Active vs. Passive Marketing

I was talking to a prospective client a couple of weeks ago and we were discussing the different options available for setting up a business – proprietorships, partnerships and corporations. 

There’s lots of information online about these options, and that’s not what this article is about – this is about growing your business!

When we talked about partnerships we talked about the different ways of organizing them: percentage based, simple office sharing arrangements, and Eat What You Kill systems.  Obviously that’s not the legal description of the structure, but basically it means that the profit from the work that you drum up belongs to you after you pay your share of the expenses.  You go out and get it, and the profits belong to you, plain and simple.

So this got me thinking about this turn of phrase “Eat What You Kill”.  It’s an obvious hunting metaphor, but maybe there’s a little bit more to it than what can be seen on the surface.  Now, I’m not a hunter, but if you think about it there are basically two ways in which you can acquire meat from the wild:  you can trap it, or you can go out and actively chase it down.

The same is true for business.

Trapping is a more passive activity.  You travel along a predetermined route that your prey is known to frequent to set out the traps and then you wait for your prey to be attracted to the bait you left.  Over time a prey who is curious will come to investigate, they’ll start sniffing around and BINGO – you’ve got dinner!  In business this is often referred to as ‘branding’ activities.  Corporate sponsorships, newspaper advertising, websites, LinkedIn, Facebook, etc.

Hunting is different – it’s more active.  You’re out there tracking down the game you want.  You find where it is right now, what it is doing and even better where it’s headed so that you can get out in front of it and lie in wait.  It is more direct, more face-to-face, and requires active participation at the critical moment of “conversion” (in hunting from wild game to meals for the coming winter, in business the conversion is from prospect to client).  The business equivalent here is networking, cold-calling, direct-mail campaigns, and ‘sale’ promotions, etc.

A good, balanced marketing system will have both of these components.  One that will allow the business owner to go out and actively seek new contacts and opportunities to grow their client base, and one that will hang out in places where clients are likely to come across the business when they are looking for you!

How to Choose an Accountant

I would love to be your accountant.  My practice is pretty young, it’s still growing and I am actively looking for passionate business people to work with.

But that doesn’t mean you should choose me.

Choosing an accountant is a big decision.  Your accountant needs to be involved in every financial aspect of your life, both business and personal, to ensure you get the right planning and advice for your specific situation.  It’s important that you find someone that fits your needs and your personality.

Since I’m likely to be a little bit biased about who you should choose I thought I would share some links to articles about choosing an accountant – give you some other perspectives.

If you want to explore the possibility of working together I would love to sit down and talk with you.  Even if you just want to chat about what your needs are and the alternatives you’re looking at, my door is open, the coffee’s on and there’s never a charge for meetings!

When Customers Don’t Pay

Collections are a pain in the neck.  That’s not why you’re in business.  You want to make sales calls, not collections calls.  So we try to mitigate collections by using different policies: credit, COD, deposits (or retainers), terms, early payment discounts.  These are all ways to treat the symptom but not the cause.

It has been a long-standing belief of mine that customers don’t pay for one of two reasons: they don’t have the money (or don’t want to part with it if they do), or you’ve made them not want to pay.

The first reason is a problem, but not a very big one.  In over 12 years of dealing with escalated collections matters I’ve run into this maybe 50 times – which may sound like lots, but with over 25,000 retail transactions undertaken that’s less than one quarter of one percent.  It’s annoying, it wastes your time, it’s frustrating, but it is not going to break your business.

The second is a much more serious problem.  Not the least of which is that it negatively affects your cashflow – the life blood of any business.  It’s also going to take up time – your time.  There isn’t enough time as it is, but now you’ve got to make phone calls, leave messages, make follow-up calls, send statements – all those things you’re supposed to do when someone owes you money.  This is your money – you’ve earned it, why won’t they give it to you?  It may go further – collections agencies (say goodbye to 30-50% of your money – if you get it at all), small claims (you think making phone calls took up a lot of time?), liens (when they refinance their property you’ll get your money – in five years!) or just writing it off as a “bad debt”.

The only thing more frustrating than this is realizing that it’s probably your fault.

In my experience, the majority of customers who don’t pay are unhappy with the product or service that they have received.  If they had been happy, they would have paid.  Promptly.

People appreciate value – and value is a perception.  Perceived value is a combination of a quality product and great customer service for a reasonable price.  If a customer is late paying you it’s probably because the product didn’t meet expectations, the customer didn’t feel like they were important to the business, or they felt the price was disproportionate to what they received.

About ten years ago the company I was working for at the time bought another multi-location business.  The deal included the physical assets of the company, the client lists and agreements and their receivables.  They had been having a terrible time collecting and had substantial balances over 90 and 120 days.  We set about contacting the customers who owed and time and time again we heard, “But the job isn’t done yet!”  In over 95% of the incidents it was a piece of trim or other aesthetic issue.  We would promptly send out a technician, fix the deficiency and immediately collect the money.  The customer was just waiting until they were happy with the work that had been done!

So measuring your receivables turnover is more than just a predictor of cash.  It’s also a measure of customer statisfaction.

It’s also a stark reminder that everything in business is driven by the customer.

It All Comes Down to the Paperwork

A question that I get asked frequently is: “How long do I have to keep all this paper?  I can get rid of it after seven years right?”


Sort of.


According to the CRA website, “As a general rule, you have to keep all of the records and supporting documents that are required to determine your tax obligations and entitlements for a period of six years.”

Of course with every general rule there are exceptions: “Records and supporting documents concerning long-term acquisitions and disposal of property, the share registry, and other historical information that would have an impact upon sale or liquidation or wind-up of the business must be kept indefinitely.”

That means the 25 year-old forklift you’ve got out in the back lot – you need the original invoice on that for as long as you own it – and six years after you’ve gotten rid of it.  The building you bought in 1989?  Same thing.  The reason for this is that the Capital Cost Allowance (depreciation) that you claim for that asset this year is, in CRA’s view, a transaction in the current year.  So the document must be retained as though the original transaction had just happened.

If you reorganize your company to create a family trust or pass the business on to the next generation those documents need to be kept for as long as the company continues (and a couple years after that too).  The good news is that you’re accountant and lawyer will probably want to keep those on hand for their own reference as well.

These days many companies are adopting a ‘paperless office’ strategy, or maybe just a less-paper office.  This will usually involve scanning and keeping many of the original documents (invoices from suppliers, bank statements, bills to clients) electronically, often as PDF’s.  These records will most likely satisfy CRA’s requirements, but they do have some specific additional guidance in this area, so if you are planning to, or already have, start in this direction you should find out what these criteria are.

The golden rule is: save it. 

If you have specific questions give me a call – I would love to chat.

Why I Don’t Charge for Meetings

There are a couple of different ways that accountants figure out what they are going to charge you to do your accounting and taxes.  They can use a flat rate system where they charge so much for a certain type of work or they can use a quoted system where they quote a price for you based on what they know about you, but the most common method is to charge you by the hour.  This eliminates the risk for the practitioner, its low cost for them to administer and it allows them to get right to work.

I use a combination of methods depending on the work that I am doing – I customize it for each client and engagement.

One thing that I don’t do is charge for meeting time with my clients, and I think I’ve finally figured out why.

At first I thought I was being responsive to my clients.  What I was hearing potential clients say was that they were being charged for small talk and that really bothered them – they didn’t feel they were getting value for their money.  I knew that my clients were talking loud and clear and I had to listen.

Then I thought it was just me – I like to chat with my clients and I didn’t want them to be penalized for being personable.

But I finally realized that underneath there was a very real, valid business reason for what I was doing.  I realized that my effectiveness as a practitioner depended on my chats with my clients.  This is when then juicy stuff comes out!  You see what makes the difference in personal finance and tax planning isn’t the little tidbits of obscure technical details of how accounting and tax law works.  It’s the ability to look at the big picture.  To step back and take in all of the details and pull the disparate pieces together to create a picture – and a plan.  These little details aren’t things that typically come up when talking business – it’s in the small talk. 

Planning on having a baby?  Let’s make sure you’re maxed on EI contributions.  Have a sick parent?  Let’s talk about providing for their care and maximizing the government’s contributions to it.  Your children going off to college?  Finishing?  Let’s sure we captured all the tuition and education credits.

Life events can have a big effect on your finances.  If I know about them then we can work together to plan for these things. 

If you know that I’m charging you for the meeting time and all you can hear is the ticking clock in the back of your mind then maybe we don’t talk about these things until it’s too late.  And I’m not able to do my job as well as I could.

So come on in for a chat, we’ll forget about the clock, and we’ll chat about what really matters to you.  No charge, no clock and the coffee’s on me.

The Third Thing Business School Didn’t Teach Me – Leadership

Leadership fascinates me – the ability to inspire, direct and engage groups of people towards a common goal or purpose.  What it takes, who can do it, who can’t, why there are many right ways – and so many wrong ways.

There are innumerable articles and books on leadership and I suppose I could have just posted a link to one of my favourite websites, but I then I would have had to choose just one and I wouldn’t have had the opportunity to share some of my own thoughts.

Hire the right people, good people.

There is nothing you can do if you don’t have the right tools.  You shouldn’t perform brain surgery with a steak knife, and neither should you try to power a rocket with firewood.  Both of those things are useful, but not for those purposes.  You MUST hire the right people.  You MUST train them correctly.  And, critically, you MUST remove those pieces that don’t fit.  This is the first essential building block of leading a successful team.

Give them the freedom to do the job for which you hired them.

You can call it empowerment, you can call it autonomy, you can call it self-actualization.  What you call it really doesn’t matter.  You’ve hired the right people and you’ve trained them well – now you must set them free.  If you don’t then you will stifle them, they will leave and you will have failed.  If you set out to hire the best and the brightest candidates for the positions available then why would you treat them as though they are incompetent?

Provide guidance and support

You’ve hired great people and fully empowered them – now what?  What do they even need you for?  Your job is to make sure that they have everything they need to perform those tasks which you’ve required of them.  Materials, assistance and time are the most common – make you’re your people are well equipped.  Motivation – communicate your mission – often.  It is your job to keep your people focussed on the goal that you’ve set.  Check in with them regularly – make sure they’re on track and that they have everything they need.  Show them that it is important to you that they succeed – and that you’re committed to helping them get there.

Being a leader is more than just being a boss.  It is not easy, but its incredibly rewarding – and it is the only way to succeed when you get to the place where you need help to achieve the business goals you’ve set.

The Second Thing Business School Didn’t Teach Me – Customer Service

I’ve said it before, and I’ll say it again – it doesn’t matter what business you’re in it’s a Customer Service business!

I’ve been reading ‘blink’ by Malcolm Gladwell, the author of The Tipping Point and in it he talks about an interesting study that pinpoints how important the impressions you make on your clients are.

Gladwell relates the research results of Wendy Levinson, a medical researcher, who studied doctors and what causes them to be sued for malpractice.  She taped interactions between doctors and their patients and was able, with an astounding degree of accuracy, to predict which doctors were going to be sued and which ones weren’t.

So what were the determining factors?  She narrowed them down to two:

Doctors that didn’t get sued spent more time with their patients – 20% more on average.

Doctors who didn’t get sued were found to be those whose interactions were dominated by empathy, compassion and active listening techniques.  Doctors who got sued were found to be dominating and condescending.

Neither of these factors had anything to do with technical ability or how often the doctors made mistakes!

I’m not saying that it isn’t important to be technically good at what you do, because its very important.  What I am saying is that the difference between being technically competent and being a success is often how you make your clients feel.

The First Thing That Business School Didn’t Teach Me – Selling

Selling is an art, selling is a science, selling is a profession.

And selling scares me.

When starting my practice last summer I called my Dad for some advice.  He’s been in business for himself for over twenty years.  I respect him and his opinion and I know he won’t hold back if I’m doing it wrong.

We chatted about being self-employed for a while, the challenges and the opportunities and I shared with him that the thing that intimidated me most about being self-employed was the selling.  His response?  “And well it should!” 

“Pardon?” I asked. 

“If you put on a fancy suit and deliver a polished presentation with glossy materials and push for the sale you’re going to fail.” 

Thanks, Dad. 

He wasn’t quite done though.  “You’re not a sales professional, you’re an accountant.  You’re going to have to market your practice, but it can’t be through traditional selling.”

He went on to say that when people came to me they were going to be looking for help.  Help with a problem – and selling for me was going to be crafting a solution to that problem.  And therein lies the key – I can solve problems.  I’ve been doing that for years.  Problems involving finance, taxation, accounting, business process development, human resource management – pretty much everything but the kitchen sink (I left that part to the plumbers!)

That’s the key to selling for most of us – finding the need to be filled, the problem to be solved, the consumer desire to be satisfied.  It’s not something they teach you in school, but if you can do that and consistently deliver great customer service your business is going to grow!

3 Things They Didn’t Teach Me at Business School

I did a lot of schooling.  Non-business Bachelor’s degree.  Three years’ worth of additional undergrad courses.  Thirty months of modular distance learning while articling.  It was a long road and I learned a lot.  What has really surprised me is all of the important stuff that I’ve learned since that no one ever taught me.

You’re going to have to sell.

Whether you’re applying for a job, presenting an expansion plan to a bank, or recruiting clients for your practice selling is an integral part of being a professional.  This applies equally to those who run other businesses as well.  You are going to have to take your ideas and present them professionally in front of those that you want to buy into what you’re selling.  This doesn’t mean that you are going to end up the stereo-typical used car salesman, but you are going to have to advocate for yourself and your business if it (and you) are going to survive and flourish.

It’s all about customer service.

You will have customers, and you will have to deal with them.  You’ve done the job of selling – they’ve bought your pitch.  Now you have to perform to meet the expectations you set during the selling phase – or exceed them.  You have to pay attention to those who will be paying your fees/salary, respond to (or anticipate) their needs.

You’re going to be a boss, and would do well to become a leader.

There will come a time when you will require the assistance of others to achieve the goals that you have set out for yourself.  Whether you get promoted at work and now have a staff to manage or that little practice of yours has grown to the place where you can no longer run the business, source new work and actually do the work you signed up for.  You’re going to need to hire, mentor, correct, encourage, motivate and maybe even fire people.  A quick check of the syllabus shows that this wasn’t taught in Advanced Financial Accounting – or likely in any of your technical courses either.

So how do you develop these skills?  Read.  A lot.  Try, make mistakes, and learn from them.  Talk with other people who are in business, share your experiences, learn from theirs.  Find a mentor.  These skills are going to be every bit as important as the technical skills you went to school for – do everything you can to acquire them, and master them.

Mortgage or RRSP?

One of the personal tax questions I get asked most frequently is whether to put money into RRSP’s or pay down a mortgage. 

Great question – and one that has meaning for almost every Canadian.

I hear from lots of people that they used to ‘do’ RRSP’s but the market has been so bad in the last 5 years or so that they don’t even bother any more.  They just don’t see the point.  Some have even told me that they keep putting money in there every month and the balance just keeps going down!

There are a couple of things to consider when thinking about investing in RRSP’s.  Obviously the first thing that presents itself is the tax advantage.  If you are in the 30% tax bracket  and you invest $10,000 you will obviously get a refund of $3,000.  Money that you can use to take a trip, buy that new 80” TV, invest or whatever you like.  When you withdraw the money when in retirement you will have to pay tax on it.  One of the basic ideas of RRSP’s is that there will be a deferral of tax, but hopefully when you retire you will be in a lower tax bracket.  This would result in a permanent tax reduction.  For instance if you are in a 20% tax bracket when you retire you will pay $2,000 in tax on that same $10,000 resulting in a permanent $1,000, or 10%, tax savings.

This is all great, but the reason for investing at all is to make a return on your invested funds – or at least to not compromise the principal.  All too often these investment goals are not being realized.  This may not be due to the RRSP vehicle itself, but due to the investments chosen inside the RRSP. 

When most people think about RRSP’s they think about Mutual Funds and GIC’s, but can own almost any kind of investment in an RRSP.  Mutual funds may or may not be the right vehicle for you.   It’s not unusual these days to see a Canadian mutual report a 10 year return of between 4 and 5%, subtract the MER’s (expenses) you’re left with 2 or 2.5% – not great given that the 10 year inflation rate average in Canada is 1.8% (so you’re left with less than 1% real growth!).  With a little bit of work you can find a 5-Year GIC at 2.35% – presumably with little or no risk to your original investment – that can be a little disheartening.

Now, some mutual funds are much better than others, but they can be harder to find.  You are not limited to mutual funds.  Equity stocks, bonds and ETF’s (Exchange Traded Funds) are tools that also work very well, but may not be suitable for an amateur investor.  You need help – a professional advisor who can sell more than just mutual funds and GIC’s and certainly more than just the mutual funds that their company runs.

So my two pieces of investment advice are: don’t settle for mediocre returns and get a good, professional, trusted investment advisor. 

Alright – if you can get a tax refund and a decent return in your RRSP (say 8-10%) and it’s meeting your tax and investment goals what’s the point of talking about paying down the mortgage?  It depends on where you are in your life and what your goals are.  Most people have a strong aversion to being retired and having a mortgage.  So if you find yourself, for whatever reason, being 45 and having 25 years left on your mortgage, then perhaps putting $10,000 on your mortgage is more in line with your goals.  This will reduce your amortization period by more than 13 months and reduce your interest costs by over $16,000 at today’s prevailing rates.

So there is a time and place where each answer could be correct depending on where you are in your life and what your goals are.  Part of the holistic approach to financial management is having the experts on your team to help you define your goals – and get there.

My favourite answer to this question is – both!  Put the $10,000 in your RRSP and then use the refund to pay down your mortgage – that’s leveraging the tools that are available to you!