“Profit is not about what you make, it’s about what you keep.”
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Today’s article will finish our Self-Employment series, but I’ve got some good news. We’ve had a LOT of online and offline feedback on this series. I also feel strongly that self-employment has a significant impact on our ability to be more independent in so many areas of Preparedness. So I’ve decided to address this issue each week.
The person who wins at being self-employed does so by adhering to a simple financial rule. It’s not about making a lot of money, it’s about KEEPING most of what you make. That is the purpose of today’s article. I once had a great gal work for me but she suddenly quit one day without any notice. She claimed that she was concerned that our company was going to go under. When I asked her what gave her that impression, she said that it was because of the e-mail that I had sent out asking everyone to be mindful of what size paper they used in the copier so that we weren’t wasting the more expensive, legal-sized paper when the regular sized paper would do (Yes, it was an ‘oh brother’ moment!). In spite of these kinds of comments you may hear from those around you, it’s important that you always pay attention to the pennies if you want the dollars to materialize. Whether it’s printing, mailing, copywriting, or office supplies, I suggest that you ALWAYS find out if there is a way for you to spend less for the items that you need regularly. One great way to save money is to purchase used equipment and tools. You don’t need everything to be new, right? It just needs to be right. Also, never be shy about asking if there is a business discount or a way for you to obtain a business discount. Next, while this may have some welfare-minded individuals hating you for the next decade, I recommend that you have an appropriate view of those who work for you. Yes, they are flesh and blood, and yes you may get along great with them. But you MUST view them as what they truly are to your business. You did not hire them to be your friend. You did not hire them to sit at a desk and make the place look better. You did NOT hire them because they needed a job. You hire other people for one reason and one reason only and that is to make your business more profitable. Pure and simple. If they cannot do that, then you MUST get rid of them as quickly as you would dismiss a bad idea or a festering odor. Everyone who works for you should be pulling their weight in strengthening your profit margins. Too many entrepreneurs hire people to do “busy work.” Well, I have only one thing to say about that—NO ONE in your company should be doing any work that does not have a direct impact on your bottom line—not you and certainly not someone who works for you. You should always have the attitude, prior to hiring someone, “How will this person make my business more profitable?” Bottom line, no one in your company should be doing any work that does not have a clear impact on your profits. Another thing that I believe business owners must do is to protect themselves from liability. It’s no secret that we are in a litigious society. For crying out loud, a woman is suing Google maps right now because she got hit by a car on the road that Google Maps led her to. This lawsuit makes the McDonald's hot coffee saga look like a cartoon. There’s no question that there’s a sufficient amount of stupidity and greed surrounding us. As such, you must protect yourself from losing everything you’ve got. You can accomplish a good level of protection by filing your business in a manner which protects you AND by making sure that you have business insurance which will pay for legal expenses. I recommend that you do some research with some experts on this matter to determine what is best for you. My father, an attorney, as well as the well-known attorney, Lee Phillips of Legalees, has always recommend that businesses protect themselves by forming an LLC in addition to obtaining appropriate business insurance. I can tell you from personal, painful experience, the LLC has saved my bacon in the past. Another way that entrepreneurs exhaust all of their profits is by purchasing large amounts of inventory. Unless it’s an inventory that you, yourself, would always want to have on hand (such as bullets or food—hee hee), I recommend that you avoid this money pit. Instead of investing in large quantities of inventory, consider what you can do by aligning yourself with companies that can drop ship the product directly to your customers. At the very least, consider leveraging your product sales with a company in which you can buy as you go and not have to buy large quantities. When my husband and I started a business which required inventory, we made a lot of trips initially to buy products only as we sold them. No entrepreneur can really afford to have product just taking up real estate. Freeing up available capital should be a prime concern for all business owners. Case in point, Augason Farms is getting rid of a whole lot of inventory for less than it cost them to manufacture. Why are they willing to sell it so low? Because they understand that those products represent needed capital that’s just sitting in a warehouse for them right now. Until there is a financial collapse in our nation, cash is still king. Another way to keep more of your money is to not buy into all of the bells and whistles when it comes to taking people’s money. I’m talking about thinking you have to take credit cards and such. It’s your business. YOU get to decide what forms of money you will accept. If you want all cash, then so be it. If you only want to take cash or debit cards, then so be it. Make a decision on this matter which best suits you and then stick with it (I’ll write an article on “how to train your customer to sit” some time in the future). In spite of the fact that you pay the credit card merchants a whole lot of fees, they do NOT represent you and your best interests. They will always take the side of the customer initially. That’s a problem when you consider the fact that nowadays a customer simply has to make an accusation that they didn’t like the product, didn’t get the product, or was charged for something they never ordered. Then you get to spend the next 6 months duking it out between them and your credit card company—all the while the money has been withdrawn directly from your bank account until the matter is settled. To make matters worse, the credit card companies make the final decision and they are just people—not lawyers who know the law, not partners in your business. “Guilty until you can prove your innocence” is their motto. Heaven forbid that you would have the audacity to spend the money you earned when you received it. I’m 100% positive that taking credit cards is a serious liability for business owners nowadays—one which should be avoided at ALL costs. While there are a lot more areas of penny pinching I could address for entrepreneurs, I would be useless to you if I did not share with you one of most significant things that entrepreneurs must do to maintain profits. You MUST familiarize yourself the U.S. Internal Revenue Code. Yes, there are over 3.4 million words in that code. So perhaps it’s not exactly some light reading for you. Not to mention all of the other case law (particularly Supreme Court rulings) that you would need to cross-reference in order to have a working knowledge on this matter as well. But I can tell you unabashedly that your ignorance of this beastly collection of words is what’s costing you way too much time and invaluable amounts of capital. Yes, this kind of reading won’t exactly make it’s way to the New York Times best-seller list. So if you’re not interested in reading, fine. But at least make your business as profitable as possible by investing in the expertise of others on this matter. There are such experts out there. Admittedly there are only a few. But their solid foundational expertise on the IRC is critical to the profit of your business. If you’re paying too much in taxes then you are robbing from your very own family. I can assure you that every single small business owner I’ve consulted with over the last 5 years is paying as much as 100% TOO much in federal, state, and other employment taxes. In closing, allow me to reassert my position that I believe that the self-employed entrepreneurs are indeed the backbone of our economy. I also feel that given the entrepreneurial characteristics of hard work, ingenuity, creativity, and undeniable work ethic, entrepreneurs represent the spirit of a independent and free nation. As such, I believe that by strengthening the entrepreneur, we strengthen our entire economy and reinforce the foundation of our society. A society which lives by the Law of the Harvest (you reap only what you sow) can never be conquered in body or in spirit.
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