If you are committed to what you do, you can overcome almost any obstacle.
• The most important thing for a growing business is to have a rolodex. It can take years to develop one that can help you solve any foreseeable problem. Find someone you trust who has a good Rolodex of professionals, until you can build your own. Before the need arises, be prepared with a network of good commercial lawyers, bankers, insurance brokers, labor lawyers, sales tax consultants etc. you can count on. Don’t try to do everything yourself. Connect with good professionals.
• If your company has 20 or more employees, have an employee handbook with company rules and regulations which everyone signs. This will eliminate future disputes on issues such as holiday pay, vacation pay and other benefits. The handbook will also afford protection on any lawsuits brought by former employees.
• Have IT people under contract to help with computer hardware and software issues.
• Choose a good bank. Look at more than just the interest rate offered. See if you can develop a good relationship with a banker who is likely to stay with the bank for a long time. Choose a bank based on introduction and recommendation, not according to who knocks on your door and promises you the “world”.
• One of the most important things in dealing with bank financing is upfront negotiation of financial covenants and reporting requirements. Not conforming to covenants is a trap that can have very drastic repercussions. Being in violation of a covenant is like not making a payment. Such violations can put your company in default of a loan. Be forthcoming in the event that your company may violate similar covenants in the near future. It is possible to request a waiver of the defaulted covenant, but be vigilant. Without a full understanding of what you are signing onto, banks can insert terms into the agreement that can cause you to incur great losses in the future.
Good record keeping is important for an owner and can help run a business more efficiently. QuickBooks is a very powerful tool that can give you trends, margins and other useful data. Have someone who is expert in setting up QuickBooks tailor-make the program for your company’s record keeping.
• Have your controller prepare a one page summary of operations at the end of each month. Have the report show data that you are interested in, such as margins by product, margins by customer or the minimum dollar amount of a shipment needed to cover delivery costs. You can only know what’s happening with your business if you have these meaningful records.
• Inter-generational issues (father-son, father-son-in-law, siblings) should be handled by a neutral third party. In any shareholders’ agreement, there must be one paragraph indicating that any dispute will be brought before a pre-selected arbitrator, whose decision will be binding for all parties.
• Tax planning usually results in deferring taxes to another year. Deal with today’s tax issues today, and—to a certain extent—worry about tomorrow’s tax laws when the time comes.
• Great tax savings can be achieved independently through charitable giving. If you are able to donate shares of appreciated stock, you can get a double deduction.
• Accounts receivable insurance for larger and high credited companies may very well be worthwhile. Even large companies can go out of business. Such insurance is inexpensive.
• Every businessman should have a contemplated exit strategy. If you plan on selling out, you must plan in advance by organizing your business as much as possible, so it will be saleable for higher multiples.