look at their time and put an actual rate too it. If these folks are not creating billable hours the business owner knows that the business is losing money.
It becomes tougher to see when your employees are not creating billable hours. With some employees it is incredibly difficult to quantify the revenue they generate but for others it can be looked at on a grander scale. If a manager oversees a department that generates $250,000 per month in revenue, why would you have that manager not focusing on that department? The department would likely not fall apart while the manager is handling some minor task but it’s not growing and there is no assurance that its running as efficiently as it could.
It was recently brought to my attention that a certain financial author is preaching to business owners that “slow and steady wins the race.” While there might be some truth to this it does not take into account who the business owner is and what is that business owner’s end goal. These are important factors to take into account when determining what pace is right for your Michigan business.
It should be noted that the individual delivering this message filed for bankruptcy protection and two decades later has a net worth estimated around $55 million. I am sure any business owner would like that kind of slow and steady growth.
Different Types of Business Owners
If you are a business owner that is looking to create a job for yourself, then the slow and steady approach works great. You do not take on a lot of risk. You generally control of your own destiny for years to come. The slow and steady approach is conservative and generally is sustainable for the goal you are looking to accomplish. You likely will not grow your West Michigan business into a Midwest, National or International business, but you likely will have what most consider a nice lifestyle business.
I love contracts. Some might even snicker at how excited I get at the possibility of putting a big deal together and using some creative drafting to make sure everyone is happy with the Agreement. Yes, I am a bit of a contract nerd. Contracts are a beautiful thing. The ability for you to strike a deal with another business and have assurances that they will follow through with their promises is a wonderful thing.
But there are a lot of bad contracts and agreements out there. This might sound familiar to you: A business owner signs an agreement to sell machines he manufactures to a customer for 5 years. He is required to build and sell .so many machines per month and the customer will pay him a set price for each machine. In year 3 of the deal, the cost of the business owner’s raw materials drastically increases and if he continues to build and sell the machines under the agreement, he will lose money. How do you get out of a bad business contract? This is just one scenario. There are thousands of other ways to be tied up in a bad contract.
Single-member limited liability companies are very common in Michigan. Most small business owners operate under this type of business entity. Some are even able to navigate the confusing system that the State of Michigan has set up on their own and been able to file their articles of organization and become a registered limited liability company or LLC with the State. So your personal assets are protected now, right?
Ummmm… Maybe. Look here is the deal: A creditor’s attorney is going look for any hole in your business entities shield and try and expose it, and because of that if all you have done is filed a document with the State and paid a filing fee, he is not just say, “Oh well, I guess there is no way this business owner is personally liable” and move on. So what do you need to do to close up those holes? Here are a few DO’s, DON’T’s, and RECOMMENDATIONS.
multi-million dollar status but I want you to think about it from a simplistic perspective. In order to be the “perfect entrepreneur” you have to a crystal clear 3D vision of your business. What this means is you need to be able to see your startup’s past, present and future all at the same time.
Let’s talk about business growth for second. Growing your business has become one of those cliché phases in the world of business. Everyone says they want their business to be bigger, faster and stronger but when you cut right to the bone, very few people are taking the necessary steps to actually grow their business.
Inc. puts out its annual Inc. 5000 list of the 5000 fastest growing private companies in the United States. In the most recent version of this list a business named ALL4 ranked 5000th on that list with 34% growth over 3 years. Over 3 years they increased their revenue from $3.5 million to $4.7 million and they added 9 jobs.
Contracts are a major part of doing business. Businesses have contracts with customers, suppliers, contractors, employees, and even those among owners and the company. Whether your business deals with a lot of these transactions or just a few major transactions, it’s important that the contracts you are executing are drafted correctly.
So how do you review a contract to make sure it contains everything you need it to so you can protect your business? That is a very loaded question because while contracts are simple in nature (“an offer that is accepted”) there are complexities that can cause major issues. I often tell clients they could draft 80% of the agreement that I draft for them; it’s that other 20% that causes problems for them. There are 5 basic things that you should look for in a contract: 1) Parties; 2) Price; 3) Payment Terms; 4) Property; and 5) Signatures.
For obvious reasons we are big proponents of businesses hiring and forging a relationship with a business law firm that can support their business. Over recent months though it has come to our attention that not all business attorney’s support their business clients as they should. It has led us to ask you, does your business attorney help promote your business’ growth or does he get in your way?
Before we get too far ahead in this conversation, this is not meant as a criticism of any attorney. Every attorney that is licensed in the State of Michigan takes an oath to zealously represent every one of their clients and some have a different views on what that zealous representation entails. It is important to interview your business attorney even after you have been with them for a while to ensure their representation of you is what you want it to be. Now with that out of the way on to the important stuff.