The E-Myth Chief Financial Officer

Why Most Small Businesses Run Out of Money and What to Do About It

Michael E. Gerber, Fred G. Parrish

• Publisher: Prodigy Business Books
• Year: 2018
• ISBN:
  9780983554219
• Edition: 1
• Topic: Business
• Subtopic: Finanza
• Index: Business

The E-Myth Chief Financial Officer fills this knowledge
gap, giving you a complete toolkit for either starting a
successful practice from scratch or maximizing an
existing practice’s performance. Loaded with practical,
powerfuladvice you can easily use, this one-stop guide
helps you realize all the benefits that come with
thriving business.

Make every detail perfect, and limit the number of details to perfect.

—Jack Dorsey, co-founder of Twitter

Every small business is a family business. To ignore this truth is to court disaster.

This is true whether or not family members actually work in the business. Whatever their relationship with the business, every member of a business owner’s family will be greatly affected by the decisions they make about the business. There’s just no way around it.

Unfortunately, like most small business owners, they also tend to compartmentalize their lives. They view the work they do as a technician on the job, rather than as a Manager on the Company and the Business, much less as an entrepreneurial Leader on the enterprise —in short, what they do—and therefore it’s none of their family’s business.

“This has nothing to do with you,” says the business owner to his wife, with blind conviction. “I leave work at the office and family at home.”

And with equal conviction, I say, “Not true!”

In actuality, your family and company are inextricably linked to one another. What’s happening in your company is also happening at home. Consider the following and ask yourself if each is true:

•If you’re angry at work, you’re also angry at home.

•If you’re out of control in your company, you’re equally out of control at home.

•If you’re having trouble with money in your company, you’re also having trouble with money at home.

•If you have communication problems in your company, you’re also having communication problems at home.

•If you don’t trust in your company, you don’t trust at home.

•If you’re secretive in your company, you’re equally secretive at home.

And you’re paying a huge price for it!

The truth is that your company and your family are one—and you’re the link. Or you should be. Because if you try to keep your company and your family apart, if your company and your family are strangers, you will effectively create two separate worlds that can never wholeheartedly serve each other. Two worlds that split each other apart.

Let me tell you the story of Steve and Peggy Walsh.

The Walshes met in college. They were in the same economics class, Steve a business major and Peggy majoring in marketing. When their discussions started to wander beyond Keynesian theory or multinational corporations and into their personal lives, they discovered they had a lot in common. By the end of the course, they weren’t just talking in class; they were talking on the phone every night . . . and not about economics.

Steve thought Peggy was absolutely brilliant, and Peggy considered Steve the most passionate man she knew. It wasn’t long before they were engaged and planning their future together. A month after graduation, they were married in a lovely garden ceremony in Peggy’s childhood home.

While Steve studied at a prestigious business college, Peggy attended one of the Top 10 marketing universities nearby. Over the next few years, the couple worked hard to keep their finances afloat. They worked long hours and studied constantly; they were often exhausted and struggled to make ends meet. But through it all, they were committed to what they were doing and to each other.

After passing his certification exams, Steve became a manager in a busy company while Peggy completed her marketing degree. Soon afterward, the couple had their son, and Peggy decided to take some time off to be with him. Those were good years. Steve and Peggy loved each other very much, were active members in their church, participated in community organizations, and spent quality time together. The Walshes considered themselves one of the most fortunate families they knew.

But work became troublesome. Steve grew increasingly frustrated with the way the company was run. “I want to go into business for myself,” he announced one night at the dinner table. “I want to start my own business.”

Steve and Peggy spent many nights talking about the move. Was it something they could afford? Did Steve really have the skills necessary to make his own company a success? Were there enough clients to go around? What impact would such a move have on Peggy’s future career as a market strategist, their lifestyle, their son, their relationship? They asked all the questions they thought they needed to answer before Steve went into business for himself . . . but they never really drew up a concrete plan.

Finally, tired of talking and confident that he could handle whatever he might face, Steve committed to starting his own company. Because she loved and supported him, Peggy agreed, offering her own commitment to help in any way she could. So Steve quit his job, took out a second mortgage on their home, and leased a small office nearby.

In the beginning, things went well. A building boom had hit the town, and new families were pouring into the area. Steve had no trouble getting new clients. His company expanded, quickly outgrowing his office.

Within a year, Steve had employed an office manager, Clarissa, to run the front desk and handle the administrative side of the business. He also hired a bookkeeper, Tim, to handle the finances. Steve was ecstatic with the progress his young company had made. He celebrated by taking his wife and son on vacation to Italy.

Of course, managing a business was more complicated and time-consuming than working for someone else. Steve not only supervised all the jobs Clarissa and Tim did, but also was continually looking for work to keep everyone busy. When he wasn’t scanning industry journals to stay abreast of what was going on in the field or fulfilling continuing-education requirements to stay current on the standards in his industry, he was going to the bank, wading through client paperwork. He also found himself spending more and more time on the telephone dealing with client concerns and nurturing relationships.

As the months went by and more and more clients came through the door, Steve had to spend even more time just trying to keep his head above water.

By the end of its second year, the company, now employing two full-time and two part-time people, had moved to a larger office downtown. The demands on Steve’s time had grown with the company.

He began leaving home earlier in the morning and returning later at night. He drank more. He rarely saw his son anymore. For the most part, Steve was resigned to the problem. He saw the hard work as essential to building the “sweat equity” he had long heard about.

Money was also becoming a problem for Steve. Although the company was growing like crazy, money always seemed scarce when it was really needed. He had discovered that he did not understand the complexity of getting paid from different customers. Sure, he got paid quickly, but some were beyond their usual 15–30 day payments.

In some cases, he didn’t get paid for well over forty-five days.

When Steve had worked for somebody else, he had been paid twice a month. In his own company, he often had to wait—sometimes for months. He was still owed money on billings he had completed more than ninety days before.

When he made numerous calls to the company owners, it fell on deaf ears. They would shrug, smile, and say that they were doing the best they could and would pay on their accounts soon. Of course, no matter how slowly Steve got paid, he still had to pay his people. This became a relentless problem. Steve often felt like a juggler dancing on a tightrope. A fire burned in his stomach day and night.

To make matters worse, Steve began to feel that Peggy was insensitive to his troubles. Not that he often talked to his wife about the company. “Business is business” was Steve’s mantra. “It’s my responsibility to handle things at the office and Peggy’s responsibility to take care of her own job and the family.”

Peggy was working part-time at an ad agency, and they’d brought in a nanny to help with their son. Steve couldn’t help but notice that his wife seemed resentful, and her apparent lack of understanding baffled him. Didn’t she see that he had a company to take care of? That he was doing it all for his family? Apparently not.

As time went on, Steve became even more consumed and frustrated by his company. When he went off on his own, he remembered saying, “I don’t like people telling me what to do.” But people were still telling him what to do. On one particularly frustrating morning, his office had to change a contract that was set up incorrectly. The company had misspelled the client’s name even though Steve had spelled it correctly on the application. He apprehensively remembered that when he had obtained this client, she had said her previous vendor’s inability to change her address on an old account was one of the reasons she changed suppliers. After keeping Steve on hold for twenty-five minutes on a long-distance call, the company said it had to update the terms, which would take three to five business days. Steve was furious.

Not surprisingly, Peggy grew more frustrated by her husband’s lack of communication. She cut back on her own hours at the ad agency to focus on their family, but her husband still never seemed to be around. Their relationship grew tense and strained. The rare moments they were together were more often than not peppered by long silences—a far cry from the heartfelt conversations that had characterized their relationship’s early days, when they’d talk into the wee hours of the morning.

Meanwhile, Tim, the bookkeeper, was also becoming a problem for Steve. Tim never seemed to have the financial information Steve needed to make decisions about payroll, client billing, and general operating expenses, let alone how much money was available for Steve and Peggy’s living expenses.

When questioned, Tim would shift his gaze to his feet and say, “Listen, Steve, I’ve got a lot more to do around here than you can imagine. It’ll take a little more time. Just don’t press me, okay?”

Overwhelmed by his own work, Steve usually backed off. The last thing Steve wanted was to upset Tim and have to do the books himself. He could also empathize with what Tim was going through, given the company’s growth over the past year.

Late at night in his office, Steve would sometimes recall his first years out of school. He missed the simple life he and his family had shared. Then, as quickly as the thoughts came, they would vanish. He had work to do and no time for daydreaming. “Having my own company is a great thing,” he would remind himself. “I simply have to apply myself, as I did in school, and get on with the job. I have to work as hard as I always have when something needed to get done.” Steve began to live most of his life inside his head. He began to distrust his people. They never seemed to work hard enough or to care about his company as much as he did. If he wanted to go get something done, he usually had to do it himself.

Then one day, the office manager, Clarissa, quit in a huff, frustrated by the amount of work that her boss was demanding of her. Steve was left with a desk full of papers and a telephone that wouldn’t stop ringing.

Clueless about the work Clarissa had done, Steve was overwhelmed by having to pick up the pieces of a job he didn’t understand. His world turned upside down. He felt like a stranger in his own company.

Why had he been such a fool? Why hadn’t he taken the time to learn what Clarissa did in the office? Why had he waited until now?

Ever the trouper, Steve plowed into Clarissa’s job with everything he could muster. What he found shocked him. Clarissa’s work space was a disaster area! Her desk drawers were a jumble of papers, coins, pens, pencils, rubber bands, envelopes, business cards, fee slips, eye drops, and candy.

“What was she thinking?” Steve raged.

When he got home that night, even later than usual, he got into a shouting match with Peggy. He settled it by storming out of the house to get a drink. Didn’t anybody understand him? Didn’t anybody care what he was going through?

He returned home only when he was sure Peggy was asleep. He slept on the couch and left early in the morning, before anyone was awake. He was in no mood for questions or arguments.

When Steve got to his office the next morning, he immediately headed for the makeshift kitchen, nervously looking for some Tylenol to get rid of his throbbing headache.

What lessons can we dr...