lifestyle. Long‐term‐care policies are also increasingly sought, and are also cheaper at younger ages. Your company can usually pay certain premiums for you, though these are often taxable benefits. Check with your tax advisors.
Retirement
Use whatever benefit plans make sense for you, but be sure to maximize your ability to put money away in a simplified employee pension individual retirement account (SEP IRA), 401(k), Roth IRA, and similar plans, which are deductible expenses for the company and have caps. Regular IRAs and Roth IRAs are also very worthwhile at younger ages. In many cases, company matching is allowed, though your contributions are from after‐tax funds.
Be aware that if you have regular (W2, full‐time) employees, benefit plans must extend equally to them, which is one of many good reasons to use only part‐time and subcontracting help.4
Contribute consistently and maximally to your retirement programs. While there is some catch‐up offered, you will usually lose the ability to make these contributions after early in the following year, denying yourself both a deduction and a contribution to your future. Even if you're just starting out, try to contribute at least partially to your allowed retirement funds.
Normal Conditions
Keep your business checking account separate from your personal accounts. You can create a savings account or money market sweep account to accommodate funds that aren't immediately needed. Be aware that almost everyone has some combination of these needs:
Regular expenses: food, clothing, mortgage/rent, recreation.
Special events: marriages, college, extended trips, and so on.
Unexpected events: family help, illnesses, uninsured losses.
Impulses: spontaneous purchases, ego needs.
Lifestyle changes: new cars, house remodeling.
Debt reduction: zero‐out credit cards, one‐time purchases.
Nonretirement investments: stocks, bonds, real estate.
Philanthropy: contributions and memberships.
Don't simply spend what you make, and don't spend it on whatever happens to be in front of you. Think about priorities, because you also have these business needs:
Professional development
New hardware, software, and technology
Office support
Nonreimbursed travel
Marketing
Communications
These can be sobering when viewed in this manner, but they are better viewed in daylight than hidden in dark corners. That's why lean and mean is best. I've never had a staff or part‐time employees, and my office has always been in my home.
Don't mix personal and business funds, even in a Subchapter S corporation, until the year is nearly ended and you can be advised on distributions and bonuses. Try to establish a separate, business line of credit with your bank. If you have both personal and business accounts, you'll have more clout and probably obtain more credit.
The purpose of credit is to even out the unequal flows of revenue and expenses. Credit should be paid off as soon as possible. That is responsible and appropriate in business. People who tell me they “never use credit cards” and pay only by check are amateurs, and remind me of people who put the rent money in one envelope and the milk money in another. If you're not willing to confidently use credit, then you simply don't trust your own abilities.
Administrative Support and Resources
Here's an area that can cost you a bundle if you're not careful, and here's why.
When I was fired as president of a consulting firm in 1985 (the owner and I shared a mutual antipathy), I told my wife I was going to go out on my own and no moron would ever be in a position to fire me again. She said fine, what was I planning to do first?
“Get an office,” I responded.
“Why?” she asked.
“I'll be out on my own.”
“Why do you need an office?”
“I won't have any support staff otherwise.”
“Are people going to come to see you, or are you going to go visit them?”
“Uhhhhhh …”
“If it turns out you need an office, then get one. But for now, why not forestall that expense?”
I still don't have an office, or a staff, or an assistant, real, virtual, or imagined (well, there is that picture of Michelle Pfeiffer). My two children went to private school from preschool through their undergraduate degrees at major universities. The total of those tuition payments was $450,000 (don't smirk—it's even worse now). I calculated that, over 21 years, a modest office with utilities, insurance, rent, repairs, and part‐time help would have cost me … $450,000.
Are you getting the picture?
The Gospel
A staff is not important unless you need it to help you walk up a long and winding road seeking enlightenment. And that's true only if you have a bad hip.
Most virtual assistants require supervision, and many of them don't represent you well, since they're representing another dozen or so people, as well. I warned one woman, in Toronto, who answered the phone for one of my mentor program members, that I would personally try to have her fired if she wasn't more polite when I called.
Also remember that full‐ and even part‐time employees often must be covered in the same benefit formulas and retirement plans that you implement for yourself and your family. And then there's illness, theft, personal problems, errors—do you really need these headaches? Most of us are refugees from larger organizations and the people management issues that thrive there, like mold in a damp cellar.
Here are six suggestions and resolutions:
1 Tuck your ego away. Having a staff doesn't elevate you in the eyes of the buyer. Telling someone your “people” will look into it will generate only levity.
2 Learn to do simple tasks efficiently. You should have invoice templates, sample proposals, automated expense statements, and so on. Use technology. Send clients or prospects letters from your laptop.
3 Learn to type, and I don't mean with your thumbs. I can type 60 words a minute, and so can you. If you can learn to use a keyboard, then you can learn to type on it. (I love the airline counter clerks who have been using keyboards for 20 years and never bothered to learn to touch type. It's not rocket science. These days, even rocket science isn't rocket science.)
4 Delegate
