Friday, December 30, 2011

SOP Friday: Cash Flow Weekly Procedure


- Overview -

Cash flow can make or kill your business. Even if you're technically "profitable," you can run out of money to pay your bills. It's largely a matter of timing.

For example, if you are owed $10,000 for work you've done, then you have a $10,000 "asset" called accounts receivable. But if that money won't come in for 30-45 days, it really does you no good. So, if you have $8,000 in bills due during that period, you have to come up with the money somehow. If you borrow and spend $8,000, then you have to be very disciplined to pay all that back when the $10,000 rolls in.

Think of money flowing INTO and OUT OF your business in 30, 60, and 90 day intervals. Balancing income and outgo can be difficult, especially since unexpected expenses always seem to arise.

In previous posts I talked about
- Running Regular Financial Reports
- Cash Flow: Dealing with Late Payments
and
- Cash Flow: Getting Paid in Advance

With luck, you are making good progress on getting paid in advance. If you need help implementing such a policy, I can help you make it happen in short order. I will write up the policy, announce it to your clients, collect credit card information, and set up all the automatic payments. I charge $250/hour for that service (paid in advance), so you might want to consider doing it yourself. It's really easy.

So anyway . . .

Now we need to monitor our cash as it flows into and out of the company.

I am a firm believer that the business owner needs to have a SIMPLE way to keep an eye on cash flow in order to make good decisions. For me, this means looking at basic cash flow numbers at least once a week. And to make the process even more relevant to daily operations, I think it's good to look at cash flow in relation to the largest expense you have: Payroll.

Quite simply, how are you doing with regard to money in the bank between now and the next two pay days? I choose two pay days because we pay twice a month (on the 10th and 25th). But our managed service contracts are all paid on the first of the month.

Note: Most clients pay us on a monthly basis. This is prepaid by credit card. Cards are run automatically on the first of the month. Depending on the card processor, the money settles into our account and is usable three business days later. Given weekends and Monday holidays, this means that the money might not be available to us for as much as six calendar days.

If clients choose to pay by check, they must pay for three months at a time. We call these "quarterlies" even though the quarter can start any month. Ideally, quarterlies are staggered so we don't have huge peaks and valleys.

The other key variable to consider is Accounts Payable - money we have to spend. We use QuickBooks to enter bills as they arrive. So we can look at AP and know what needs to be spent between now and the next pay period. See the table below. These are just fictional numbers to illustrate.


This Excel spreadsheet is NOT a super-detailed view of finances. It is a simple overview of the most basic information we need. Here's what you see there:

- Date.
This spreadsheet was run at the end of November. So it's after the last pay period for the month and before the first pay period for the next month.

- Cash on Hand.
This is literally the bottom line in the QuickBooks check register we use for paying all operational expenses, including payroll.

- Accounts Receivable.
We only list money here that we are sure will come in. So, if a client just received a bill and might not pay in the next few days, we don't count that. But if someone has terms of net 20 (our default), and an invoice has been out for ten days, then we are sure the money will come in.

We list quarterly payments that will be received. Again, these are checks that pay for three months service. Because the three months can start any time, this number varies from month to month.

Finally, we list monthly payments. These are clients who pay by credit card. This money "just shows up" on the first of the month. This number only changes if we add or lose a client, or if the number of machines on managed service changes. These numbers are based on contract amounts in our PSA system.

- Accounts Payable.
These are the bills we expect to pay between now and the next payroll date (the 10th). This number is larger during the first part of the month than the second because many bills roll in around the first and are due shortly thereafter (e.g., rent).

- Payroll Due.
This is an estimate based on previous payrolls and the estimated hours we expect to pay.

- Rinse, Repeat.
Notice that we also estimate income and outgo for the next pay period (the 25th).


Benefits
As simple as it sounds, you need to know whether you'll have an easy time or a tough time making payroll. Should you put off paying a bill? Should you restrict hours or give a tech the day off to save money? More importantly, how are you doing with the NEXT payroll? If you ding all the credit cards on the first of the month, the first payroll is easy. But if you have too much break/fix labor and not enough managed services, the second payroll might be difficult.

The primary benefit of this procedure is to have peace of mind. You can plan two or four weeks in advance.

But right away you'll find yourself thinking a little more strategically. Do you really need this or that? Should the tech hours be expanded or contracted? Will you be able to take an extra draw this month?

With this process in place, you will also be able to see cash accumulate as you prepare for an upcoming annual payment (e.g., worker's comp insurance, or annual Microsoft dues).

As you tune into your cash flow you will get a real sense of how money actually "flows" into and out of your company. One of my guiding philosophies is that you get better at whatever you put your attention on. So if you want to get better at finances, paying attention to cash flow is a great place to start. Look at this Excel spreadsheet at least once a week!

I am amazed at how many people have been in business for five or ten years and cannot rattle off their monthly or weekly cash flow numbers. As you work with this information, it will become an important piece of your decision making process. If a program costs $250/month, what will that do to your cash flow? If you hire a new technician, how many hours can he work?

And at a more basic level, are income and expenses in line with one another? Is one growing faster than the other? Is there a trend, or was that a one-time event?


- Implementation Notes -

Implementing this process is easy.

First, create a spreadsheet like the one pictured above. It's not too hard to figure out.

Second, for each pay period, copy the worksheet and create a new one. Name them based on pay period (e.g, Jan 10, Jan 25, Feb 10).

Third, go through this at least once a week. Monday is probably best. If you have an office manager, go through it with her. She should be able to fill in most or all of these numbers.

Fourth, once you determine that you have X dollars to spend on paying invoices, go ahead and mark them to be paid in QuickBooks. As soon as you're done reviewing cash flow, have your office manager print out the checks for the invoices you decided to pay.

Interestingly enough, that last little habit might tempt you to look at cash flow again tomorrow. Don't worry. That's a good thing.

One of the keys to success here is to Keep It Simple! Don't junk up the cash flow spreadsheet with details about types of expenses or detailed dates. The more complicated it is, the less likely you are to execute the process regularly!

Note: This entire process takes no more than 15 minutes. So it helps you run your business better, but it's not difficult or time consuming.


- Benefits -

The greatest benefit of watching cash flow is that you will become more profitable. How? Well, you'll plan a little more and probably spend a little less. You'll borrow less money and pay fewer penalties.

The more you take time to step back from executing your business and spend time examining it, the better your business will become. You will find yourself thinking more strategically about how you handle and manage money.


Holding a Mirror Against Your Warts

Warning. Some of this might not be fun. Within the first one or two weeks, this process will reveal whether you have huge problems with your business finances. The huge (potential) problems are 1) No regular income, and 2) Accounts receivable that's out of control.

When you start out with this procedure, you might find that your numbers are irregular or unpredictable. If so, that means that your A/R for hourly labor (break/fix) is too high. If you can't plan two weeks in advance to know what you're going to receive, then you have little or no managed service revenue. I'm not kidding you when I say that I would not have ANY employees unless I could point to a spreadsheet that showed how I'm going to pay them in the next two weeks.

With break/fix labor, the stream of money coming in can be very unpredictable. You will see this painfully clear as soon as you look at your numbers. If nothing else has motivated you to sign some service agreements, look at cash flow! We want to guarantee that we can cover our monthly expenses based on guaranteed revenue on the first day of the month!

As you monitor cash flow, you will see this monthly (and quarterly) number go up and up over time. As that number goes up, your stress will go down.

The other huge problem is accounts receivable. You shouldn't have any! Or at least you shouldn't have much. If all hardware and software is pre-paid (see Cash Flow: Getting Paid in Advance) and managed services are paid on the first of the month, then the only accounts receivable you have is for incidental hourly jobs and projects.

Projects are great. We always get paid in advance for the core of a project. That means 90% of the money up front and the rest is the "expected but unpredictable" piece of fine-tuning a project.

If you've been reading this blog for long then you know that I am adamantly opposed to giving credit for 30, 60, or 90 days. I hear all kinds of excuses about why that's not possible because your clients are different from every other client on earth. Well they're not. They're just not. You know that big corporation that says they never pay in advance? They do. They just don't pay YOU in advance. That government agency? Same thing.

The most successful consulting companies all get paid in advance. The ones who won't stand up to big money and demand it get paid in 30, 60, 90, or whenever.

If you have accounts receivable, you will be paid less than 100% of what's owed. Period.

This is an absolute truth of business. You might get 75% or 85% or even 90%. But you will never be paid 100% of the money you are owed when you extend credit.

You can believe me or you can learn from experience. Most people who learn from experience assume that their hard earned lesson was a one-time deal with a crappy client that they'll never have to worry about again. But believe me, there are plenty of other people willing to take your services and pay you less than fair value. Ignore the lesson or learn the lesson: the choice is yours.

As you look at your cash flow on a weekly basis, you will become acutely aware of the difference between money you are owed and money you will be paid. Note that "money you are owed" is NOT on the Excel spreadsheet. Why? Because it doesn't matter. The money you are owed is irrelevant. It is unimportant. It is FICTION.

The reality is that you have to focus very closely on a much smaller number: "Accounts Receivable For Sure." That's reality. That's the money you KNOW you're going to receive. Someone owes you $30,000 or $10,000? All of your clients combined owe you $15,000? So what? You can't spend that. You can't use it for payroll. You can't take it to the bank. You can't do anything with it.

The only money that matters is the money you are actually going to receive in the next 10-15 days. Actually. Really.

Why? Because you can actually spend money that you receive. You can pay employees with real money. You can pay rent with real money. Promised money that might show up is not relevant to running your business. As you go through your cash flow week after week, focusing only on the "Accounts Receivable For Sure," you will begin to realize that you need to beat down and eliminate your accounts receivable.

Banks and accountants think accounts receivable are an asset to your business. But if you're a small business, they are a cancer that can eat you alive. Eliminate accounts receivable until you have revenues over $2 million/year. Then keep AR as small as possible.


- Forms -

The only real "form" for this is the Excel spreadsheet discussed. You will also need to keep track of your managed service contracts and have a calendar that shows who pays monthly and who pays quarterly.


Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Your Employee Handbook


:-)




Now Shipping:

Wednesday, December 28, 2011

The Super-Good Project Planner for Technical Consultants

I set up a small page for this book at http://www.supergoodprojectplanner.com. Please check it out when you get a minute.

The Super-Good Project Planner for Technical Consultants

An E-Book on Practical Project Management

by Karl W. Palachuk

Buy one for everyone in the family

Another great binder project! This is an E-book package on project management. Designed specifically for Technical Consultants to manage the kinds of project they see every day in their consulting practice.The e-book is delivered as two documents in a single download.

Make every project a successful and profitable project!

Perfect as a place to start managing your next server installation. Based on the best practices of KPEnterprises Business Consulting, The Super-Good Project Planner for Technical Consultants covers the basics of project planning in the real world of the Small Business I.T. consultant.

Then it jumps right into a down-and-dirty, get-it-done process for creating and implementing projects that work. The primary audience is the technical consultant.
But this process, with very little fine-tuning, should work for just about any SMB project.
We show you how to
  • Meet all the project goals
  • Maintain excellent communication with the client
  • Manage expectations
  • Stay profitable

    and
  • Avoid scope creep!




Product Description
This book is guaranteed to improve your business.

Thousands of companies have used this book to improve and standardize their processes, document their client networks, and take their businesses to the next level -- and so can you!

Buy Now!
Only $49.95
Buy one for everyone in the family

Book Specs:
  • E-Book - 8.5" x 11"
  • 133 Pages + 20 pages of forms
  • Includes all sample Project Binder forms
  • Publisher: Great Little Book Publishing
  • Downloadable (no shipping!)
Download Table of ContentsDownload the Beginning of the BookView Sample formsPreview Ch.5 (Running a Project)
Table of Contents
pdf
Chapter
pdf
Chapter
pdf
download running a project
pdf

Standard operating procedures will set you free!
Having standardized forms and procedures can go a long way to improving your company's success and profitability. Projects are simply the next step in that process.


Sample Projects
We have included three sample projects. With these, we've filled out all of the project forms so you can walk through it and see exactly how it's done. The projects are
- Moving a Web Site from Small Business Server to a Hosted Server
and
- Switching to a New ISP with Zero Downtime
and
- Moving from Hosted Email to Bring Email In-House with Zero Downtime

Buy Now! Only $49.95
Buy one for everyone in the family
- - - - -
:-)

Three Days Left to Save Big on Robin Robins' Amazing Bootcamp

Got a memo from Robin this morning.

Please join me in Nashville. I will once again be on the panel to review the biggest, best marketing superstars of the year.

From Robin:

- - - - -

It just dawned on me that the deadline to get a FREE iPod and FREE Managed Services Online Marketing Toolkit is about to expire in 3 days (December 31st):

http://www.robinsbigseminar.com

(Seriously, I was enjoying a bit too much holiday cheer and suddenly realized I hadn't sent you a reminder.)

When you register for this year's Boot Camp, you'll get:
-A free iPod pre-loaded with the audio of the previous 2-year's Boot Camps
-A free copy of the MSP Online Marketing Toolkit
-$500 off your registration

You'll also get these free bonuses from the speakers:
-The 10 Biggest Sales And Marketing Mistakes Everyone Is Making And How To Avoid Them
-Strategic Planning And Effects-Based Thinking
-Quality Score And Landing Page Testing For Google

I URGE you to attend...

This is THE best event in the world for getting real, tangible marketing advice and sales strategies that are specific to your IT services business. I HONESTLY cannot image why any intelligent person running an IT business would stay home and miss out on this - and I don't mean that as a slight. I really just can't image what excuse - other than death or other unforeseen crisis - would keep someone away!

For a small pittance of a fee, you're going to leave with dozens of PROVEN, actionable marketing and sales strategies you can INSTANTLY apply to secure more new clients, boost sales and profits...and it's all going to be handed to you! Seriously, where else can you get this?!?!?!

I've done everything I can to make this as easy as possible...from keeping the price very low to putting a full money-back guarantee on your registration AND travel. I've also invested over $75,000 to bring in the country's TOP experts on sales, marketing and business growth strategy. That's because I WANT you to go...not implementing and struggling is NOT an option for you as my client. No, I can't force you to do anything, but I'm giving my best effort to get you moving again.

I promise this will be a life-altering and business-changing event for you.

Register here: http://www.robinsbigseminar.com

Dedicated to your success,

Robin

- - - - -

:-)

Tuesday, December 27, 2011

Sales Boost: Toner for The New Year

Need a sales boost? I think there are some regular proposals you can send out to your clients. One good one is toner cartridges.

As you know, toner can range from a low of $30 per cartridge to a high of $150 or more. The $75-$90 range is very common.

And who uses toner? Everyone. Every single one of your customers.

Here's a project you can give to your sales department. That might be you or the office manager, too.

Step One: Find out what kind of printers each client has. Ideally, this will be in your Network Documentation Binder. It should also be in your PSA system (Autotask, ConnectWise, Tigerpaw, etc.).

So make a table. Maybe an Excel spreadsheet. It should list each client and the printers they have.

Step Two: Look up the toner cartridges used by these printers. Fill in the table with another column for cartridges. Some will be just black, some will be three cartridges, and some will be four. Write down very specific cartridge numbers.

Step Three: Look up these cartridges at your favorite supplier (Ingram, Synnex, etc.). Get your pricing for each. Fill in the table with your costs and preferred mark-up.

Step Four: Write a letter to each client along the lines of:



Did you know that we sold toner?

As you are painfully aware, toner is one of the most expensive office supplies you buy. That means you don't want to have a lot of it sitting on the shelf. I've attached a quote for a full set of toner cartridges for your [fill in the model] printer in case you're looking to spend some money this fiscal year.

In addition to simply selling toner, we can help you save money on all of your printing costs. First, if you're on platinum managed service, we can probably monitor your printers remotely for no additional charge. This will give us an alert if you need service - or if a toner cartridge is getting low. Or we can make printer checks part of the monthly maintenance at no additional charge.

Second, we can deliver toner only when "order toner" indicator goes on. This will preserve your capital by providing toner only when you need it. We've seen clients with thousands of dollars worth of toner cartridges in their supply cabinets. That's money you can be using for something else.

Third, we would like to help you find your next printer. Many modern printers don't "count" color pages if you print in black and white. Older printers counted a page as a page, so you bought replacement color toner even though you didn't need to.

We can help you choose a good workgroup printer that meets your needs, uses toner efficiently, and has reasonably-price toner cartridges. That will save you a lot of money in the long run. The second quote I've attached if for an HP [fill in the model] printer we've had a lot of luck with. This is a workhorse at a very reasonable price. We've also quoted a full set of toner cartridges so you can see what they cost.

Fourth, we can save in little ways. For example, if your printer is efficient with color toner when you print in black and white, we can configure it to print B&W by default. That will save you money every day. When you want to print in color, you just choose color on the same screen where you choose between portrait and landscape.

We are proud to serve your company every day.

I would like to schedule a meeting with you to discuss this or anything else. Please contact me if you're interested.

Thank you for your business.


You'll need to customize this letter for each client. But you probably have a few clients with the same printer. And if you've got a client with a mish-mash of printers, then life gets a little more difficult. But you can still address a sample printer.

As a general rule, you should sell one or two brands of preferred printers. You don't need to service them. But you should either sell something with a three year warranty or offer extended warranties.

You should ALWAYS quote a full set of toner cartridges with every printer quoted. First, many printers show up with baby toner carts that will run out right away. And, second, it gives the client a sense of what the cost is.

I recommend that you do NOT discount from your standard mark-up and try to compete on price. If you're within 10-20% of the street price, you'll be fine. Look at the work you did above, and the letter. Staples is not providing this service to your clients. Office Depot is not providing this service to your clients. Office Max is not providing this service to your clients.

This is about service. Don't make it about price.

If you sell managed print services, this is a great way to start that conversation.

Eventually, you will have most of your clients on one or two brands of printers. That makes their life easier and it makes your life easier. You can learn a brand or two. You can keep up with a brand or two.


Important Do-Not's

Do Not Keep an Inventory of Toner. If you're small, inventory is always a bad idea. If you pay $70 for a toner cartridge that you hope to sell for $80, you can tie up a lot of money waiting for someday. And if ONE cartridge sits unsold on your shelf for the next five years, you can throw it on the recycle pile. You just lost the profit on seven sales. In other words, you lost the profit on $560 worth of sales.

Do Not Compete on Price. Yeah, you might trim a little. But don't go to PriceGrabber and find the lowest price, then drop below that. Remember, your clients are probably buying at Stapes and Office Max. You have to be close to them. You're able to provide some value added service, but hand delivery. You're providing the big picture. That's worth something.

Do Not Fret if You Don't Get the Sale. Hey, these folks weren't buying toner from you yesterday. So you tried something and it didn't work. But guess what? Now the client knows you do more than remove viruses. They might just call you the next time they have a printer question or need a quote. You've laid the ground work and put your name on their desk one more time.

Good luck. If you hurry you might be able to get some year-end sales if people have money to spend.

:-)




Want to figure out how to make money with Cloud Computing?

Join the Cloud Services Roundtable today
and listen to a great series of podcasts!

www.cloudservicesroundtable.com


Friday, December 23, 2011

Nominations for SMB Awards Open

Two "lists" are currently taking nominations. Please participate . . . This is your community!

- - - - -

1. MSPmentor 100 Survey Ends Today!!!

See the article at mspmentor.net.

Hard to believe this is the fifth annual MSPmentor 100 survey. Joe P and Nine Lives Media are looking for the world’s top 100 managed services providers.

Nominations ends tonight at midnight Eastern time, 9 PM Pacific. The survey is open to all MSPs worldwide.

Says Joe . . .
"The MSPmentor 100 results will honor The World’s Top 100 MSPs, plus MSPmentor will publish multiple regional lists honoring MSPs in North America, EMEA (Europe, Middle East, Africa) and AANZ (Asia, Australia, New Zealand). And we’ll celebrate the MSPs that created the most jobs and added the most headcount in 2012. Note: We’re still a bit light on MSPs from Central and South America — but we’ll honor MSPs in those regions, too, if we receive more participation. Plus, all survey participants are eligible for our global list."

Take the survey now!

MSP Mentor 100 Survey

Results will be unveiled in February 2012.

- - - - -


2. SMB Nation Accepting Nominations for the SMB 150

Got a memo from HarryB at SMB Nation. Once again, they're working with SMB Technology Network to gather nominations for the SMB 150 list.

You can make nominations right now at http://www.surveymonkey.com/s/W6SXLZ2.

Harry was very clear: You can nominate yourself or anyone else you wish. All you have to do is enter their name, contact info, and a reason for the nomination in that Survey Monkey form.

In early 2012, SMB Nation and SMBTN will generate a ballot with all of the nominees.

Thanks to Harry and SMBTN for providing this resource!

- - - -

:-)

SOP Friday: Hiring Your First Employee

In November I talked about the Hiring Process for I.T.. Way back in 2008 I discussed Hiring Your First Employee, which covered my personal experiences.

A few days ago I addressed the cost of hiring a new employee. You might want to review that before you read this post.

Today we're going to look at some important things to consider when hiring your first employee. We're not talking about a contract employee or a sub-contractor. I consider these the seven "big picture" policies you should adopt regarding hiring your first employee.

This topic is important because it has a huge impact on your ability to grow and be profitable. Once you have a few employees, you will realize that labor is the most expensive thing in your company. It's hard to see when you're a sole proprietor because you don't pay yourself more or less based on the number of hours you put in.

- - - - -
Sidebar: The Real Expense of An Employee
First, let's remember a few key points about the real expense of employees.

First, being overwhelmed is a reason to address being overwhelmed. Hiring an employee is not necessarily the path to deal with the fact that you're overwhelmed.

Second, firing a few key clients might be more effective and profitable than hiring an employee.

Third, employees cost lots of money. Lots and lots of money. In ways you can't imagine until you've done it.

Fourth, employees have to bring in a lot more than their salary. You're not here to break even.

Fifth, hiring employees means selling more work!

. . . on the positive side . . .

Having employees allows you to grow your company in ways you can't imagine. You can do more things, serve more clients, make more money, and take a day off!

[end sidebar]

- - - - -

With that in mind, here are some thoughts about your first hire.

Thing One: Hire an Assistant First

Why are you hiring an employee? Is it because you're lonely? Probably not. Is it because there's too much work, or you see a bunch of work coming down the road? Probably.

Looking back over the last 16 years as a business owner, and having built more than one corporation with employees, I hold very firmly to this belief: Hire an Assistant First. That means a part time office manager, bookkeeper, general help. This will be someone who can pick up your shirts from the cleaner, run to the post office, get out the billing, file the paperwork, clean the office, and maybe generate quotes, fax contracts, and do a million chores you've been doing yourself.

As a technical service business, we automatically think the first hire is someone to provide technical service. But that's usually not the best choice.

The easiest way to increase capacity for technical service is to free up YOUR time. An administrative assistant will get that done.

There are lots of people out there who just want to work 10-20 hours a week. The best administrative assistant I ever hired was Lana. She had a kid (and then another), and she just wanted to work 20 hours a week - max. For years I asked her to work more and she just wanted to work 20 hours.

If you do decide to hire a technician first, just remember that you will have to train that person and do a lot of new paperwork. So you will lose more hours in your week! Many people do it that way, but it really is the tougher road to travel.


Thing Two: Create A Budget

I won't rehash the articles mentioned above. But seriously consider what it will take to hire someone and to make payroll twice a month (or however you do it).

Create a budget and tweak the numbers until they make sense. Cut a little here, add a little additional labor income. But be very realistic. It is a horrible feeling to lay someone off because you didn't plan right. (Ahem. Trust me.)

Be prepared to take a personal pay cut! Labor is your largest expense. That means money for the new hire will come out of your personal pocket at first. If all goes well, this is temporary, but be prepared if it's not.

In other words . . . PLAN the financing so there are no surprises.


Thing Three: Be Prepared to Train

No matter who you hire, you will need to train that person. In the short run, that means more time off task for you. And that's very hard to do when you are already feeling overwhelmed.

Take a deep breath. Spend some time at home every morning thinking about your business. Commit yourself to slowing down just a little so you can get more done.

Time spent training a new employee is "unproductive" in the short-term, but will make you money in the long-term. Ultimately, people will either be trained, or they will train themselves. If you train them, then they'll do things your way. If they train themselves, then whatever they end up doing is what represents your company. It is better for you to train them!

Read the E-Myth Revisited by Michael Gerber. For lots of reasons. In particular, giving up too much to the new employee.

Spend time each day showing the new hire one more piece of the business . . . and then hold her responsible for what she's been assigned.


Thing Four: Use a Payroll Service

Don't THINK about doing payroll yourself unless you are an accountant or bookkeeper.

Payroll is a monster pain in the butt - even with one employee. You have to keep aside money for deductions for Federal taxes, state taxes, social insecurity, Fed unemployment insurance, state unemployment insurance, etc., etc., etc. And then you have to transmit these large sums of money through a Federal Deposit Insurance bank with cover forms and blah, blah, blah.

Pay $50 and have someone else do it. Period. If you pay twice a month, you will end up with 24 extra filings, plus quarterly reports and filings, in addition to end of the year paperwork. So that's 29 government sponsored opportunities to screw up and have them put a lien on your house. Unless you count state and federal separately, in which case it's 58 extra filings a year.

Give up now. Just pay the $50.

. . . And don't think about paying anything if you can't make those tax payments. The state and federal governments DO have the ability to take away your car, your house, and you birthday. So do not ever run payroll if you can't pay the taxes.

With any good payroll service, you just jump online, enter hours per employee, and click submit. They'll give you reports with amounts that will be withdrawn from your checking. One amount will normally be for net pay (the amounts on the checks) and another amount for taxes.

The payroll service will file your state and federal taxes for you. They will handle quarterly reports. They will generate end-of-the-year W2s, etc. All you have to do is make sure you have cash flow to make the engine run. (Weekly cash flow projection is the topic for the next SOP Friday article.)

I recommend you find a payroll service that does NOT charge for direct deposit and does NOT pressure your employees to open accounts with a specific bank. Direct Deposit is extremely handy for everyone and is a service you can offer employees for free. So do it.


Thing Five: Paperwork!

You might as well start developing a process now. Create a hiring checklist. This includes creating a job description that stands out and is way better than what the competition is putting on Craigslist. If you want some tips, search my blog for "Craigslist." You can start here: Hacking Craigslist for Job Postings.

Your checklist should also include all the practical things you need the first day and the first week. Will the employee need keys, alarm codes, mileage reimbursement forms, email, logon credentials, Autotask or ConnectWise license, Zenith logon, Sharepoint instructions, etc.? You'll have to do paperwork for hiring: W2s, I-9s, emergency contact info. Set up payroll.

All employees must sign a non-disclosure agreement that covers both your intellectual property and procedures AND your clients' intellectual property and procedures. This must be binding even when employment has ended.

Does this person need a desk? A computer? An anti-static strap?

Think of everything you can and write it down. You'll forget stuff. When it comes up, be sure to update your checklist. It's going to be mostly the same with the next employee.

You will want to create a file for each employee. It will include all hiring paperwork. It will be a place to put information on certifications, letters of reprimand, and everything else related to that person's employment. This file should be in a secure place, under lock and key. This file will include their social security number and probably the routing information for direct deposit to their bank account. Don't be sloppy with this.


Thing Six: Hire Hourly Not Salary, If You Can

Many people have a vision in their head that they want to hire a salaried employee so they can work the person extra hours and not have to pay extra money. Well, the world just isn't that simple any more. First, many states have laws either limiting this or actually requiring extra pay for more than 40 hours. Second, if you just have a backlog and not a permanent need for an extra 1,000 hours of billable labor per year, then you'll be paying someone to sit around wasting time and money.

Salary is a much larger commitment. Someday you can make that commitment. But with a first employee, you need flexibility. You need to be able to send them home early, add a shift here, take it away there. You need to manage your employee as diligently as you manage money. It is very easy to let 3, 4, 5 hours get added to a paycheck. Well, see the earlier blog posts on The True Cost of An Employee.

Value every hour you let someone work. It will cost you full price.

Employee time is a bit like buying things on Credit Card. You buy more because you don't have to open your wallet right now. But you will have to open it within a couple of weeks . . . plus worker's compensation insurance, taxes, etc.

Be prepared to manage employees' time. Time = money.

Budget each week the number of hours you can afford. Assume that a few extra will show up for unforeseen reasons.

Give appropriate tasks to appropriate employees. That means, have the less expensive employees do as much as possible. Is a task REALLY technical, or can an admin do it? For example, if you need to send some reports to a client, do you need a tech to do that? One of the most profitable rules in our company is: If it can be done by an admin, assign it to an admin.


Thing Seven: Don't Feel Bad About Hiring People Part-Time

There are people who automatically assume that "employers" are big, rich companies with billions of dollars to spare. And they believe that handing out part-time jobs for low wages is a horrible sin and the root of all evil in America - and the world. Let me give you another perspective: That's just plain bullshit.

I can tell you from experience that there are LOTS of people who are happy to work 10-20 hours a week for $10-$15/hour. This was true before the recession and it's more true during the recession.

You are doing good things for the economy and the people you hire. You are trying to grow your business. You are literally the backbone of the international economy. More people are employed by micro businesses than Fortune 1000 companies! Be proud of that!

No, you can't afford health benefits or 401K's or paid vacations. But you can put money in someone's pocket so they can pay rent and put food on the table. You can buy them lunch from time to time. You can give them a place to hang out during "off" hours and continue their job search for full employment. You can let them use your phones and your laser printer.

When you hire someone, even part time, you give them a chance to get out of the house and contribute to our economy. No one wants to be unemployed. No one wants to sit around in their house feeling the months slip away without making progress toward a better life. YOU - the employer - can do something to help them.

No, you probably don't have $70,000 or $80,000 sitting around so you can give someone a "great" job. And you can't guarantee their employment for five years. But you can do something. You can do something that makes your business stronger. You can do something that helps someone get back in the job force. You can help someone pay the rent.

The kindest thing I can say about the Occupy Wall Street people is that they are overwhelmed with an economy they can't control. In the meantime, they are completely ignorant about the realities of running a business and trying to make a living as a self-employed worker. And they're really, really bad at math!

Ignore the bullshit.

This little mini-series on hiring your first employee has laid out some of the hard facts about making the jump from a one person company to a two person company. It is hard. And it is expensive.

You know that you might fail before you start. You take a bunch of your hard-earned money, and you place a bet on a stranger to help your company move to the next level. If you fail, you're back to being a one-person shop and trying to figure out how to re-calculate your future. If you succeed, you are NOT an evil mega-corporation.

Scary Fact: In my own experience, and with many consultants I've talked to, it is very likely that you will make about the same amount of profit with one employee as you did with none. If you don't manage it right, you'll make the same amount with two employees as you did alone. Really.

So you need to create a company that can actually make more money with employees than you did without. You have to be prepared to do things differently. And you have to focus on that bottom line.

I met about 1,000 new friends this year as I traveled around the country. Most of them are sole proprietors. Most of them have all of their wealth tied up in their business. They rely on their own wits and hard work to make enough money to pay the rent, make the car payments, buy food, cloth their children, . . . and maybe have enough money to keep one employee's family housed and fed.

I applaud every one of these hard working people. You deserve to be held up in honor as the backbone of America, not derided as evil because you can't pay an entry level technician $60,000 plus 401k.

Be proud of what you do, and what you contribute to our economy.

And if I can help you figure out how to hire someone and stay profitable, let me know.

Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Cash Flow - Weekly Procedure

:-)




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by Karl W. Palachuk

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Wednesday, December 21, 2011

Save Big Money Right Now on Robin Robins' IT Sales and Marketing Boot Camp

Join Me In Nashville April 11-14 for Robin Robins' IT Sales and Marketing Boot Camp.

If you sign up right now you'll get a free iPod loaded with all the presentations for the last two years. That's some awesome stuff!

Plus a copy of the MSP Online Marketing Toolkit

Plus save $500 right now!

Here are the deets from Robin:

- - - - -

Hey Karl,

Before you take off this week, please take 60 seconds to check this out...

We've recently opened registration for our annual IT Sales and Marketing Boot
Camp, which is our annual BIG event where the best and brightest IT business
owners, marketers and sales pros come to Nashville to share, collaborate and
learn fresh NEW strategies for marketing and selling IT Services (cloud, backup,
managed services, network upgrades and more):

http://www.robinsbigseminar.com

But here's why you want to go to the above site before the holidays...

From now until December 31st, we're giving away a FREE iPod to the first 50 who
register, PRE-loaded with the audio recording of the last 2 years' Boot Camps...

...PLUS, I'll give you a free copy of the MSP Online Marketing Toolkit, which is a
marketing 101 course for any IT business who needs to do a better job marketing
online via their web site, e-mail, Facebook, SEO, Google AdWords, etc.

You can also get $500 off your ticket right now with Early Bird pricing:

http://www.robinsbigseminar.com

Of course, the iPods will go fast and the MSP Online Toolkit will end on
December 31st. You can lock all this in with a flex pay plan AND we have a
BETTER than money-back guarantee on your registration.

If you have any entrepreneurial passion to really grow your business and start
generating serious profits, this event will give you tons of relevant ideas,
resources and the right direction you need to make that happen in 2012.

At least check it out:

http://www.robinsbigseminar.com

Dedicated to your success,

Robin

- - - - -

See you in Nash-Vegas, Baby!

:-)


Not Training IS Training

My daughter recently got a dog. Like many (too many) dog owners, she rationalized that it didn't make sense to begin training the dog until it was in a stable environment. All the moving around during the Summer was too confusing for the pup. And the Fall semester at school was too hectic. And then she moved to a new apartment.

Guess what? The dog's six months old and trained . . . to bark. Trained to go where she wants. Trained to chew what she wants. Trained to eat whatever she finds.

In other words, NOT training is training.

So now we're beginning real training.

If you have kids, clients, or employees, you know it's the same story.

If you don't set down the rules, people figure out for themselves what's okay, what's acceptable, and what's preferred. Without your feedback, they try different things and continue doing whatever works.

This is why we have formal training. If you just send your technicians (or office staff) off to do their best, they will probably do well. But they won't do things YOUR way, and they won't do things consistently. It will cost you time and money. And it might cost your business it's reputation.

Similarly, with clients, if you let them do whatever they want, it will cost you time and money and freedom.

Consider the client who calls you at ten o'clock at night. If you answer, and help them, and don't charge extra, then you have trained them that it's okay to call you at night. If you stay at their office until six or seven or eight PM, then you have trained them that those are your hours.

It is sometimes hard for people to believe that their clients won't all leave if they say "no" to things like this. But trust me: They won't leave! Most businesses have reasonable rules and regulations. They have reasonable hours (e.g., 8:00 AM to 5:00 PM, Monday through Friday).

If you set such boundaries and enforce them, then clients will simply accept that you have reasonable limits. If you let them take advantage of you, they will. It's not a malicious thing. They're not trying to take advantage of you. They are just doing whatever they want because they have not bumped up against any limitations.

By not training your clients, you are training them to do what they want.

Look at what your clients do. They have reasonable hours. They charge for after-hours support. They are closed two days a week. They don't answer the phone in the middle of the night. And somehow, they're successful enough to pay your bill.

Yes There Are Exceptions

When I travel and speak, I frequently mention that we work 8:00 AM to 5:00 PM Monday through Friday. And 99.99% of the time, the first question I get is "Do you mean you never have to fix a server in the middle of the night?"

Well, well sell business class HP equipment and it's required to be under warranty. So, to be honest, machines don't break in the middle of the night. It has been YEARS since we've had a real after-hours emergency.

But, sure. If there's an after-hours emergency, we'll deal with it. We'll work on weekends for $300/hr.

There are exceptions to our rules. Same at the doctor or dentist who has to come in on their day off. Shit happens. We deal with it.

But we don't create a rule based on the exception. The exception exists because we have a rule. Too often, people use the exception to justify not having rules and not training their clients and employees.

Don't be afraid to start laying down the limitations and enforcing them. It's really not difficult. And it will make you happier and more profitable!

:-)






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by Karl W. Palachuk

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Tuesday, December 20, 2011

SMB Nation Announces Dates, Theme for 2nd Annual MVP Nation Event

Regina over at SMB Nation forwarded this press release to me. SMB Nation's MVP Nation Event will be at the Microsoft Conference Center, Redmond, Wash., on March 2-3, 2012. Here are the deets:

- - - - -
Bainbridge Island, Wash. – November 8, 2011 – SMB Nation announced today that it will hold its 2nd Annual MVP Nation event at the Microsoft Conference Center, Redmond, Wash., on March 2-3, 2012. Based on the theme “Best & Brightest,” the conference is being touted as one that is geared toward those who “have what it takes to be the Best and Brightest in the IT Industry.”

MVP Nation will offer attendees the rare opportunity to learn directly from the esteemed Microsoft MVPs in a deeply technical environment. With a focus on the new Windows 8 technology, the two-day event will allow attendees to create their Windows 8 road map.

The event is one that is a gathering of three well-established communities:
  • The Microsoft Most Valuable Professionals (MVPs), who are award-winning technical experts focused on all Microsoft product groups.

  • Community members, who rarely have the opportunity to interact directly with the MVPs in a public event setting. Community members include IT Pros, consultants, resellers, channel partners and in-house IT staff.

  • Community sponsors, who can connect with MVPs and attendees to create amazing technology products and services.
“After our first MVP Nation last year in Seattle, we’re back with a focused two-day deep dive on everything Windows 8,” said Harry Brelsford, Founder and Chairman, SMB Nation. “The primary emphasis will be on server-side topics along with content on desktop, mobility and tablet issues.

Windows 8 is a topic that impacts everyone--whether you are an IT pro, developer, user. This event is for everyone who wants a deeply technical experience, which we have likened to “graduate school for geeks.” We joke that no “wimps” are allowed at the two-day brain explosion!”

This year’s MVP Nation event will follow the long-standing private and closed annual Microsoft MVP Summit that traditionally brings in 2,000 MVPs. MVPs represent more than 100 product groups. The MVP Nation event will provide an opportunity for both attendees and sponsors to meet and learn from the MVPs. In addition, the speaker roster for this year’s event includes many MVPs who will possess the latest Windows 8 information, since they will have just come from briefings held at the Microsoft MVP Summit.

MVP Nation has already gained support from an enthusiastic and well-known sponsor community including: D&H Distributing, Cisco, Microsoft, Intel, StorageCraft and many others that are well-known in the SMB community.

“First and foremost, we are community. We’re from the community producing a community event supported by the community and attended by community members. How cool is that?,” Brelsford said. “Beyond the amazing SMB Nation staff and tribal membership, we have enjoyed fantastic support from like-minded similar communities including the MVPs, user groups, trade associations and other affinity entities. And most importantly, we really recognize and realize the warm welcome we’ve already received from Microsoft Redmond. For the first time in years, an SMB Nation event returns to the Microsoft campus at the amazing conference center. We hope that our efforts satisfy the Windows 8 hunger of the technology community!”

For more information and to register for MVP Nation 2012, please visit mvp.smbnation.com.

- - - - -
:-)



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Service Agreements for SMB Consultants: A Quick-Start Guide to Managed Services by Karl W. Palachuk
- Still the best Quick-Start Guide to Managed Services!

Now only $39.95 at SMB Books!

and

Managed Services in A Month by Karl W. Palachuk
- Check Out the #1 ranked Managed Services book at Amazon!

Buy it as a printed book or ebook!

Monday, December 19, 2011

The Cost of an Employee


File this under "Massive slap in the face after being splashed with cold water."

In my SOP Friday series I have discussed The Hiring Process for I.T.. Next Friday I'm going to talk about Hiring Your First Employee.

But there's a bit of business to take care of before that: Do you have the money to hire your first employee?

This topic is important because it has a huge impact on your ability to grow and be profitable. Once you have a few employees, you will realize that labor is the most expensive thing in your company. It's hard to see when you're a sole proprietor because you don't pay yourself more or less based on the number of hours you put in.

(Note: Adjust figures as needed. Percentages are probably about right, but you might pay more or less, and make different assumptions regarding all numbers. It will be a good exercise to run the numbers for yourself, in your business, in your state/city/country.)

The Real Expense of An Employee

It's important to make a very rational decision when it comes to hiring. Yes, you're super busy and maybe even overwhelmed. But that doesn't necessarily mean that hiring someone is the answer. With employees come liabilities.

First, the employee will cost money. Let's say you pay $20/hr. At half-time, that's $400/week. At full-time it's $800/week. Then add Social Security, state unemployment, federal unemployment, and all the miscellaneous taxes. Depending on your state, this could easily be in the range of 10-15% extra.

Second, there's insurance. At a minimum, you have to have worker's compensation insurance. That's required by law. You have to decide where to get it. Absolutely shop around. You will pay way too much the first year, and less the next year. You'll need to shop this every 2-3 years for the rest of your life. Figure another 5-10% of gross wages.

You might also decide that this is the time to tune up your business errors and omissions insurance. If you don't have it, now's the time to get it. Then there's general liability. You have to be covered in case your employee backs his car into a client building, or blows up a $5,000 server. Depending on coverage and insurance company, figure $1,000-$1,500 a year for both.

Then you'll have to pay the employee for gas/mileage. Starting January 1, 2012, the federal rate is 55.5 cents per mile. If an employee makes ten client visits a week, at 20 miles each way, that's 400 miles or $222/week. Just over $11,000 for the year!!!

You'll end up paying for some meals for your employee. It might be McDonald's, but it's still $5 here and $10 there.

Your employee will need a desk and a chair. You might provide a computer, a waste basket, and some other niceties. Most of these are one-time costs.

You should have a PSA system (Autotask, ConnectWise, Tiger paw, etc.). So there's another license expense there.

Will you pay health benefits? Depending on the plan and the employee's age, this could be anywhere from $150/month to $1,000/month. It is best to wait on this if you can. Remember, this is a highly regulated element of employment, so you have to offer the same thing to everyone.

Again, what about 401K or some other defined benefit program? X% off the top. And you have to offer the same thing to everyone. And again, you will probably want to wait on this.

In all, expect to spend about 40-50% extra in additional costs for every hour of labor paid. You can only cut so many corners here. Let's figure low and add 40%. So your $400/week employee really costs you $560/week and your $800/week employee costs you $1,120/week.

Assuming there are unpaid days off somewhere, multiply those numbers times 50 weeks to get the real cost.

Let's do some rounding down. So without any benefits or health insurance, your $20/hr employee will cost you about $50,000 a year.

It is critically important that you get this straight in your head: That employee does NOT have to earn you $50,000 to pay for himself. You will have to train him, monitor him, work with him, and take YOUR time away from other things in order to make him productive and profitable.


Breaking Even is Not Profit

You've got an employee that costs you $50,000 plus a bunch of your time. Now consider how much money you need to bring in to make that worthwhile.

It's not $50,000. That's really not even breaking even. Give your extra time, hassles, and all the government forms, let's call the cost $60,000.

With all the money and all the hassles, how much does this employee have to bring in to make his presence worthwhile? An extra $10,000? An extra $20,000?

DO NOT fall into the trap of hiring someone just because you're overwhelmed. It might be easier to DROP a handful of really small clients rather than climb the mountain that leads to being an "employer." It might be more profitable to fire a couple of clients!

There are many paths to get away from being overwhelmed. Don't assume you have to have employees.

Let's assume you want this new employee to net you a modest $10,000 in extra profit.

That means you have to be able to BILL (and collect) an additional $70,000 the first year.

That seems like a big number, but it's very manageable. Remember that no one is 100% billable. You should be able to make your new employee about 50% billable the first year and 60-65% billable the second year. 50% means that you will pay him two hours labor for every hour you are able to actually bill a client.

That means you'll max out at about 20 billable hours per week. Multiply that by 50 weeks and you have 1,000 billable hours. If you charge $100/hour, that's $100,000. Looks easy!

That always looks so good on paper.

But it never works out that way in the real world.

You will work your ass off to reach these numbers. It is possible. But YOU and your employee need to be focused like laser beams on making billable hours the highest priority.

You can do it.

But it's much harder than it looks.


Where Do You Get $70,000?

Let's stop staring at that $100,000 number. Maybe next year. For now, let's focus on the more realistic $70,000 figure.

If you're a sole proprietor, that still looks like a huge number. You might have ten clients paying $1,000/month for a total of $120,000. So an extra $70K is a huge increase. How is it even possible?

Well, here's where you have to have a strategic plan. Do not fall in love with the idea of hiring employees until you have a plan.

It starts by dividing the problem into manageable chunks. Start by putting your new employee on standardized monthly and weekly procedures. For example, if he can knock out all of the client monthly maintenance checklists, he will touch every client machine AND learn your processes more quickly.

Next, divide up that $70K into weekly goals. You need to bill about 14 hours a week to reach that goal. So maybe give the tech a personal goal of three billable hours per day. And schedule the work in your PSA system so that the first three hours of each day are billable. If you can do that regularly, you'll have 15 hours/week!

Scheduling the truly billable work first thing each day will ALSO show you that it's not as easy as it looks. ;-)

The good news is: You went down this path because you're overwhelmed and need someone to help with the work. Just make sure it's billable work. So you've got a backlog. Put the new tech on the billable stuff.

The bad news is: If your tech is any good, he'll knock down your backlog in short order. This is actually a good argument for hiring someone half-time if you can. That way you have a longer lead time to generate additional labor and clients.

Another way to divide up the $70K goal is to figure out how many new clients you need to add. What's the size of your average client? How many servers? How many workstations? How many hours does it take to support them? How much money do they bring in?

Define an idea client. Then go out and start selling.

Work will not magically appear! I know you know that. But many people just don't accept the fact that they need to sell themselves in order to get new work. If your target client has 20 desktops, one server, and brings in about $1,700/month, that's $20,000 a year. Great. You need three of those. That's $60,000 plus project labor. That should get you to $70,000.

. . . Ugh . . .

Did you see what just happened? You became the sales guy. At least you became the person who needs to sell three ideal clients this year. In addition to all your other work. And you've lost a certain amount of your time managing an employee and dealing with all the paperwork, taxes, forms, insurance, and personnel issues.

It's hard . . . it's really, really, hard to hire that first employee. And it's a hard year ahead to make it work. As I've mentioned before, it took me several attempts to build a business that could support additional techs.

Now it's easy. But of course we have lots of clients, and we have processes in place. Building that from the ground up is hard work!

If you haven't already read it, PLEASE do yourself a favor and read The E-Myth Revisited by Michael Gerber. He tells the story of someone who started to grow, hired an employee, dealt with the "stuff" around that, lost the employee, and developed a successful process for moving forward.

This is hard.

But it's very possible! Millions of businesses have figured out how to do this! You can do it, too!

I didn't write this to discourage you. I wrote it to make sure you proceed with your eyes open. It's hard, but it's possible. And when you come out the other side as an employer that knows how to manage employees for maximum effectiveness, then you're on your way to a whole new world of entrepreneurship.

Stay tuned on Friday for my SOP installment on Hiring Your First Employee. December 23rd at http://blog.smallbizthoughts.com.

:-)




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Saturday, December 17, 2011

Scuba Santa

My friend Allen Miller from Cincinnati has a pretty cool Christmas job: He's a scuba-diving Santa at the local aquarium. Check it out.


If you're in the area and want to see the show, visit http://www.cincinnatiusa.com/Events/detail.asp?ProdID=91743



Allen volunteers year round to go diving in the aquarium in order to help clean the facility. Then in December he spends his spare time entertaining the kids (and grown-ups, too, I'm sure).


Just another I.T. professional enjoying his hobby and helping the community!


There are a few more pix online at https://picasaweb.google.com/110151869371345559645/SantaTemp?authkey=Gv1sRgCOnclIGJ5baPcA

Allen is a member of the I.T. Pro user group and helped us have an extremely successful visit this year. Can't wait to go back. I love Cinci and look forward to going back.
:-)

Friday, December 16, 2011

SOP Friday: Activating and Registering Client Software and Hardware

One of the most annoying things you'll ever come across is a new client who doesn't "own" the software on their systems. Their hardware is not registered to them. They have no warranties. The services that must be registered are not in the names or emails of anyone in the company.

In most cases, this client has no documentation.

So the former consultant disappears one day, or gets fired. You come in and look around. You can't log into the firewall or the server. Eventually you have to replace the firewall, crack into the server, sell the client a bunch of legal software and new hardware. You get the idea.

In end, you have to charge the client thousands of dollars for the goods and services they supposedly already bought from someone else. It's a horrible, despicable situation.

This kind of behavior makes me ashamed to be in the same business as these consultants. They are thieves and low life scum. But we see this again and again.

One of the reasons I developed the documentation that eventually became The Network Documentation Workbook is to guarantee to my clients that I would never leave them in such a situation. As I say in that book, the client owns the software, the hardware, the network, and the documentation. It is dishonorable and dishonest to leave them in the situation described above.

Your policies around software and hardware should focus on more than the basic rule that you should act honorably. Your policies should be clear, honest, and provide a sustainable process that contributes to the smooth operation and future profitability of your client.

Here are some basic policies we use to manage software and hardware with out clients.


Software Policies

- Installation
When we sell software to a client, we always install that software. Unless there are extreme circumstances, we install the software and we charge the client for it. Our managed service agreement states that all software must be installed by us. In addition, it states that all labor necessary to fix machines after someone else (including the client) installs software is billable.

It may not seem to you or your client that software installation is a skill worthy of a $125/hr technician. But it is. If you don't believe me, watch three or four of your clients install software. They put things in strange places. They don't choose the right options. They do it differently every time.

This is what you do for a living, and you will be careful to make sure that you can support the software you install. If the client does it, you don't know what actions they took or decisions they made. That can make it more expensive for you to support.

- Activation
We always activate software. Whatever the process, we make sure that this is taken care of. Some clients react favorably to a popup that asks them to activate software. Others will call on the phone or even log off their computer. It is a simple thing to activate the software and make it a non-issue.

This also eliminates the question of whether the installation is complete, so you can check the last box on the installation checklist!

- Registration
We generally do not register software unless it is required for support services. Normally, registration benefits the manufacturer and not the purchaser. It results in spam but few benefits, if any.

Of course, if product activation requires it, then we do register the software.

- Licensing
All licenses must be legally registered/recorded in the client's name. They paid for it. It's their's.


Hardware Policies

- Registration
As with software, all hardware that needs to be registered should be registered in the client's name. The same arguments apply.

- Lifespan
It is our core belief that a business class machine’s useful life is 3 years. Even if it is in perfectly working condition after three years, it's truly "useful" life is over. It is slow by today's standards. The hard drive is too small. It doesn't have enough memory. It doesn't have the latest ports and hardware options.

- Upgrading Hardware
We do not upgrade hardware in machines that are more than 3 years old. It has been our repeated experience that either there will be a significant loss of time vs. profit just getting the correct parts from our supplier, or some other hardware issue will exacerbate the scenario such as the motherboard failing after the memory is installed.

The only two possible exceptions are:
1) A retrofit (not upgrade) of a business critical machine in an attempt to keep it alive long enough for its replacement to come on line.

2) We have explained our position to the client and the client is willing to pay for the time to find the correct parts, plus all time for installation and troubleshooting of issues arising from that installation.

It is highly unlikely that any one client would ever be so endeared to a machine that they would select option 2.


Documentation

All hardware must have a Machine Specifications ("Machine Spec") sheet filled out and placed in the The Network Documentation Binder.

All licenses, software, warranties, and hardware registration information should be documented in the Network Documentation Binder and in the PSA system (under "configurations").


Storage

For every machine (server, desktop, printer, firewall, etc.) there is a pouch-type folder. If there is physical media for an application, it is stored in a folder for the machine on which it is installed. The same is true of warrantie and license information.

If there is electronic media, such as a downloaded application or update, those files must be saved in either the C:\!Tech or the D:\!Tech directory. See the SOP Friday article on The !Tech Directory.


The Most Important Process

The most important process regarding software and hardware is that it should be registered to the email address Administrator@[client_domain].com. If a human name is absolutely required, you can enter in the primary contact. But the email must be the administrator account for the client's domain.

Sometimes we think the primary contact will always be there. Maybe it's the owner. But time and time again, something happens so that the email changes, the company gets bought, the contact gets another job, etc. It is therefore critical that software (warrantees, etc.) be registered to an email address that you will always have access to. That way, you will always be able to deal with renewals or other issues, even if the primary contact is on vaction or gets hit by a bus.

All registration information must be recorded in the Network Documentation Binder and in the PSA system.


Implementation Notes

Implementing these policies follows a familiar pattern. First you need to decide on your policies. Then you need to write up your policies. After that, you'll meet with your staff and make sure they understand your policies.

These processes include policies on how you register software and hardware; storing physical media; storing electronic media; upgrade policies; and more. Don't think that this is a simple little policy. These inter-related policies affect sales and long-term goals as well as simple documentation.

When you have properly registered and documented software and hardware for your clients, you provide them with much more than the basic "proof" of ownership. When properly documented and stored, you'll have everything you need to recover or replace the client's systems in case of flood, fire, theft, or some other insurance-related incident. In fact, you'll have documentation you can fax right to the insurance company. For licenses, you'll save the client thousands of dollars because you won't have to re-buy licenses for damaged or stolen machines.

Over the long run, having all of this information properly registered will make upgrades easier to manage.

It will also make it easier for you to "retire" old equipment without leaving all kinds of software and paperwork behind. Because everything related to a specific machine is where it belongs, and where you can find it, cleaning up is easy.

How cool is it to donate old machines to a charity and include all the relevant paperwork and documentation?


As you can see, this simple-sounding process works its way into a great deal of the smooth operation of your business. Over the long run, this will make both your business and your client's business run more smoothly and profitably.


Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Hiring Your First Employee

:-)






Check Out Erick Simpson's
Network Operations Center Operations Guide
The Best NOC and Service Desk Operations Book Ever!

by Erick Simpson

Ships from stock right now!

Tuesday, December 13, 2011

Network Documentation Workbook - A Guide for Small-Medium Business Windows Administrators

I set up a small page dedicated to this book. You'll find it at www.networkdocumentationworkbook.com. Please also see an older bog pst about this book.

 Managed Services in a MonthThis book is out of Print. It is available only at an e-book. he e-book version is only $79.95.

Buy one for everyone in the family

Basically, we've had a nice long run. Maybe someday there will be a version 2.0. But for now, this book is out of print.
The e-workbook is delivered as:
  • A zip file with
  • The book in .pdf format 8.5" x 11"
  • and the CD as an ISO image
You get the entire book and CD as they were originally published. That means all the forms in both .pdf format and .doc/.xls format, so you can customize them, update them, and add your logo.

If you do not have Roxio, Nero, or another CD burning software that easily creates CDs from ISO images, we recommend the ISO Powertoy at http://isorecorder.alexfeinman.com/isorecorder.htm.



We all say we need to document that network someday. Well someday is here!

The Network Documentation Workbook came out of the standard procedures of KPEnterprises, a small business consulting firm in Sacramento, CA. The "Consultant Edition" allows you to document all of your clients' networks. You get all the forms on CD-ROM in both Word and PDF format.
You can customize them for your operation, including putting your own logo on the forms.

Product Description

This book is guaranteed to improve your business. Thousands of companies have used this book to improve and standardize their processes, document their client networks, and take their businesses to the next level -- and so can you!

Buy Now!  Only $79.95 Buy one for everyone in the family

Book Specs:
  • Paperback: 8.5" x 11"
  • Consultant Edition includes all forms on CD-ROM
  • Publisher: Great Little Book Publishing
Download Table of ContentsDownload the Beginning of the BookView a Sample form (Router Configuration)
Table of Contents
pdf
Chapter
pdf
Chapter
pdf


- What's the password to the firewall?

- Which IP address should I assign to the new printer?

- How much memory's in the boss' PC?

Everyone knows you have to document your network, but everyone hates doing it! The Network Documentation Workbook will make this chore as easy as can be.

Whether you are a Network Administrator looking to document one domain, or a Professional Consultant looking for a standard approach to documenting dozens of networks, this workbook is for you.

This is not a big fat book of theory. It includes the forms,with explanations and examples, and best practices for documenting small business networks.

My approach is to create a binder that includes all the important documentation for your network: Windows domain information, server configurations, IP addressing, password — Everything! You'll get everything from a Table of Contents to a Monthly Maintenance Checklist, all ready to be copied into your binder.

The Consultant Edition includes a CD with all forms in Word and PDF formats. You can customize the word docs with your logo, etc. The Consultant Edition allows you to document all of your clients' networks.

Buy Now! Only $79.95
Buy one for everyone in the family


What They Say About
The Network Documentation Workbook:


"When my laptop got stolen the thing that upset me most was the loss of your Network Documentation Workbook CD-ROM. My documentation has never looked better!"
— Kristina Baker, MCSE, CCNA, ASE, etc…
System Design Engineer
HealthTech Solutions, Inc.

"We've used Karl's documentation book for roughly three months and in that time we've been:"
  • "Able to reduce call volume for basic questions when other vendors needed to interact with the network (when the new copier was installed for one of our clients they were able to find the documented SMTP server along with the SMTP auth username and password)"
  • "Able to provide an off-site copy of the network infrastructure so we could plan the upgrade without an on-site visit. Because the template was filled out and stored on our SharePoint we were able to review the network and find out exactly how many components, connectors and cables we needed to bring to order."
  • "Able to bring the new techs up to speed much faster by letting them review network topology, settings and inventory from our SharePoint."
— Vlad Mazek,
The SBS Show, Exchange Defender, Own Web Now

"Karl's approach is great. He has taken a monotonous, boring task and turned it into a sales tool."
— Beatrice Mulzer, Author,
Microsoft Small Business Specialist Primer & 70-282 Exam Preparation Guide, and other books

"Whether you are a seasoned IT consultant or just starting out, this book will save you precious time in creating a documentation solution for your client's networks. We all say we document our client networks and most of us do in some way, but this book covers everything and gives you a solid foundation to grow from without having to spend the many, many hours it takes to create a good documentation procedure for your business. As the owner of a small IT services firm, this book along with it's documentation gave me a solid foundation for our documentation procedures without spending hours and hours doing it myself. This book is well worth the price!"
— Amy C. Luby
Recognized authority on managed services
and SMB Channel Relations


Buy Now!
Only $79.95
Buy one for everyone in the family