What a better way to celebrate TAX DAY 2017 than to discuss all the things we wish we had known when starting our business!
Nikki and I began Method Agency back in late 2013 as experts at marketing and complete newbies when it came to the ins and outs of running a business. But as my friend with her Harvard MBA and her own small business can confirm, there is no degree that teaches you what you end up learning by just DOING IT (Sorry, Harvard).
Despite feeling completely unprepared to JUMP IN and start making it happen, we, like the millions of small business owners before us, just did it anyway.
How people ran businesses before Google we’ll never understand, but we have relied on our internet searching skills, the tribe of incredible business owner friends and acquaintances around us (many of whom you’ll get to meet during our Bitches in Business conversations!) and a whole lot of mistakes to get us to where we are today!
We recognize that anyone starting out is going to have experience their own version of the path we’ve gone down (and continue to…. oh the journey isn’t over!) here are 4 things we wish we had known when starting our business:
1. Create a partnership agreement
Nikki and I have been working together since long before we launched Method and have been friends for a lot longer. Through the years we’ve learned how to disagree, how to argue and how to support each other. We’ve learned how to have awkward conversations about money and debt and the type of salary we want (and need).
But one thing we didn’t know, is that we needed a partnership agreement. A partnership agreement is the document that spells everything out: Who gets what if we dissolve the company? What happens if I die? What if Nikki wants to take a sabbatical? How do we operate if and when we have children with our partners? This is an agreement that is hard to create because you’re envisioning all these future hypothetical situations so that there is an answer if and when they occur. Fun Fact: We don’t yet have this agreement!
Additionally, depending on what state your business is incorporated in, you may have to have an Operating Agreement which spells out how the business is divided, how you pay yourselves, what you do with profits, what happens to the “Shares” if a partner wants to sell, etc. Pennsylvania doesn’t require LLCs to have Operating Agreements, but with the help of Google, we created one anyway!
2. Find yourself a Team
We’re so #blessed to have each other at Method. We are together to celebrate the wins and exciting movement forward in business and have each other to support the other during the not-so-good times. We realize how lucky we are to have a healthy functioning partnership where we’re also good friends!
Even if you’re solopreneur, find yourself a team! Maybe you call your business-owner dad when you get some bad tax day news or lose a client. Maybe it’s your acquaintance from college who does PR across the country and is a year or so ahead of you in her business. Just don’t go through it alone. It’s too tough and taxing to take it all on yourself!
Our Team has been the two of us since day 1, but now consists of fellow female entrepreneurs, strategic partners in social media, PR, web and graphic design, our business coach and more!
3. Understand the basics of how you are taxed
I wish we could tell you we’ve mastered this one, but we have not, though we are finally ON OUR WAY (see #4)! We had no idea how to understand our taxes, what we were required to pay as an LLC vs. our personal taxes, and how to ethically and legally limit our tax liability through distributions and IRAs and more.
But it’s important. In fact, despite it just being the two of us and handling our books in-house, we have at least one monthly meeting to go over our budget, look at our Profit and Loss statement from the month prior and discuss any upcoming expenses and money issues concerning the business.
It often seems silly to have this serious financial discussion so often when we’re not this big agency with a huge staff and office chairs to pay for, but it’s an important exercise for us to engage in. One of our goals for 2017 (after tax insanity dies down for our accountant) is to include more conversations about taxes so that we both have a better understanding of what in the world Uncle Sam (and Uncle William Penn (PA) and Uncle Jerry Brown (CA)) wants of us!
4. Use Professionals
Oh boy. If we could say one thing to our 2013 selves, it would be this. Hire a lawyer to set up your LLC. No, we didn’t have the money then, but fixing our mistakes in our 3rd and 4th year of business is costing us more than taking a loan from our personal savings account would have.
(Lawyer-friends hold your ears!) While most businesses can probably be set up using an online service like Legal Zoom, one professional that is KEY from Day 1 is a good accountant. Use someone who knows the city in which your business is registered. We switched to a new, highly recommended accounting firm last Fall and cannot believe how much we’ve learned, how DUMB we feel about the mistakes we/our former accountant made and things we haven’t done and should have (like, set up our business to operate in the city in which we DO, for example).
It’s taken us about six months to straighten everything out, and a lot more money in accounting fees and penalties to various state and city governments than had we done it right from the beginning, but we are on our way to a better understanding of how our business should operate from here on out!
We could go on, but these 4 Basic Ideas are the ones that come to mind that we REALLY wish we had known! But despite not knowing them, here we are- still making it work, fixing our mess-ups and, hopefully imparting some wisdom along the way so that others don’t repeat our mistakes!
Oh yeah, and finding time to do the marketing we started out as experts on! The fact that running your business sometimes takes more time than the actual business itself (in this case Marketing and PR) is a whole other conversation for another time!