Reading about the insane requirement of 1099s for purchases lately, I keep having a thought about matching that I have seen nobody else mention: Cash versus accrual accounting.
My former business was a simple partnership. We had a tax ID number as the business, and operated in some ways the same as a corporation might. However, our large client sent us a 1099 each year as if we were an individual contractor. Apparently this was required, since we were not, in fact, a corporation.
We used accrual accounting.
Which in retrospect I consider a mistake, but I took my accounting degree and made things theoretically pure. Kind of a geeky, OCD thing, when it comes down to it.
There was never a year when the 1099 from the client matched our declared revenue from them, entirely aside from the presence of other sources of revenue that made the grand total differ and were not reflected by any pesky paperwork to the IRS.
Now imagine that as applied to products.
Is it reportable on a 1099 when you make the purchase on terms and it’s on the books as a purchase, or is it reportable when cash changes hands? Are prompt payment discounts included or excluded? How is any of this information useful when the year it falls inti for the seller doesn’t align with the year it falls into for the buyer?
We’ve already seen that at least some in Congress understand nothing of accounting, even rules they themselves have applied. Do they have the slightest idea what they’ve done in that regard?
Rob has posted excellent thoughts on being an introvert, yet an entrepreneur as well; two things that might not seem they would work together. As an introvert, a fellow INTP, coping with what can sometimes be near-debilitating is a subject of great interest to me.
I can see how immersion in the entrepreneurial flurry could actually help, as long as there is always a little down time. It tends to affect my business negatively, but more so if I am less busy, less so if I am more busy. Yet it is a barrier to becoming busier; a conundrum.
The funny thing is, I often remark to people about how shy I am, only to be told by the more casual observer “you’re not shy!” I am quite capable of putting on a more gregarious face, but it takes a toll and requires balance. I also act more gregarious with people I already know. Catch-22.
Here I am, needing to sell – not merely engage in some relatively standoffish marketing – and needing to increase my volume of billable work by 50% for starters, 100% to break through the “need two people and can now afford it” barrier. Yet between introversion and the residual terror of picking up the phone that doing high volume tech support tends to impart, I can hardly bear to answer the phone (and need the aforementioned greater volume before I can have someone answering for me). It wouldn’t hurt for me to do personal cold calling, but there is no way that’s going to happen. I can make myself physically sick anticipating such a task. Thus the approach of building enough volume, gradually if that’s how it has to be, then lighting things up to a new level by bringing on someone who can “do sales.”
Not that I can never manage to flare up into evangelical mode, but I don’t do it the way one of my former partners could. Yet he was more introverted – or at least far moodier – than I am. If you truly believe, brothers, then that can be far easier than other things introversion impacts. It’s all very challenging.
I originally wrote this in 2004, thus the dated references to a TV series long ended.
The Gilmore Girls episode that aired on Tuesday, October 26 had a great example of all or nothing, either/or, uncreative business thinking. I was just bursting as I watched, thinking of all the possibilities.
There are spoilers if you haven’t seen the episode, and some explanation enough to set the scene if you have never watched, or not recently watched, that show.
Lorelai co-owns, sort of the senior partner, an inn located in the sleepy, tourist-appeal, fictional village where she lives. This is a fairly new development, following the closing of an inn she managed after it was partially damaged by fire.
Luke, long time friend and father figure to Lorelai’s daughter, owns the popular local diner.
These days, Luke and Lorelai are finally in a relationship, this being one of those show where “it” has been there all along, but their marriage and the final episode would pretty much have to go hand in hand.
One of the partners in the inn, Sookie, is an astoundingly good cook and runs a mean kitchen, but is obsessive and not always practical.
The inn is doing okay for a new venture, but needs to trim expenses. Lunch is an obvious problem. They are staffed up and ready to go, yet they do no lunch business.
That makes sense. Tourists book at the inn, eat breakfast, check out and leave before lunch or go hit the town and have lunch elsewhere, then they are back for supper. Lunch would be the orphan meal.
In a classic battle that loses sight of any but the either/or alternatives, Sookie insists they have to keep lunch, insulted that her turf will be trampled. Lorelai insists that there will no longer be lunch served at the inn, period.
That was what got me all excited, saying “but they could…” and amusing Deb.
Nobody buys lunch. The possibility exists that sometimes an inn customer will want to. You’re losing money and will go out of business if you don’t trim costs. Or generate revenue, if only marginal, to offset them.
So you could…
I may have had other thoughts, but it’s been over a week since I first itched to write this. In short, doing the either-or is too simplistic, though it was also a plot device, and represents the kind of failure to imagine that people all too often experience. It’s always harder from the inside, too. I well know. Kill this business unit. Leave this business unit exactly as is. Save massive cash but harm the image of the business. Bleed the business dry. Either. Or. By the same token, we make widgets and they are used for X. We will refuse to acknowledge that widgets can also be used for Y, because X is our business. That’s the way to become a business class case study.
Well, turns out Sookie wasn’t completely lost to the possibilities. She went off on her own accord, sending another character out with discount lunch fliers to drum up business. The problem was not proposing the idea to her partner and ignoring the decision, good or bad, to close the kitchen at lunch.
So the comic foil of the show ended up in a hot dog suit, handing out fliers in front of the diner, getting Lorelai in trouble with Luke and Sookie in trouble with Lorelai. I was unsatisfied with Lorelai ultimately enforcing the lunch closing. Yet Sookie was absolutely insane to have a staff of seven bustling away with nobody ordering lunch. She does food, not practical business.
I would think if the supper crowd justifies it, there might be room to have a person or two prepping all day and able to handle basic lunch orders. Problem solved, resources efficiently allocated, business model improved, and no need for an either/or decision.
This is not that post. At least, not in full or as I envisioned it.
However, I came up with a great analogy for one of the problems we had in my business. We love to watch The Phantom Gourmet, a Boston show on channel 38 each Saturday and Sunday morning. It’s a food and restaurant review show.
One place they profiled recently is a healthy fast food place started by two friends, who’ve known each other since they were five. Now, they pick on each other a lot while they’re working, and disagree about things, but they both wanted to start a restaurant, and they knew what kind.
My experience with friends getting together, all very informally and that was one of the problems, lends itself to a restaurant analogy. Imagine getting together and starting a business with some people, and you want to have a restaurant. You figure you all are talking about a formal sit down place, reasonable and family oriented, but not cheap, with a typical wide-ranging menu. That’s what you have in mind, after all, and nothing the others have said makes you believe they mean different. Come to find out that some of your partners meant they wanted a fast food place. Some wanted a ritzier place. The fast food folks found that some wanted it to be a fried chicken joint, and others wanted to serve burgers.
You end up with a hot dog vending cart, because nobody could agree, most of them never had any intention of putting in any money, and it was easy to set that up on the cheap. In theory, it can be used to bootstrap to something bigger. Trouble is, it really only needs one person to run it, not a whole partnership, and it only generates money enough to pay one partner, but other partners want a piece of it too, but don’t want to expand the business to multiple stands and spend full time manning one to make that possible. When you do need extra or fill-in help with the stand, you could pay someone $10 an hour, but partners want the work to go to them for $30 an hour. Partners also don’t want you to start up extra carts and hire people off the street rather than them, but they don’t want to staff them, so nothing is allowed to happen where you could make a profit on lower cost labor, making the other partners some money for doing nothing.
Because there is no immediate return in planning for the full restaurant the hot dog stand will lead to, the other partners won’t bother to put any legwork toward it, leaving it entirely to you, even though you’re running the stand full time to help bootstrap the whole thing.
It’s an excellent analogy for my business. One of the big problems was lack of common goals and focus.
The third Carnival of the Capitalists Q&A question with James Pethokoukis of the U.S. News & World Report blog Capital Commerce is up, as part of a post that says Don’t Use the Market to Predict a Recession. It features a question from Brian Gongol, longtime CotC participant and supporter and creator of the Gongol submission form, on prospects for greater use of government inducement prizes for innovation.