August 2011
W-2 & 1099 Information

Small Business Blog

Brought to you by Steve Strauss

August 2011


It is hard to underestimate just how important the employee-hiring process is. A good employee can become a new profit center - driving sales, helping others succeed, giving your business a better reputation, and making the office a better place to be. Of course, here at Greatland, making your hiring process easier is what we are all about.

Conversely, if you let the wrong person in the door, he or she can steal from you, upset morale, anger customers, and/or hurt sales. Almost as bad is that the unscrupulous employee may even sue you for "wrongful termination" (i.e., illegal termination), even though you were legally and morally right in letting them go.

As such, you can't be too careful when interviewing prospective employees. Of course honesty, intelligence, skill, and affability are important. You can garner a lot of this information from resumes and references. Knowing what people did in the past is a pretty good indication of what they will do in the future.

This is pretty standard stuff. Most small business owners have a pretty good sense of what they want and are looking for in an employee. They know about checking references.

However, one area that I find often overlooked is something I call "coachability," and it's vital to making a smart hire. Coachability is the ability of the employee to take direction and make changes, to listen and adjust, to think and respond. Just as not everyone is cut out to be an entrepreneur, so too is it that not everyone is cut out to be an employee.

I have a good friend who recently went to work at an upscale retail store. She is positive, energetic, and happy to have the job. However, she has a co-worker there who constantly snipes behind the manager's back, says "yes" when they ask her something and then ignores most of what they said, corrects all of her co-workers, and is generally unhappy (although she professes otherwise in front of her managers.)

"What's her problem?" I queried my friend. She responded that the woman used to own her own store (losing it in a bankruptcy) and as such, still thinks she knows better than everyone one else how to run a shop and resents having to take orders from the managers. She is uncoachable, and she's a cancer to the team.

Running a store and making a good hire then, in this sense, is not unlike running a sports team. There are good teammates and bad teammates. There are employees who make everyone around them better and those who hog the ball. Here where I live, we have a pro sports team with a player who is considered uncoachable. He doesn't listen to his manager (the coach), does what he wants, and the team suffers.

Having uncoachable employees can ruin your team too. You have to stock your team with employees who are willing to do things your way, who listen, who can take constructive criticism, who are willing to try new things, and who are adaptable and positive. Coachability is a vital characteristic, often overlooked. So, when interviewing those prospective employees, be sure to find out what kind of teammate they have been and will be. As much as skill and smarts, their coachability can make or break your season.

Customer Disservice

Customer service is one of the most overused phrases in business, so much so that it has practically become trite. Real customer service must be more than simply mouthing, or incorporating into a mission statement, the phrase "the customer is always right." (For one, the customer isn't always right.) Actual customer service must be more than simply reiterating a hackneyed phrase; to mean something, it must relate to specific actions to take, and not take.

Here then are my Five Sins of Customer Disservice

  1. Never Put Phone Calls Ahead of Real Customers: How often has this happened to you? You patiently wait in line some place, you get to the front, you catch someone's attention, and then the phone behind the counter rings. All of a sudden, the phone call has become more important than you and it takes precedence over your issue.

    When this happens to me these days, I refuse to accept it. I kindly tell the employee that I was there before the phone caller. But it shouldn't have to get to that point. Real people who patronize your business in person are almost always most important than looky loo phone callers. Make sure that your employees know that and are taught to treat your actual customers with the respect that they deserve.
  2. Accept no Nopeys. Growing up, one of my favorite cartoons was Gumby. Gumby had a pal named Nopey. No matter what you said to him, no matter what you asked him, Nopey's answer was "No!"

    Too many employees try to flex their muscle by saying no. It seems to give them power, or at least a sense of power. But great harm can come from the Nopey employee. They are the ones who anger already unhappy customers and they are the ones who turn customers into ex-customers.

    For instance, just last week, I was in a take-out restaurant. Instead of the two side dishes that came with the meal that I didn't want, I asked for a cup of soup instead. The counter person said no. I explained that the one cup of soup cost less than the two side dishes. He still said no. I now say no when my wife says we should go there again.
  3. Do Not Be a Strict Constructionist. In the law, a strict constructionist is one who says that laws and policies do not evolve, that the document as written must be strictly interpreted.

    While that might be a valid legal argument, it makes for poor customer relations. Sometimes the smartest choice is to bend policy and make an exception. The customer will remember it, and your business will probably not be harmed by it.
  4. Never Accept Bad Manners: Your customers should not be thanking you, you should be thanking them. Common courteously and good manners can go far towards leaving your customers with a good impression of your business.
  5. Do Not Your Customers for Granted: While seemingly obvious, it is nevertheless critical to remember that loyal customers are loyal only to a point, and that the second they feel unappreciated, their loyalty will be a distant memory. So make sure your best customers know they are special and are treated that way.

Seller Financing

People often wonder how to get into a business with little or no money. Is it possible? It is, but it isn't easy. One of the best ways to do it is to find an existing business with an owner/seller who would be willing to finance all or part of the purchase. The business itself acts an asset, securing the loan and deal.

People in real estate do this all of the time. Let's say you found a nice duplex that's going for $100,000. Using a 10% loan, it is possible to buy that $100,000 asset with as little as $10,000 down. The bank will loan you 90% of the money you need to buy the property. That's called leverage - the asset itself secures the loan required so that you need not come up with a lot of money out of pocket.

That sort of leverage is similarly possible in the business game.

Indeed, sellers can be sometimes be very willing to finance some of the purchase price. Not surprisingly, this occurs when they are very motivated to sell, for whatever reason. Another reason seller financing is great because sellers may finance as much as 80% of the deal. 100% seller financing is not unheard of either, but very rare, frankly.

The best and most realistic option is to combine bank and seller financing. Let's say you want to buy a restaurant worth $100,000. The bank may be willing to loan you 50%, and the seller may chip in another 35%. All you need now is to come up with another 15% and you have bought the business with very little money down. Where do you find that $15,000?

There are several options:

  • Your own cash. Of course this is optimum. Both sellers and banks will want to see that you have your own skin in the game. If that's not possible, things get tougher, but some other options include
  • Getting a partner with cash. Just make sure you can work well together.
  • Liability financing: Sellers will usually include in the cash price the amount they need to pay off creditors. If you agree to assume those liabilities however, you can reduce your out-of-pocket down payment by that much. Assuming $15,000 in liabilities is not hard to do. But again, this would normally only work with a 100% seller financed deal.
  • Cash flow financing: If the business earns $10,000 a month, offer to pay the $15,000 balance in three payments after closing of $5,000 each, spread out a month apart. For a business that makes $10,000 monthly, that should be easy.
  • Inventory financing: The purchase price will take into account the value of the inventory. If you are short $15,000, ask the owner to liquidate $15,000 in inventory, and then reduce the purchase price by that amount.
  • Asset financing: Arrange, before the sale, to sell one of the business' assets at closing to help finance your purchase: Equipment, patents, trademarks, trucks, office space, etc.
  • Broker financing: Most business sales are done through a broker. To keep a deal, almost any broker would be willing to forgo part of his or her commission and put it in the pot for the seller. My brother sells commercial real estate and it is not uncommon for him to (sadly) kick-back part of his commission to close a deal.

Bottom line: Creative financing is very possible with a seller-financed and owned business.

Finding Expert Professional Help

Small business people typically need two sorts of professionals - lawyers and accountants. They are necessary because they can help steer you away from trouble, and get you out of trouble if need be. Lawyers can help with contracts, leases, hiring and firing employees, and a host of other issues. Accountants will help prepare your taxes and can give other helpful financial advice. Combined, these two professionals can become vital advisors.

But this begs the questions: Where do you find a good accountant who knows his stuff, or a lawyer whom you can trust? The best way is through a satisfied customer. A referral will tell you far more about a professional than a dozen television ads. So, if you know someone (or know someone who knows someone) who has a business similar to yours, find out how they like their lawyer or CPA. You need to discover the following:

  • Did the professional get good results? Did the case settle successfully, was the contract beneficial, were taxes reduced? Results are what count.
  • Was the lawyer or accountant accessible? Far too many attorneys are hard to reach and don't return phone calls quickly. A call should be returned within 24 hours. That is what you should insist upon.
  • Were the fees reasonable? While you need to be conscious of fees when hiring a professional, but they are not the most important thing to be concerned about. As in the rest of life, with attorneys and accountants, you often get what you pay for; the cheapest is probably not the best.
  • Who does the work? Many lawyers and accountants (especially at big firms) pawn your work onto underpaid, overworked associates. While this helps keep their fees down, you want to make sure that the person you hire is the one doing the work when it counts.

If you can get a referral for a professional who meets these criteria, call him or her and schedule a meeting. As you are looking to start an important long-term relationship, expect to spend a few hours with the lawyer and accountant. Get a feel for his or her personality. Make sure he understands your needs. Find out about his or her background. Get some referrals. Certainly, you should not expect to be billed for this meeting, and if you are, it's a bad omen.

Barring a referral from a friend or business associate, here are some more ways to find good advisors:

  • Call your Local Bar Association. Almost all cities have an association of local lawyers called a "bar association." The lawyers are listed by their areas of specialty and the bar can usually give you the names of some of its members who have a good reputation. As bar associations are non-partisan, you can rest assured that the recommendation will be pretty trustworthy.
  • Contact the AICPA: The American Institute of Certified Public Accountants is the premier national association for CPAs in the United States (

You want to find a professional whose judgment you trust, who is smart and sharp, who seems more concerned about helping you than billing you, and with whom you get along. A tall order for sure, but doable.