but I can’t give up. I have to play my heart out until the buzzer goes, or I will let down my team and our fans. If I give up, the coach probably won’t give me the chance to play in a close game again (or any game!).

Parents who want to raise kids to become great adults should look for ways to teach their kids resilience. Sports aren’t the only way. Music, theater, service, school work, and part-time employment, for example, can all help.

2. Level your emotions

Sometimes we want to give up because we can’t handle the emotional roller coaster. I wrote a previous post about how to level the roller coaster.

Life is never as bad as we feel during down moments and never as good as we feel during high moments.

Our emotions are coded for survival. The fight or flight response is meant to keep us alive in life or death moments. In our day we rarely face such moments, but our ingrained emotional response can make tough situations feel like life and death. This is a good thing if it motivates us to do all we can to get through the situation, but we shouldn’t let fear become debilitating.

Controlling our emotions can be difficult, but it helps to take a step back and think about why we’re feeling a certain way at a given moment.

3. Talk about your feelings

It can help to talk through our feelings.

We can talk to someone removed from the situation. Whoever you talk to might have some objective advice for handling the situation. They may give you the encouragement you need to keep going. Just having a listening ear might be enough. Sometimes expressing our thoughts out loud helps us recognize when we’re thinking irrationally.

Talking  to someone involved in the situation can help provide perspective. They may correct misconceptions you have about the situation. They may have additional information or insight that you weren’t aware of.

We should be careful not to discourage those around us, especially if we are in a leadership position, but healthy relationships and a healthy culture should allow for free expression of our feelings.

4. Intentionally practice resilience 

Michael Hyatt has mentioned on his podcast the story of his friend who runs marathons. He ran the Boston Marathon with his daughter, who asked at mile 21, “Dad, please remind me: why are we running this stupid race?” He replied, "Because we are practicing not quitting."

We can choose to participate in activities that allow us to practice resilience. Maybe marathons are not your thing, but you can find other ways to practice resilience. Choose to take on a challenge in your career that scares you. Commit to a demanding role in a non-profit organization.

Resilience is an essential character trait for those who want to accomplish important things in their life. Nothing worthwhile comes without challenges, and the resilient push through challenges and enjoy the rewards.

Question: How do you build resilience?

4 Ways to Pull Yourself Out of a Motivation Slump

Do you ever have days when you can’t seem to get yourself moving? Days when your energy and motivation are shorter than your to-list? Days that you look back on and wonder if you accomplished anything? I am normally highly self-motivated, but I experience maddening stretches when my motivation doesn’t live up to my expectations. I recently struggled to motivate myself to be productive through two days in a row, which got me thinking about how to lift myself out of a motivational slump.

Self motivation is extremely important. One big difference between leaders and followers is that followers need leaders to motivate them. Leaders can’t depend on others to motivate them.

Here are some ideas for getting out of a motivational slump:

1. Exercise regularly

Regular exercise has a long list of benefits, many of which directly contribute to increased motivation. For example, exercise causes our bodies to release endorphins, which triggers positive feelings. Counterintuitively, exercise actually increases energy levels. High energy combined with positive feelings is a nice recipe for motivation.

I find a noticeable difference in motivation between days I exercise in the morning and days I don’t.

I wrote a post relating my experience of stopping running for a year and then starting again. After a few years of running led to widespread improvements to my life, I listened to “experts” who said that “chronic cardio” (i.e. frequent running) is bad for you. I became convinced that I would be better off with less frequent, more intense weight training.

During the year I stopped running I gained weight and noticed a significant drop in energy and motivation. In the few months since I resumed running 3-4 times per week (while still weight training twice a week), I have lost weight and regained my energy and motivation.

Exercise doesn’t have to be rigorous every time. The subdivision I live in surrounds a large man-made lake with a network of asphalt trails. A brisk walk around this lakes feels almost as good as a run.

2. Structure your schedule

I find the strength of my motivation to be correlated with how effectively I plan my time. I struggle on days that are wide open without a clear plan. On these days I spend more time reacting to email and checking social media than proactively tackling my to-do list.

I like to plan my next day on the night before. I review my to-do list, identify my top priorities, and decide the order in which I will tackle them. In this way I avoid wasting precious morning brainpower trying to figure out what I’m going to do that day.

It helps to tackle the most difficult or least enjoyable tasks first. I struggle with motivation when I have dreaded tasks hanging over my head throughout the day. It’s better to knock them out first when I have the most energy and willpower, and then I can spend the rest of the day on more enjoyable tasks.

Whenever possible I prefer to block out certain days or periods of time for related tasks. Rapid task switching is unavoidable at times when running startups, but it is draining and unproductive, especially when those tasks use different parts of the brain. It’s difficult to solve a customer problem on the phone and then go into a strategic planning meeting and then build a financial model.

For example, I try to schedule conference calls for Tuesday, focus on technical tasks Wednesday, have on-site meetings on Thursday, and tie up loose ends on Friday.

Everyone has a different situation, but you can experiment with structuring your schedule for maximum motivation.

3. Set short-term milestones

I struggle to motivate myself when the tasks I work on today don’t get me noticeably closer to an end result.

I learned this through an experience I had while going to university. I took a PhD prep track within my masters degree because I was considering an academic career. During one summer I worked part time researching for a professor and part time programming for a startup software company.

I found myself struggling to motivate myself to work on the long-term research project while looking forward to tackling the short-term projects at the fast-paced software company. After that summer I abandoned the academic path and for the last several years have worked with startups.

Looking back, I don’t think an academic path was necessarily the problem (although I’m happy with the direction I chose). Rather, I should have broken down the long-term project into short-term milestones.

Milestones should be set so that the work on any given day will bring you noticeably closer to it.

4. Make a change

So far I have focused on how to motivate yourself in your current circumstances. However, sometimes extended lack of motivation is an indicator that it’s time for a change. Sometimes the path we set out on is not the best one to continue on.

Before making a change, we should carefully consider our motives. We should consider whether or not the previous steps will get us back on track. The grass usually isn’t really greener on the other side, and any worthwhile pursuit will have periods of boredom and difficulty and seemingly impossible obstacles.

Self-motivation is an essential trait for leaders. But even the best leaders face periods of time where they struggle to motivate themselves. However, what makes them leaders is the ability to pull themselves out of motivational slumps.

Question: How do you motivate yourself?

4 Ways to Become Antifragile

A few days ago my preteen son was unable to sleep as he thought about the Nepal earthquake. He knows about the major fault lines along the Wasatch Front near our home in Utah, and he was concerned we would be involved in a similarly devastating earthquake. Do you worry about the impact that unpredictable, devastating, and rare events might have on your life? These events may include natural disasters, worldwide economic downturns, war, loss of income, or personal health challenges.

What if instead of fearing these adverse events, you can be prepared to benefit from them? Wouldn’t this bring more peace and confidence to your life?

Benefiting from chaos, disorder, and unpredictable events is a concept outlined in a book I recently listened to: Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb.

Antifragile a word made up by the author, and the concept can apply to many things. In this post I’ll focus on building an antifragile life.

Our life is fragile if it can be easily broken or damaged by adverse events. You may think that the opposite of fragile is a life is one that is not easily broken or damaged by adverse events. However, the author defines the opposite of fragile, or antifragile, as something that benefits from seemingly adverse events.

Here are four ways we can build an antifragile life:

1. Get out of debt and build a financial reserve

An individual loaded with maximum debt is fragile. Many families choose to take on a level of debt with which the minimum payments fit within their budget, but barely. They are fragile to even the slightest disruption, such as reduced income or unexpected expenses.

Other budget items, such as eating out and entertainment, can be quickly adjusted down as needed. In contrast, in most cases assets can’t be sold quickly or easily to reduce debt payments. Many types of debt are either unsecured, such as a credit card, or secured by an asset with less value than the debt balance, such as a vehicle.

Living on much less than we earn, and using the excess to build a financial reserve, will make up more antifragile. It is obvious that a financial reserve, no debt payments, and a comfortable budget will make adverse events easier to endure.

But how do we actually benefit from financial shocks? One example is the ability to take advantage of great deals. Those who had a lot of cash in 2008-2009 had unprecedented investment opportunities. The Dow Jones stock market index has almost tripled since its 2009 low. Phoenix housing prices have almost doubled. Vacation properties dropped even more than residential real estate. Businesses and business assets could be bought for cheap.

2. Maximize health

The right kind of adversity can improve our health. When facing resistance, muscles tear, and then the repair makes them stronger than before. Aerobic capacity increases as we sustain an increased our heart rate, such as while running. Exposure to a small level of dangerous microorganisms can make us less susceptible to its affects in larger quantities (i.e. the principle behind vaccines).

However, we need a reasonable baseline of health before this adversity can be beneficial. A person with a weak heart shouldn't go on a long run. A person with weak bones should not try to lift heavy weights or play basketball. A person with unconditioned muscles and tendons should not try to sprint. How many people who are older and more out of shape than they think they are pull muscles while attempting to run around the softball bases!

3. De-risk career

In the book, the author compares two brothers. One has a good education and has had a long career in the HR department of a large corporation. The other has little formal education and is a New York City cab driver. The HR brother has a steady income while the cabby brother’s income varies widely each day.

Even though the HR brother makes more money and may appear to have a better career than his brother, the author argues that the HR brother is fragile while the cab driver is antifragile. The HR brother could lose his job at any time, which would completely cut off his income. The cabby brother has more sources of income than he can possibly take advantage of (millions of people in one city). If his income drops on one day, he can quickly adjust by moving to another area within the city.

You don’t need to own your own business or become a freelancer to be antifragile. You can build a strong network and solid reputation. If you lose your full-time position, tapping your network might even lead to a better opportunity.

Another way to become antifragile is to develop a career that comfortably pays the bills while allowing time and freedom to pursue other interests, such as a side business. The author is a professor of risk engineering at the Polytechnic Institute of New York University. This position allows him the freedom to research and write his books. Einstein had a well-paid and relatively undemanding job at a patent office, which allowed him to think about his most impressive ideas while working.

4. Look for minimal downside and maximum upside

Another way to become antifragile is to focus time and attention on opportunities with minimal downside and maximum upside.  Of course, these kinds of opportunities aren’t always obvious, but it’s a good principle to keep in mind as we choose how to spend our precious time.

He uses options, the financial instrument, to illustrate this principle. Options allow you to buy the right, but not the obligation, to buy (call options) or sell (put options) something at a given price (usually shares of stock in a company). If you buy a call option, you have virtually unlimited upside as the stock goes up, and your downside is limited to the price of the option.

Education is a good example of this principle. The only downside of education is the time and cost, which are measurable before you begin, and the upside can be unlimited if applied appropriately.

Another example is working for a promising startup company and receiving equity as part of your compensation. Assuming you don’t have your own money invested, the downside is the opportunity cost of something else you could have been spending your time on and the risk of losing your job. The downside is no different than working for a big company, but he upside is potentially much greater if the company does well and your equity multiplies in value.

Conclusion

There is no way to predict the biggest shocks in life. By becoming antifragile we can prepare ourselves to benefit from inevitable randomness and chaos. Being antifragile can give us greater peace and confidence in our lives.

Question: How can you make your life more antifragile? 

The Five Laws of Stratospheric Success (from The Go Giver)

I recently listened to The Go-Giver: A Little Story About a Powerful Business Idea by Bob Burg and John David Mann. The authors package the five laws of stratospheric success into a brief, engaging, and easy-to-read parable.

Multiple books have been written about each of the five laws, but the authors effectively illustrate these laws in a story about Joe. Joe is a relatively successful sales executive who feels like he is stalling in his career. He is about to miss his quarterly sales quota, and he desperately turns to a wise old co-worker for help. This co-worker introduces him to “The Chairman” who in turn introduces him to five successful people. The five people each teach him one of the laws of stratospheric success.

The format reminds me of Andy Andrews’ Traveler's Gift: Seven Decisions That Determine Personal Success. The main character, David, is transported to seven key points in history where historical figures teach him the seven decisions.

The five laws of stratospheric success are as follows:

1. Value: give more in value than you take in payment

This is a principle not easily measured by traditional accounting methods. Accounting seems to dictate that businesses should extract maximum payment from customers while expending the minimum cost.

However, this law defines value much more broadly than can be measured by dollars and cents.

In a successful transaction, one that will lead to more transactions, each party must feel they are better off than before. The customer must feel that the product or service they receive brings more value to their lives than the dollars they spent. On the other side, the seller must receive a price higher than it cost to provide the good or service.

Money is simply an echo of value created. As Dave Ramsey likes to say, banknotes are “certificates of appreciation."

This law must be followed to create any successful business, but it is easy to see in some relatively new business models.

Many online software companies use a “freemium” model. Their pricing may include various pricing levels, including a free version. Those using the free version are obviously getting more value than they’re providing in payment if they find any value at all. It also provides a risk-free way to decide if the additional features in the paid version will be of more value than the cost. This is a major improvement from the old days where customers made large and long-term software purchasing decisions based on a demo.

Many professional content creators (bloggers, authors, etc) offer most of their content for free. As they prove the value they can provide, some percentage of their followers are willing to pay for books, courses, conferences, etc.

2. Compensation: your income is determined by how many people you serve and how well you serve them 

This reminds me of Zig Ziglar’s famous quote, “you can have everything in life you want, if you will just help enough other people get what they want."

Some of the perceived inequity in the world results from this principle. It may seem unfair that famous musicians or sports players get paid millions while many beloved teachers barely make enough to live on. Like it or not, these famous people are paid more because they are able to reach more people.

In The Go Giver, a teacher realized she would be able to serve more people if she created an online education business. As a result, she was able to provide value to more people and earn more compensation.

This law doesn’t mean that it’s not honorable to serve within a small sphere of influence. But the law does mean that the compensation will be more limited when compared to serving a larger audience.

3. Influence: is determined by how abundantly you place others interests first

In order to influence those around us, we need to shift our focus from I or me to others. When others can see we have their best interests in mind, they will trust us and therefore allow us to influence them.

Of course, the interest must be sincere, and the reason for desiring for influence must be to serve. Many influential leaders have used their influence for self-serving and even evil purposes, such as Hitler and Stalin.

For one of the most influential works on influence, see the book Influence: The Psychology of Persuasion by Robert B. Cialdini.

4. Authenticity: the most valuable gift you have to offer is yourself 

You will serve best by being yourself and not who others want you to be. You have unique gifts and talents to bless the world with.

Bronnie Ware, a nurse who worked for years with dying people, wrote a popular blog post about the top 5 regrets of the dying. The top regret was "I wish I’d had the courage to live a life true to myself, not the life others expected of me."

Being yourself doesn’t mean being who you are now without improvement or progression. That’s just complacency and stagnation. Being yourself means becoming who you want to be.

5. Receptivity - the key to effective giving is to stay open to receiving 

This may be the hardest law for many of us to follow. We know that giving to others is a good thing, but we have a hard time receiving. It may be that we don’t want to put other people out. It may be that we don’t want to admit that we could use help.

It takes two to tango. For us to be able to able to give, someone needs to receive. Sometimes that receiver needs to be us.

Kids love receiving gifts. Christmas is an especially magical time. But as we get older, we find much more joy in giving gifts than receiving them. Finding joy in giving is a good thing, but as a receiver we can allow others to feel the joy of giving.

Conclusion 

These five laws are more about who we are than what we do. Sometimes the best way to change who we are is to first change how we act. If we are sincerely trying to change, we really can fake it until we make it.

As we follow these laws, we can make our way toward stratospheric success!

Question: How have you applied these laws? 

Don't Believe Everything You Think

I loved playing Little League baseball while growing up. As an 11-year-old I was excited to move from "Triple A” (age 9-10) to the “Majors” (age 11-12). I was big for my age, and thanks to many hours playing catch with my younger brother, I was a decent player. Our region had two leagues for the Major age: the regular league and the farm league. I should have recognized that a farm league is for those not ready for Major League (like professional baseball), but at some point I got the relative prestige of the leagues mixed up.

As a result, I desperately wanted to be part of the farm league. My parents and friends probably assumed I wanted to start with a more relaxed league before advancing. They probably tried to explain the difference in leagues, but I must not have listened. I knew what I wanted to do.

I realized what a mistake I had made soon after the season started. We played in the more rugged diamonds and with no standard uniforms. I watched my friends in the main league playing more competitively in well-manicured diamonds and nice uniforms.

Much later in life I heard Andy Andrews say a phrase that brought me back to this experience: “don’t believe everything you think.” 

This phrase also reminded me of other experiences where I confidently made decisions based on flawed thinking.

A few years ago I made a series of poor decisions regarding family vehicles. Within 2 years we bought and sold an Accord, Trailblazer, Odyssey, and Tahoe because after a short time with each I became convinced that we needed something different. We lost money each time, and I was never more satisfied with the next one. I don’t even enjoy the process of buying and selling vehicles!

I have tried to learn over time that I can’t believe everything I think. The following tips have helped me look more critically at my thinking and hopefully led to better decisions:

1. Be patient and skeptical

My worst decisions have been the ones I made the most quickly. Impulse purchases certainly fit in this category but usually don’t have as much impact as choosing a career, making a job change, hiring people, expanding a business, etc.

Most decisions do not need to be made quickly. The urgency we feel is usually created in our own impatient minds. We should take time to make decisions, and during that time, we should be skeptical of our own thoughts.

2. Gain experience

Sometimes the only way to recognize flawed thinking is to recognize patterns over time. We all think differently, so it’s difficult to provide universal rules. We can try to reflect on the thought process that has led to good and bad decisions in the past.

3. Follow a life plan

In several previous posts I have referred to my life plan, which was inspired by Michael Hyatt. Creating a life plan gives us a vision of where we are now, where we want to be, and the goals and habits that will get us there. This life plan can be created and modified over time while we are thinking clearly and are free from the pressure of a pressing decision.

When we have new ideas, we can compare our ideas with our life plan. If it fits into our overall vision, it’s likely a good idea. We don’t need to automatically disregard an idea that doesn’t fit perfectly, but we should look at it more critically.

4. Have a trusted advisor

We all need confidants with whom we can share our deepest thoughts. We need people who will be kind and patient while also challenge our thinking. This adviser can be a spouse, parent, child, friend, or even a professional life or career coach.

Sometimes it takes someone objective to snatch us out of our flawed thought process.

5. Recognize that the grass usually isn’t greener on the other side

We should be skeptical of thoughts that are negative toward our current situation and positive toward a different situation. Of course, that doesn’t mean we should always be complacent in our current situation. Progression is a good thing, but we should be careful about how we think about progress.

We might think a different job, a different business, a different location, or different friends will solve our problems. And sometimes we will be correct, but we should first try to improve our current situation before jumping to a new one.

It can be hard to recognize that sometimes our thoughts are flawed or flat out wrong. After all, they are our thoughts. But not believing everything we think can save us from bad decisions.

Question: How do you recognize and correct flawed thinking?

Procrastinate on Purpose Book Review

I want to accomplish a lot in my life. As a result, I’m always looking for new time management strategies. I’ve written previous posts about prioritizing time and cutting out the unnecessary. There are many tools and tricks for being more efficient with time, such as task management apps and audiobook or podcast apps for consuming content while doing other things.

By piecing all of this information together, we can learn and experiment with how to make the most of our time. All of this is good, but I haven’t found what I feel is a comprehensive framework for thinking about time management.

That is, until now. I recently read the book Procrastinate on Purpose by Rory Vaden.

Vaden addresses perfectly what I felt was missing from other frameworks but couldn’t identify.

Other time management strategies focus on efficiency and prioritization. It is about allocating our 168 hours per week to get as much of your most important activities done as possible.

Instead of efficiency and prioritization, Vaden describes how to multiply our time. In essence, it’s about spending time on things today that will give us more time tomorrow.

To help us think about what will give us more time tomorrow, he adds a dimension missing from other time management strategies. Other strategies, such as Stephen R. Covey’s Time Management Matrix, manage time by weighing urgency (when does it matter) and importance (how much does it matter). Vaden adds significance (how long does it matter).

Significance addresses how what we do today affects us in the future.

What can I do today that will add more time in the future? How do I multiply my time?

Vaden suggests that we run tasks through the following funnel:

1. Eliminate. This is the fastest way to free up more time in the future!

2. Automate. Sometimes it takes an investment in time and/or money to automate tasks, but automation frees up more time in the future. It may be an investment of time and money to set up a software system, such as Infusionsoft to automate customer interactions. It may be an investment of time to set up bills on auto-pay.

3. Delegate. This is also an investment because it takes time to train someone to do a task, but it will free up time in the future. He suggests the 30x rule. Even if it takes 30x as long to train someone as it does to do the task, it’s still worth the investment.

For tasks that make it through the funnel, we can choose to:

1. Procrastinate, or

2. Concentrate

I’ve always thought of procrastinating as a bad thing. Vaden calls me a Worry Wart. I like to get things done the first possible moment they can be done.

However, getting things done early exposes us to what he calls change risk. Between the time we complete a task and when it needs to be done, something might change. Maybe that task didn’t have to be done at all, or maybe the change means you have to redo the task.

I’ve been too busy congratulating myself for usually being ahead of schedule to recognize the wisdom in this principle. I have to admit that there have been many cases where getting things done early has actually taken more of my time later. I have filed tax returns early only to get another slip that I wasn’t expecting. I have responded to group emails right away even though someone else on the email was in a better position to address the issue. I could go on with examples.

Gun Slingers are on the other side of the procrastination spectrum. They leave everything to the last minute, and they risk missing important deadlines.

The challenge is to find a happy medium. Do a task early enough that you don’t risk being late, but not so early that you risk something changing.

In summary, time management is really about self management. It is about taking time now to make sure I live the life I want to live in the future. It’s about being successful in the way I define success.

Question: What do you to today that creates more time in the future?