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Years ago I posted up a wonderful tutorial somewhere about starting one’s own business. This is intended to be a continuation of that long-lost tutorial. Perhaps one of our wonderful administrators or I will someday move the first one here…
So you want to run your own business…
After the permits are procured, and you’re up and running yourself you should check into advertising. Newspapers are a decent start at advertising, but don’t expect a really big response. I suggest using a more visible medium where people actually hear or see your ad content. Radio is wonderful, but much more expensive than newspaper ads. I paid 3650 for 1 month of advertising, 2 commercials a day in both the morning and noon ‘drives’ (when the most listeners are in their cars going to work or at lunch). The expense came from buying the ad time during peak listening hours, on the number 1 arbitron-rated station in the area. Below are the results of those ads:
Week 1 – 1 paying customer, 4 estimates
Week 2 – 4 paying customers, 12 estimates
Week 3 (current week, monday – today(wednesday) – 20 paying customers, 7-10 estimates per day and I’ve hired another employee.
Not a bad start for a business not even listed in the yellow pages, right? Now some nasty little peculiars:
1. Make sure you pick a good marketing rep at the radio station. A bad rep will take your money and you won’t see any returns on it in the form of customers. She’ll write you bad commercials or won’t schedule the ads to air at the right times. I lucked into a good one. Now that I know better I’d do it this way: Talk to the Station Manager and Programming Director. Find out which salesperson has the best results. Odds are good that the person whom the other businesses in your area go to advertise is the right one for you. I’ve heard comments from friends saying “every time I get in my car I hear your commercial” and “I just heard your commercial on the radio at work!”. Keep your ears open for these – they’re billboards saying your rep is doing a good job for you.
2. Review your content! Make bloody well sure your ads say everything you want them to, if possible in a humorous manner without insulting the intelligence of the listener. Stupid commercials make you no money, funny ones get you remembered… Here’s an example of my morning spot – for the housecleaning business:
Poker game noises in background. “the boys” talking about how they’re having fun while the wife’s out of town and how he has 2 weeks without her. Phone rings. Hubby answers. Cool as a cucumber he talks to her and discovers she’s on her way home. He hangs up the phone. Mass panic ensues. “Call the Ladies of Clean!” to superman type music with our blurb about how we’ll make it look wonderful and fetch groceries too. Wife gets home and is somewhat awed because her house looks better than it did when she left… Repeat spot talking about our services and phone number.
It’s a nice 1 minute spot, kinda funny because of ‘boys poker night’ and mass-panic with the boys hauling tail outta there. Every time this commercial airs my phone rings, even when it hits at 6:45 am, which leads us to the next major point – which was also emphasized in tutorial 1.
ALWAYS answer your business phone.
Just like you, people HATE talking to answering machines. This is a very large advantage to a home-based business owner because he’s always there around the phone. I don’t care if the bloody thing rings at 3am, I answer it as if it’s my normal working hours. Paying customers usually call you within 30 minutes of opening or closing times, or right after your commercials air. When I move my business from home to an official office (very soon now since it’s growing so quickly) I’ll pay the extra cumshaw for an answering service just so my customers don’t have to talk to a machine.
Employees and how to handle them
1. Take care of your employees. They’re all you have and your livelyhood rests in their skills. Make bloody well sure you pet their egos occasionally with the ‘good job’ or ‘I like how you did this’ – and make bloody well sure you pay them as close to what they’re worth to you as you’re able to. My top girl makes more than I do per hour at this point since I’m only paying myself minimum wage to save ‘business money’. She gets the long-distance call outs because we pay her milage too and know she needs the money. Since hiring her I’ve taught her not only how to clean a house efficiently and make her customers happy, I’ve taught her how to do job estimates and our pricing, I’ve taught her what the advertising costs, and basically the whole business. Next week (time permitting) she learns payroll and the interview process for hiring new girls. My reasoning behind this is that my ace will eventually run the business for me – she’s got that kind of smarts and savvy, and it works me out of the loop to pay more attention to important things like advertising and customer follow ups (see later in this tut).
2. The hiring process –
I absolutely, positively refuse to hire ‘just anyone off the street’ to do our job. Anyone can clean a house, it’s true, but not everyone can be trusted to enter someone’s home without stealing everything inside, and not everyone has the skill to make a customer happy. I look for the following in a potential employee – both officially and unoffically:
– She MUST be trustworthy. I have the girls all bonded to $10,000 theft/dishonesty so if the issue ever arises I can repay a customer and prosecute/terminate the girl in question, but I really don’t want my bond rates to go up so I take care beforehand by using background checks, random visits to job sites, and customer follow-ups. When I ‘seal the deal’ at a job estimate I also leave them my business card with my cell number on it so if any issue arises it can be addressed IMMEDIATELY.
– She must have a friendly personality and be willing to do anything for our customers. Like honesty, this is an absolute must have. If my customers aren’t happy I get no repeat business, nor referrals from my customers. “And they tell two friends, and so on, and so on, etc.” Is absolute truth. An irate customer will tell seven. You figure out the numbers – I’ll hire customer-oriented girls and make bloody well sure they know what I expect from them (which, by the way, is to do anything the customer wants short of lewdness, and we won’t fetch alcohol – so sorry, no poker night beer-runs). If my customer wants her oven cleaned, the girls do it (for a $50 extra charge of course) – baseboards, windows, laundry, dishes, the works. We do it all and the girls are willing and eager to do it too. They know to do this because I make it worthwhile for them to do it – they know their incentives for going the extra mile, and they know that extra mile means more business for us too which means the whole ball of wax shows up in their paychecks.
– I’ve had exactly one employee who tried to screw me over – here’s how she did it and how I handled it for future employees:
Ex-employee (we’ll call her “genious” from here) decided she’d undercut our business prices to some of our customers and steal them away from us – then quit us and went into business for herself cleaning houses. After I find out about it it’s too late to do anything – but I’ve regained those customers because she stopped doing her customer service anyway and I stole ’em back by her same method.
To prevent this in the rest of my crew (now 3 girls, my wife, and myself) I had Mrs|ce draft up a ‘conflict of interest’ agreement with our employees, where they all sign and agree to not work in the housecleaning industry for a period of 1 year after they leave our employ. This gives me grounds to sue the crap out of the next one that tries it, and the girls all know it, and it’s in their ‘new hire’ packet with one signed by everyone including myself who was already employed.
Keep your eyes and ears open. Talk to your employees often, not just as ‘boss to employee’ but as friend to friend. My girls are my friends, some trusted more than others, but all my friends. I treat them accordingly.
A tiny bit on unemployment tax
After your business is paying out over $1500 in payroll each quarter you must begin to pay unemployment tax. Contact your local workforce commission for details. This is uber-important because if you ever fire an employee and they file unemployment on you if you haven’t paid taxes yet and should have, you’re had. Note this also – if you start your business with 1 employee and don’t pay that employee enough to meet the $1500 payroll but 2 quarters into the game you’re running 5 employees a week and ARE hitting that $1500 mark, you must pay unemployment tax for the ENTIRE YEAR TO DATE. If you anticipate growing your business over that mark, pay the tax before you have to and save the BIG CHUNK shock when you do have to…
The Infernal Revinue Stealers and Employees
NOTE: The great state of Texas, where I do business, has no state income tax so this will NOT be addressed in this tutorial. If you want to do business somewhere other than Texas I strongly suggest you do your homework on State Income Tax withholding, and comply accordingly. If you’re really feeling nice you can post a tut all about it here
Having a small business with actual employees is vastly different from the one-man operation I had with my old computer business – here’s the financial differences:
1. IRS (hereafter referred to as ‘those bastards’) – requires that you deduct Federal Income Tax withholdings and Social Security (aka FICA) from your employee’s paychecks (and yours if you treat yourself as an employee to avoid self-employment tax like I do) – and pay them each pay period through a program called EFTPS (aka: the bastards I pay). In addition The Business Must MATCH any FICA deductions from an employee paycheck. This means that if you hold 10 bucks out of your employee’s check for FICA, you pay those bastards 20. Got it? good. Let’s give a better example:
Joe’s Monkey Business has 3 employees – making $5 per hour, all of them get 40 hours per week, and payroll runs weekly:
Fred is married with 2 dependents
Joe is single with no dependents
Trudy is married but wants withholdings at single no dependents rate
All on the up and up, and legal. Here’s what payroll will look like –
Fred – 40 hours@$5.00 = $200 gross pay. FIT withheld is $0, FICA $12.40
Net pay $187.60.
Joe – 40hours@$5.00 = $200 gross pay. FIT withheld is $16, FICA $12.40
Net pay $171.60
Trudy – 40hours@$5.00 = $200 gross pay. FIT is $16, FICA $12.40
Net pay $171.60
SO to those bastards I pay –
$106.40 broken down as:
$24.80 for Fred’s FICA, and $40.80 each for Joe and Trudy.
Calculating FICA is the easy part – currently it’s 6.2% of gross pay, with the business matching. FIT has to be looked up on a handy table in the same publication that tells you how much FICA to withhold – titled
Publication 15 (Circular E), Employer’s Tax Guide (Including 2006 Wage Withholding and Advance Earned Income Credit Payment Tables)
This book is updated YEARLY every January, so make friends with those bastards and get that publication every year. Don’t forget or you’re in a world of trouble.
How often do you pay those bastards? Ideally every payroll, but they don’t get cranky until you put it off for 1 month – so at 1 month make bloody well sure they’re paid, because at 1 month and 1 day if the check isn’t in their hands, your business is closed, no exceptions.
Before we go further I should back up a bit and tell you about a permit not mentioned in my previous tutorial – it’s called an “Employee Identification Number” and you get it from those bastards. In a small business that has no employees your social security number doubles as your EIN. If you have even one employee, you must have this number. You’ve also got to have it for EFTPS and it takes 3 weeks after being assigned a permanent one to sign up for EFTPS, so make bloody well sure you procure it at least 3 weeks before your first paychecks get cut. You can order the form to do it from those bastards, or if you’re fortunate and have a those bastards office in your hometown like I do, you can pay them a visit and get told to fill it out and call them – or you can do it online which is easiest – it takes about a minute.
Also I strongly suggest contacting your local ‘workforce commission’ in regards to unemployment taxes
A final, vastly important point before I close this up – Recordkeeping
I saved the absolutey no-holds-barred number one most important point above all else for last. I cannot stress this enough.
KEEP RECORDS OF EVERYTHING!!!!!!!!!!!
IRS (those bastards) NEVER do anything unless it’s in writing. Make damn sure you comply or THEY WILL OWN YOU!
Let me repeat this:
Don’t lie to those bastards. Don’t hide anything from them. Keep records of everything. Every nickel in, every nickel out. Tell them. Treat those bastards like your best friend and make damn sure they’re happy. These people can not only sieze your burgeoning business, they can also seize everything you own and leave you living in the streets or worse.
Now – that being said – what do you do with those nasty lil records?
I’m not sure of any law that requires me to do so, but I keep records for at least 10 years. My reasoning is that the IRS only audits back 7 years so if I keep ’em 10 I’m safe and covered. I keep both hardcopy and electronic copies of all of my records – the hardcopies go into a handy storeroom I’ve rented offsite, the electronic ones go into my fireproof safe in my home. If those bastards want to know about the business lunch I took 10 years ago (and they might) I can tell them. Included with each (I suggest those rubbermaid totes, it’s what I use) box of file folders and records is a journal for that period of activity. I keep this journal on a daily basis – and it lists everything I do with the business in a quick format – 8am-10am answered business phones, did recordkeeping. 11am-noon did business lunch with Joe Monkey, a potential client, and Fred Monkey, his boss who is also a potential commercial client. 1pm-5pm did payroll, employee spot-checks and customer follow ups..
You get the picture.
When I fill a tote I close the journal, put it inside, and start a new one.
NOTE this journal is NOT for appointment setting – I’ve a different book for that one plus a nice lil software package that can handle it too. I like being redundant with my customer info – in addition each employee carries a day planner with her appointments in it for each day, plus any notes the business has on her customers for that day – so she knows that Trudy Tightwad is picky about her knick-knack shelves and Joey Oilman likes his bed made so tightly a quarter jumps to the moon… All of this is kept both in hardcopy and in my computer so it’s never forgotten. My customer’s happiness is paramont. Shucks, I even send ’em birthday and Christmas cards, as well as a ‘we haven’t heard from you in awhile’ letter if it’s been over a month since their last visit – all from the info I keep. I NEVER reveal my customer’s information to ANYONE – I hate being spammed/telemarketed, and I know my customers do too, plus someday it’s this same information that’ll be worth the megabucks when I sell the business.
A couple of final notes regarding domestic and commercial cleaning
1. The whole reason we went into this field is because we needed a cleaning person and every agency we called wanted an arm and leg for nearly nothing – basic cleaning only, no dishes, no ovens, no laundry, no windows. I got sick of hearing ‘NO’ and even sicker when I heard their prices. “Ladies of Clean” was born from the cleaning girl we did eventually hire who was willing to do anything we needed, cheaper, my wife, and myself. Our motto is ‘Whatever it takes’ – we do everything our competitors don’t, and we do it all cheaper. We don’t tell prices over the phone ever because we want the personal visit to their home and to show them the price comparison sheet (yes, we did a bit of pretending and called our competitors, who do give prices over the phone) showing where we beat the hell out of them To date I’ve had very few who didn’t like us not giving prices over the phone (probably our competitors who want our pricelist) and very few who ‘had to think about it’ when it came time to seal the deal – our price is *that* good, and I’ll show you how we do it in the next step.
2. We base our price on the job, not the customer. It’s a simple process really – we find out exactly what the customer wants. We figure up how much time it will take. We figure overhead which is broken down *by the day* and is in the head of the person who’s doing the estimate, and we mark all that up by 10% – that’s it. We make 10% over overhead on each job and we do twice what our competitors do, and we’re making a killing at it.
3. We diversified –
Once again and I can’t stress this enough – we do what our competitors won’t, for a lower price. In a 4 hour cleaning (which is average for a 3br house) we will do 3 loads of laundry, 1 load of dishes (or 2 if there’s 2 loads worth), windows, baseboards, ceiling fans, the works. We’ll take more time and go fetch your groceries at the closest market (that costs extra), or clean your oven (that costs extra too, and it’s easy money since the chemical does 99% of the work and the girl can clean house in between working on the oven).
Next month we’re adding in a ‘hubby for hire’ service for those handyman jobs that need doing – at a fat $30 per hour since there’s no competitors in the area. My eagle’s hubby is dying to get involved at it since I offered him $15 per hour to do it and he’s making less than 10 at his current job. It’ll be part time until business in that aspect picks up, and he knows it, and is willing to be ready when we need him (thankfully his job lets him take off whenever he needs to for any reason and doesn’t mind…) If jobs are too big for him to handle I’ll subcontract this to whatever area professional can get the job done – plumbing? I know a plumber who’ll do it for $10/hour. Carpentry? same thing, just $15. Get the picture? Even when subcontracted I’m making money, which is the point. They do the work, I sit under the shade-tree drinking iced tea and schmoozing with the customer while they sweat and bust arse. Hell, we’ll even roof your house, but remember it’s $30 an hour per person… a crew of 6 means a fat $180 an hour for 12 hours…and roofs come from the roofing company at $75 a square with the average house having 4-6 squares of roof (12 hour job) – this means for a $450 job I’m getting $2160 doing nothing but placing a phone call and making my customer happy My subcontractors are all aware how much I’m making and are happy with it because they’re already making their nut with their usual fees.
Yard work you say? Not a problem says I – I go down to the local temp employment agency, pay them $10 an hour (from which they give $6 an hour to an unskilled laborer) and I make $30 an hour sittin in the shade…
Business is all a game. You win, you lose, you break even. It’s all in how you handle yourself in the ‘losing’ and ‘breaking even’ points that make the difference. Don’t limit yourself by your own personal knowledge when deciding which business to start up – you can learn, which is the biggest aspect of being a businessman. My IT skills help me setting and keeping records and getting things done quickly and efficently. I know ZERO about cleaning a house, putting on a roof, doing plumbing, and nearly zero about doing home repairs or yard work. I don’t need to – that’s why I have employees and I make money on their labors, enough to pay myself, my rent, my bills, my advertising, the works.
Questions? Comments? Feel free to add – I don’t profess to know everything about small businesses, but I’ll give responses my best effort.[/b]