America, the cheapskate. With this new administration, there’s a lot of talk about balancing the budget, reducing taxes, and that old chestnut–“job creation”. Part of the problem is that we don’t have people developing skills that are more relevant to the economy than coal mining, but that’s another post for another day. But conservatives love to talk about how policies are helping or hurting small business owners.*
There’s all this talk about job creation and how things like the Affordable Care Act discourage business growth. **The truth is that it takes money to make money. If you can’t afford the expenses for your business–including reasonable employee wages–then you need to reevaluate before you start talking about growth. If you can’t pay your employees, you can’t afford to grow– period! So either you need to reevaluate your business processes to see how you can better handle your workload with what you have, or up your marketing game to get more business in the door.
It’s really unfortunate to me that so many business owners are so cheap. Everyone knows the saying “it takes money to make money”, but few seem to truly understand that. It’s not hard. When you are starting a business, most of your profits should be reinvested as working capital. That’s not to say you shouldn’t pay yourself something to live on. But the first three years are not for you to run out and buy an expensive new car or wardrobe, or lease an expensive office downtown in the hip neighborhood. They are for you to master your branding, network, market yourself, and find out what processes will allow you to scale up from the current skeleton crew operation.
As you all know, I’m a lawyer. As a service professional, an attorney’s or law firm’s reputation is everything because a lot of business comes through word of mouth. Doing a half-assed job on cases you shouldn’t have taken, and missing deadlines because you can’t manage your docket, is bad business and will potentially get you in trouble with the state bar. Discounting every client who complains about your fee will bite you in the foot. If they are a repeat customer, they’ll expect the same discounted rate. The clients they refer to you will expect a discounted rate. They also won’t take your seriously. In my experience, the clients who get a discounted fee or are on contingency are the most high maintenance, demanding clients. They want to go to trial long after it’s clear they should take a settlement and go home. You waste precious billable hours wrangling them when you could be working on more lucrative cases. All of this for a client who is not substantially contributing to your bottom line. Many of these things are true for other professionals as well.
So that’s why my interview the other day irked me so much. The firm had a standalone building with a dedicated reception lobby, two conference rooms, four offices and a break room. There was a recent model year BMW parked close by. My interviewer’s shoes looked designer and their shirts and suits looked custom tailored. Yet, they want someone to work for them 7 days a week for a pittance. See, we millenials peep game. The same Baby Booomers who claim we’re lazy and entitled, told us to know our worth, negotiate everything, and demand respect. Now that the rubber has hit the road, they’ve changed their tune. They want us to do better, just not better than them. And that’s messed up.
*Everyone thinks about the Mom & Pop diner when you say small business, but they don’t give a crap. Under tax law you can create an S-Corp, literally “small corporation”, which can’t have more than 100 shareholders. But there are S-Corps which are multi-million dollar international operations. #TheMoreYouKnow
**The ACA requires that businesses with 50 or more employees provide sponsored health insurance coverage. The cost of this coverage is deductible by the company as a business expense.