Can Your Business Run Without You?

What would happen to your business if you became ill for an extended period of time?  Could someone else man the shop for you easily?  Would you be more relaxed on vacation (or at the very least, take a vacation!) if you knew that the business could be better taken care of while you are away?  Have you ever thought about hiring an employee or assistant, but are overwhelmed with the thought of training someone in all of your business systems and processes?  Are you holding onto too many tasks that you know you could be delegating, but don’t have the infrastructure in place to effectively delegate without taking up too much of your precious time as the business owner?  If you answered yes to any of the above questions, you are in need of a business blueprint!  It’s time to create an Operations Manual.

What is an Operations Manual and Why Do I Need One For My Business?

Before you started your business and in the early stages, you probably did a lot of planning.  Most likely, you were told to draft a business plan, and you may have even done so.  Unfortunately, most small business owners rarely look at their business plan after creating it, thereby rendering it meaningless on a daily basis.  A business plan is a static document, as opposed to a living and breathing one that serves as a guide to your business systems and processes.  Developing systems and taking the extra step to document them is vital to a business running smoothly and automatically.  Unfortunately, most businesses are lacking in this area.  Business owners get caught up in the daily activities of running the business, and do not take the time to document or blueprint the systems in place.  In the E-Myth Revisited, author Michael Gerber sets forth the idea that all businesses need to be “franchised” in the sense that they can run automatically, deliver a consistent experience to customers, and can be maintained, at least to some extent, without the owner’s hands-on involvement.  While you may not literally be franchising your business, Gerber’s concept broadly translates into developing an Operations Manual for your business.

What Are the Advantages of an Operations Manual?

An Operations Manual makes it easier to delegate and run your business.  However, even if you have no employees, independent contractors, or assistants of any kind, the importance of an Operations Manual should not be overlooked.  It provides structure and clarity by helping you examine the big picture and how each part fits into the whole.  It is also a handy tool for reminding yourself of your business systems when things get busy and you are overwhelmed.  The manual serves as a central location for vital business information, making it easier for you to find what you need in one fell swoop.  In a nutshell, an Operations Manual helps promote a consistent experience for your clients, and helps you avoid reinventing the wheel.

What Format Should an Operations Manual Be Stored In?

An Operations Manual can be hand written if that is your absolute preference, but I would not recommend it.  As this document is so vitally important to your business, you should maintain it in electronic format.  It is easier to revise, send as an attachment when necessary, and be backed up to avoid loss of data.  Some clients prefer to create their Operations Manual using a 3-ring binder approach.  While this may be tempting, if that binder is destroyed or lost, there goes all of your hard work in creating an Operations Manual.  Do yourself a favor and store the manual on a computer (and back it up!) or online at a secure site.

What Should an Operations Manual Include?

An Operations Manual is the manual of all manuals.  It can be as comprehensive as you want and need it to be.  It should serve as a blueprint of your business for you, your employees, assistants (virtual or on-site), and anyone else that is on a need-to-know basis.  The Operations Manual essentially covers everything that goes on behind-the-scenes of your business.  Here are some examples of what an Operations Manual may include, but as you develop one for your business, you will undoubtedly think of many more items to include.

    • Passwords to all of your online and offline business accounts
      (be sure to give some thought to maintaining proper security measures);

List of frequently used business supplies with purchasing/ordering information;

List of business documents;

Prospects intake process;

Client intake process;

Sample email templates;

List of all team members and their contact information;

Procedures for hiring new team members and training them;

Preparing for client sessions, proposal pitches, speaking engagements, professional association meetings, etc.

Client follow-up process.

Take the time to draft an Operations Manual.  It will be time well spent, and you will reap the benefits of it long after you finish the blueprint.

Copyright © 2009 Lisa Montanaro of LM Organizing Solutions, LLC.

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Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

By now, you have probably heard the term “Coopetition.” Coopetition is a contraction of the words cooperation and competition, meaning essentially cooperative competition. In the business world, coopetition means collaborating or partnering with your competitors in an innovative way so that both parties benefit. The most successful entrepreneurs realize early on that the old military adage, “To know your enemy, you must become your enemy … Keep your friends close and your enemies even closer” applies just as well to the business world. Of course, we all know that your competitors are not truly your enemies (at least I hope they aren’t!), but the idea of keeping them close is the point. A creative collaboration with your biggest competitor in the same industry may be the best opportunity for boosting your business.

Many of you are already familiar with the idea of collaborating with your competitors through membership in an industry specific professional association. For example, I am a member of the National Association of Professional Organizers (NAPO), the premiere association for my industry. I attend the annual conference every year as a participant or presenter, belong to a local organizers’ neighborhood (an informal chapter), frequently engage in discussion on the organizers’ email list, and serve as a mentor and business coach to new organizers and organizers-to-be. I have partnered with other organizers in various ways, as well as share referrals back and forth. This coopetition with other organizers has enriched my business in ways that are immeasurable. I’ve benefited greatly from these relationships and from keeping an open mind in my approach to dealing with my competitors.

It is smart business to capitalize on the positive aspects of a competitive situation. However, for coopetition to work effectively, both parties need to clearly define their roles, making sure not to overstep boundaries. The goal is to find a way to partner with your competitor (read: colleague!) so that both parties can substantially benefit from the collaboration. Look around at your competition, and identify competitors that share the same zest for business and success that you do. You want to make sure that you align yourself with a competitor that you respect and admire, and that exudes the same sense of professionalism and level of expertise.

What are some ways that you can engage in coopetition that will boost your business? Here are some examples of strategic alliances between competitors that are innovative, creative, and effective:

    • Develop a joint venture project together. Some of the best business ideas are born out of competitors joining together. For example, in my industry, organizers are collaborating together to offer certification prep courses, train new organizers, design organizing products, etc.

Share a booth at an expo, tradeshow or business showcase.

      Not only will this help each party keep costs down, but as we all know, two minds are often better than one. You may come up with great new ideas to market your industry and businesses, offer more products, and gain more attention from participants and the media.

Co-present with a competitor.

      Co-presenting is a wonderful tool when done well. I have had the opportunity to present with colleagues to offer workshops that I may not have been able to do on my own. The participants benefit from hearing two different presenters, which helps keep the workshop fresh and interesting. Each presenter only has to do half the work, which makes your job easier overall.

Advertise with a competitor.

      Advertising is expensive. Sharing that expense with a colleague or competitor to promote types of service, your industry, or an event you are doing together is a great way to maximize advertising costs.

Refer leads to each other.

      This is probably the most common form of coopetition. But don’t lose sight of how powerful it is! What you give out almost always comes back. If you cannot service a prospective client, find a colleague or competitor that can. The potential client will view you as a true professional and resource-provider, and the competitor will be grateful and will usually reciprocate in the future.

Co-author an article or book together.

      Writing does not come easy to many people. Consider sharing writing responsibility by co-authoring an article or book with a competitor. This may be the most effective way to get published in your industry. For example, if you teamed up with 9 competitors in your industry and all wrote one chapter, voila, a 10-chapter book is born!

Offer a teleclass or webinar together.

    You’ve probably seen this many times where two business experts team up to offer a teleclass or webinar together. Many times they are in complementary industries, such as an interior designer (or life coach, or wardrobe consultant, etc.) and professional organizer, or a financial planner and accountant. Again, two minds are better than one, work is shared among the presenters, and the participants get to hear from two experts. It’s a win-win situation for all involved.

Think broadly, keep an open mind, and seek out collaborative opportunities to boost your business with coopetition. Used wisely, it is a fantastic tool to add to your business.

Copyright © 2009 Lisa Montanaro of LM Organizing Solutions, LLC.

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You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

Just Say No!

Knowing Your Limits When Taking on Volunteer Leadership Roles

As an entrepreneur or any other type of business professional, you are probably often asked to take on volunteer leadership positions, such as a Board member, a committee chair, etc. These roles can be incredibly satisfying from a personal and professional standpoint. However, it is often difficult to know when to say “no” when faced with too many opportunities and too little time with regard to volunteer leadership roles.

Recently, I was asked to take on two separate leadership positions for two different organizations that I am a member of. While both offers were extremely tempting, I knew right away that there was no way that I could say yes to both positions, and do both with finesse. Every time we say yes to something, we say no to something else. Therefore, I made a difficult phone call to the incoming President of one of those organizations to explain that although the offer was tempting and I appreciate his faith in me, I needed to turn down the offer in order to accept the leadership position for the other organization.

This made me think about how in all aspects of life, we sometimes have to ‘just say no’ to some offers in order to do the best job that we can with the things we say yes to. I realized a long time ago that we can’t do it all. Well, not if we want to do the things we commit to well. In order to give 100% to every volunteer leadership position that you take on, you need to carefully consider what that role involves and whether you are able to bring your all to the table. If you can’t, the better answer (albeit often the harder one to give) is “No.”

The following guidelines have helped me to make the tough decisions as to what to say yes to and what to say no to with regard to taking on volunteer leadership positions for business or civic organizations. I hope they assist you, as you decide what falls within your ‘absolute yes’ list and what you will ‘just say no’ to.

Is it a Cause That You Believe in? – Sometimes you take on a volunteer position not so much for the position itself, or even for the tasks you will be doing, but because the organization’s work or agenda furthers a cause that you so deeply believe in or value. For example, many people serve as board members of organizations that specialize in cancer research, homeless shelters, Habitat for Humanity, etc. The list goes on depending on the causes that you believe in.

Does it Improve Your Business or Further Your Industry? – When I first joined my local and county chambers of commerce, I was the first and only professional organizer to be a member. Not only did this bring an amazing amount of exposure to my business and what I did, it also helped further the professional organizing industry as a whole.

Will it Enhance Your Reputation? – Think about whether it will enhance your reputation in terms of aligning yourself with this group. Also, what if you take on the position and do not do a good job? Think about whether you can give 100% and shine in the position. If you can’t, then it may have a negative effect on your personal and professional reputation.

Been There, Done That – Will it be a repeat performance? For example, the offer I just turned down would have been my second term in the same exact position. I’ve watched this organization grow and expand, and feel it is in a good place right now, and that my time has already been well served. It is time to move onto leadership positions within other organizations and take on new and exciting projects to bring in fresh ideas and energy. The organization I am saying yes to is one I have been involved with for several years, but I have never held a leadership position within it, so this is a new experience and one I look forward to.

Can You Afford the Financial Commitment? – Most organizations expect their board members and other leadership volunteers to give freely of their time and expertise. But some organizations take that a step further and also expect their members to give a certain amount of financial commitment. One example is Rotary International, where the members give financial support and choose worthy causes within the community to be the recipients of those funds. Be sure to ask what level of financial commitment is expected, and ask yourself whether you can realistically meet it before saying yes.

When in Doubt, Follow Your Gut – Regardless of the above criteria, you will probably know if you should ‘just say no’ based on your gut reaction to the request to serve. If you are asked to serve in a volunteer capacity or leadership role for an organization, and you cringe at the idea, with no trace of excitement, follow your intuition and say no! Yes, a certain level of fear or anxiety may be normal when asked to serve as a volunteer in a leadership capacity for an organization. You may be nervous about being in the spotlight, meeting new people, how to juggle this new role with all of your other responsibilities, etc. But, often times, people say yes purely out of obligation when the ‘real’ answer is quite obviously staring them in the face based on their gut reaction. If your gut screams no, follow it!

Copyright © 2009 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

Many of you are probably already members of Facebook, the ever-growing, very popular social media site. By “member,” I mean that you have a personal profile. Millions of people do.

But how many know that businesses can create Facebook pages, which are called fan pages? The main difference is that a profile is personal and, therefore, linked to an individual person, while a fan page is linked to a business or organization. Another major difference is that profiles can only be entirely viewed by people that you “friend,” while fan pages are completely open to anyone on the web.

Why create a fan page for your business or organization? Fan pages are a great way for a business to get online exposure, keep in touch with clients, reach prospects, establish credibility, offer specials, etc. In other words, to develop the KLT (Know, Like & Trust) factor that is so important in doing business today. Fan pages can also increase your search engine optimization (SEO) online and drive traffic to your website or blog.

I created a Facebook fan page for my business, LM Organizing Solutions, LLC. You can visit my fan page at www.facebook.com/
LMOrganizingSolutions
. I plan to offer organizing tips, advice, inspiration and motivation! I also plan to “reward” my fans by offering special deals that only they are privy to, such as audio recordings available to fans only, discounts on products and services, periodic giveaways, etc. In addition, I plan to “use” my fans wisely by asking them pointed questions about their favorite organizing products, as well as their ideas for future blog posts, teleclasses, and article topics. It will be a wonderful, two-way relationship! Best yet, we can stay in touch on a daily basis and it is totally interactive!

So head on over to Facebook, check out the LMOS Fan Page, and click on the box on top that says “Become a Fan.” I promise you will be pleased you did so!

Copyright © 2009 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

When I am conducting an organizing, time management or business related workshop, I often ask if anyone has heard of the Pareto Principle. I usually get a room full of blank stares. However, if I ask if anyone has heard of the 80/20 Rule, many people nod their heads yes, and have a better idea what I am talking about. The Pareto Principle takes its name from a 19th century Italian economist named Vilfredo Pareto. In the late 1940s, business management guru Joseph M. Juran suggested the principle and named it after Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population. Pareto studied the unequal distribution of wealth in his country in order to offer suggestions as how to improve its disparity.

Pareto’s Principle (or the 80/20 Rule as it is often called) has expanded over the years to include many examples of unequal distribution. Essentially, the 80-20 Rule now stands for the proposition that in any grouping of items or events, roughly 80% of the effects come from 20% of the causes. Or stated in the reverse, 20% of the items or events is always responsible for 80% of the results.

The 80/20 Rule has become a common business principle, resulting in the oft-repeated phrase, “80% of your sales come from 20% of your clients.” Conversely, 80% of your complaints come from 20% of your clients, and 80% of the profits made in your industry come from 20% of the businesses.

The Pareto Principle also applies to a variety of other items and events: we only wear 20% of our clothing, we spend 80% of the time with 20% of our acquaintances, 80% of our interruptions come from the same 20% of people, 20% of the work we do consumes 80% of our time and resources, etc. You can apply the 80/20 Rule to almost anything, from business and time management principles, to clutter and physical possessions. The exact percentages may vary, but the overall gist of the principle remains the same.

The Pareto principle was also featured in the book, The 4-Hour Workweek by Tim Ferriss. Ferriss recommends focusing one’s business activities on the 20% that contributes to 80% of the income. Boldly, he also recommends firing the 20% of clients that take up the majority of your time and energy, and cause the most trouble, often referred to as ‘toxic clients.’

I personally love the way Joseph Juran described the phenomenon in the 1940s – the “vital few and trivial many.” The 80/20 Rule means that in any grouping of items or events, a few (20%) are vital and many (80%) are trivial. 80% of our results come from 20% of our activity. That means that of all of the daily activities you do, and choices that you make, only 20% really matter (or at least produce meaningful results).

What is the takeaway that we can learn from the Pareto Principle?

Identify and focus on the 20% that matters! When life sets in and you start to become reactive instead of proactive, remind yourself of the 20% you need to focus on. If something in your schedule needs to be deleted or not completed with your fullest attention, try your best to make sure it’s not part of that 20%.

Use the Pareto Principle as a litmus test to constantly check in and ask yourself: “Is this truly part of the 20% that matters?” Let the Pareto Principle serve as a powerful daily reminder to focus 80% of your time and energy on the 20% of your work and life that is really important and delivers positive results.

Copyright © 2009 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

How many of us have heard the old familiar phrase, “The shoemaker’s children always go without shoes?”This phrase has become synonymous with almost anyone neglecting his or her own business. We are all guilty of it now and again. We get so busy working in the business that we forget to ‘mind the shop’ in meaningful ways. Unfortunately, in the process, we wind up losing one of the best experts we have on staff – ourselves! So, take a step back, and hire someone with superb expertise – you.

Let’s say, for example, you are a financial planner, but your finances have become a mess. Or perhaps you are a professional organizer, but your office is in complete disarray and you can’t find anything. What type of image does this project to your clients, and the world at large (assuming anyone knows about it!)? Not a very good one. But more importantly, you suffer because of it. You spend all of your best time and energy on your clients, and don’t take your own advice. This is not a great model for running a successful business. You should ‘walk the walk’ and ‘talk the talk’ when it comes to the business advice you dispense to others. You should be a role model for your clients and other like-minded entrepreneurs.

In the book, Crazy Sexy Cancer Survivor (fabulous book that is really about life, not only cancer), author Kris Carr writes about how a good model for healthy living has been established by the Federal Aviation Administration (FAA): wear your seat belt, don’t smoke in the bathroom, and if the plane goes down – put YOUR oxygen mask on first! Great advice in general, but also for an entrepreneur running a business. If you aren’t taking care of business inwardly, you can’t expect to succeed and exude a positive, productive image to the world.

So, how do you avoid the shoemaker’s shoes trap? Start treating yourself like a prized client! You must start doing the inward focused work that you often neglect to do in order to move forward in your business.

Audit your business based on your particular area of expertise. All of you have a unique area of brilliance that you excel in. Don’t give it all away to others! Save some for yourself. Audit your business based on your area of expertise and figure out what is lacking, what needs improvement, etc. Couldn’t you benefit from hiring you? Most likely, yes!

  • Set aside the time for a private boot camp or corporate retreat. You probably advise your clients to take time for their businesses, but when is the last time you booked uninterrupted time for your business? Every year, I book a boot camp or “corporate retreat” for my business. I write an action plan of what I want to focus on, and then I go to town and get it done. It is a great way to pump out projects that have been lingering, brainstorm what the direction of my business will be in coming months and years, and develop a future action plan. It is a time to both be productive and plan ahead.
  • Put your business through any checklists, systems, or processes that you put your clients through. You all have them: those great systems, approaches, and processes that you develop and share with your clients. Now, take some time to put your own business through the same systems. Not only will your business benefit, but also you will understand the systems more, see if there are any holes that need to be plugged, and any ways the systems can be improved upon. Therefore, you benefit, but so do your future clients.
  • Continue to hire yourself as needed. Once you’ve done the inward work necessary to keep your business running in tip-top shape, don’t neglect it again. If you start to see the shoemaker’s shoes trap rear it’s ugly head in the future, hire yourself to keep it at bay!

Copyright © 2009 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

So, your business is growing and you are ready to outsource or delegate some of the work in your business. However, you are confused about how to classify a new team member: employee or independent contractor? The following is an overview of classification of workers to help guide this important business decision. As with any aspect of your business that is of a legal or tax nature, you should consider seeking the formal advice of an accountant and/or attorney to assist you.

Hopefully, this overview will provide you with enough basic information to ask relevant questions of your business advisors.

Classification of Workers

  • Classification of a person as an independent contractor or employee is important for tax purposes.
  • For an independent contractor, you must file IRS Form 1099-MISC to report payments of $600 or more.
  • If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker, which typically include income taxes, Social Security, Medicare, and unemployment.
  • If you want the IRS to determine whether a worker is an independent contractor or an employee, you can file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.

Independent Contractor vs. Employee

  • As a general rule, an individual is an independent contractor if the person for whom the services are performed has the right to control or direct only the result of the work, and not what will be done, how it will be done, or the method of accomplishing the result.
  • An individual is an employee if he or she performs services for an employer and the employer can control what will be done and how it will be done.

Categories of Control

  • The IRS examines the relationship between the business and the worker by reviewing 3 categories:  Behavioral Control, Financial Control  and Type of Relationship
  • These 3 areas form a list of 20 factors that the IRS uses to determine the distinction. IRS Revenue Ruling 87-41 outlines the 20 factors in detail.
  • Generally speaking, independent contractors retain control over their schedule and number of hours worked, jobs accepted, and performance of their job.
  • Employees usually work a schedule required by the employer and their performance is directly supervised.
  • IRS Publication 1779, Independent Contractor or Employee, is another valuable resource that discusses the differences between the two classifications

1. Behavioral Control

Behavioral control covers whether the business has a right to direct or control how the work is done through instructions, training, or other means.
  • When and where to do the work.
  • What tools or equipment to use.
  • What workers to hire or to assist with the work.
  • Where to purchase supplies and services.
  • What work must be performed by a specified individual.
  • What order or sequence to follow.
  • Whether worker is trained to perform services in particular manner.
Training is an area where some small businesses come close to creating an employment relationship with independent contractors by requiring detailed training, including “shadowing” of the business owner/service provider, and requirement that services be provided in a certain manner.
Requiring an independent contractor to have taken certain classes is not the equivalent of providing training, but merely requires a qualification level and skill set required for work. It may be a safer route to take when hiring subcontractors.
Also, training in company policies is not necessarily the same as training in how to do the actual services.

2. Financial Control

Financial control considerations are as follows:
  • The extent to which the worker has unreimbursed expenses.
  • The extent of the worker’s investment in the facilities used in performing services.
  • The extent to which the worker makes his or her services available to the relevant market.
  • How the business pays the worker.
  • The extent to which the worker can realize a profit or incur a loss.

3. Type of Relationship

The IRS examines the relationship between the parties:
  • Written contracts describing the relationship the parties intend to create.
  • The extent to which the worker is available to perform services for other, similar businesses.
  • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation or sick pay.
  • The permanency of the relationship.
  • The extent to which services performed by the worker are a key aspect of the regular business of the company.
For more detailed information visit www.IRS.gov and refer to IRS Publication 15-A, Employer’s Supplemental Tax Guide or IRS Publication 1779, Independent Contractor or Employee.

Terms of an Independent Contractor Agreement

The following are typical clauses found in an agreement between a retaining business and an independent contractor:
  • Define independent contractor status
  • Scope of work (duties & required responsibilities)
  • A non-solicitation and/or non-compete clause
  • Non-disclosure clause
  • Copyright/work-for-hire
  • Consent to use of trademark
  • Payment terms (compensation & out-of-pocket expenses)
  • Term of project or relationship/termination
  • Obligation to carry general liability insurance
  • May also include a governing law provision, indemnification clause, conflict of interest clause, non-hire provision, and request for taxpayer ID number for 1099.
Non-compete agreements are reviewed by the courts for reasonableness based on several factors, including the nature of the business, the nature of the worker’s duties, the geographic territory encompassed by the non-compete, and the length of time chosen. They are often hard to enforce.
Non-solicitation agreement can protect against stealing of clients and/or employees.
For an employee, you can draft a basic employment letter outlining date of hire, salary and benefits package, probationary period, pay raise eligibility, etc. Employees are generally “at will” unless otherwise designated, meaning they can be discharged due to any legitimate, non-discriminatory basis.
The employer chooses which benefits to offer (sick leave, vacation, etc.); benefits are usually not required (check state and local laws and regulations). Benefits are mostly based on industry standards and employee expectations, and are used to entice employees.
As with any major business decision, do your homework — speak with expert advisors, (accountant, attorney, business coach, etc.), and speak with colleagues that have experience in retaining workers in order to find out which classification makes the most sense for your business. Good luck!

Copyright © 2010 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

I am always amazed at how travel can improve your business and your life. Recently, my husband and I visited the beautiful Caribbean island of St. Lucia. It was a fantastic vacation by all accounts. The island is a marvel of nature with soaring peaks, an active volcano, lush rainforests, volcanic sand beaches, etc. We stayed at a really special place called Ti Kaye Village Resort and booked through a wonderful local company named Serenity Tours. I was able to unplug from my busy life back home, and truly enjoy a tropical escape. However, I did not turn my business brain off just because I was on vacation. To the contrary, I carefully observed and realized that travel in general, and the people of St. Lucia in particular, can teach us a lot about how to run successful businesses and live better lives. Here are the lessons learned.

  • Great Customer Service Gets Noticed – We all know how important good customer service is. But how many businesses truly excel at customer service? At Ti Kaye, the little touches made a big impact. The check-in procedure gave us a glimpse of how amazing the service is. You arrive and are given a complimentary drink (rum punch!), a banana leaf necklace is placed around your neck, you sit in the open air bar enjoying the view, and the manager comes over to introduce herself and tell you about the resort. You sign one piece of paper, give a credit card, and then are shown to your cottage, where your bags are already waiting for you. What got our attention was how personalized it was, and how it didn’t feel like a traditional check-in. There’s no lobby. You’re sitting at an open-air bar with an amazing view of the Caribbean Sea. Another example of the excellent customer service is the complimentary neck and shoulder massages before dinner. (Don’t even get me started on the spa!) It was the little things that made a big difference, and truly got our attention. From a business standpoint, customer service is not only still king, but gets noticed and creates true fans of your business.
  • Make Your Clients Feel Special by Personalizing the ServiceOur tour guide from Serenity Tours, John, actually took the time before he met us to find out what we do for a living, and then weaved it into the conversation. For example, he saw that I do motivational speaking on my website, and commented how much he loves Tony Robbins and finds motivational speaking so inspirational. He found out that my husband is a veterinarian, and shared that his sister-in-law is also a veterinarian. He offered to arrange for us to tour her vet practice on the island. That type of personalized approach in going deep with your clients, researching them, and really taking the time to find out what makes them unique goes a long way. We truly felt special. I have no doubt that Serenity does that for all of its clients, as all service-based business owners should do.
  • Manners & Friendliness Count – St. Lucians are friendly, warm, and open people, and this makes visitors feel welcome and appreciated. This is something we can all benefit from in life and in our business with our clients. Manners and friendliness make a difference! For example, they call elder women “Mom” in the British tradition as a sign of respect. We noticed it and thought it was a nice touch. We were always greeted with a friendly salutation, thanked for our service, and were even treated to some warm, big hugs when saying good-bye. Treat your clients with respect, mind your manners, and engage them with warmth and affection.
  • Challenge Yourself – There are twin volcanic peaks on the island called The Pitons. You can hike Gros Piton, which is 2600 feet high. It is a serious physical challenge, but also a mental one. It took us 2 hours to reach the summit, and then 2 hours to hike back down. It is a difficult hike as the trail is very rocky so you have to really watch your footing, and it is steep. But, it is worth it! The views from the top are incredible! Doing something like that when you are traveling, or even in everyday life, can remind you of your own strength and resilience personally and professionally. Are there new business ideas that you are dying to implement but have been holding yourself back? Challenge yourself. The rewards may be amazing once you reach the “summit.”
  • Be Authentic – We loved hearing about the history of the people that live near Gros Piton in the community called Fond Gens Libres (land of the free). The community was originally formed of Royalists escaping the guillotine during the French Revolution, and then slaves that had escaped or been freed (St. Lucia abolished slavery in 1834.) There are only about 100 descendents of those original ancestors living in the community of Fond Gens Libre today, and they are fiercely independent. They stand true to their beliefs and way of life. Their example serves as a powerful reminder to stand by your beliefs, your views, and be authentic to your true self personally and professionally.
  • Give Prospects a Free Taste – At the resort where we were staying, there is a lovely secluded beach called Anse Cochon. And there are some local “beach dudes,” which is their official term according to the St. Lucians. One is known as the Fruit Man. He climbs trees every morning and fills up his kayak with coconuts, bananas, and a number of other delicious tropical fruit. He then kayaks out to the visiting catamarans that come to the cove for snorkeling excursions. We would watch him and think, “Do people really buy from him?” “How does he make a living as there are not that many tourists on this secluded beach?” We soon had our answer. While we were swimming one day, he kayaks over to us, cracks open a coconut and says, “Taste.” So of course, what do we do? We taste. And it is this fresh, delicious coconut water, surrounded by fresh coconut meat. We are in heaven. He tells us that he will bring us another one later in the week, and if we really love it, then we can pay him for both. We get another one a day or two later, and then a third one on our final day, and we pay him for all three. That’s when it dawns on me that Fruit Man is an amazing sales person. Why? Because he gave us a free irresistible taste of what he sells, and once we experienced it, we were hooked! This is a great example of giving your clients a free taste of your services and expertise. Whether it is a free monthly e-zine, a preview teleclass, a free phone consultation, a free special report or article, a Facebook Fan Page where you post tips or provide extra value, etc. Don’t be stingy with your expertise and content, as it will come back to you in sales and fans – at least three-fold if the Fruit Man is any lesson.
  • Rejuvenate & Refresh – Unplugging, decompressing, relaxing, and leaving the daily grind of your life is a great opportunity to rejuvenate and refresh so that you come back ready to face your life and work again. So make time for travel and vacations. They are an important part of staying fresh. Besides, you just may learn some fantastic business lessons too!

Copyright © 2010 Lisa Montanaro of LM Organizing Solutions, LLC.

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You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

When you agree to perform services for a client, and the client agrees to pay you for such services, you and your client have entered into a legal contract, often referred to as an agreement. The terms of the agreement, however, are difficult to recall and prove unless in writing. A written agreement is pivotal as it puts clients on notice of business policies and terms, sets a professional tone, promotes consistency of policies, and is legally enforceable in court (the decision whether to sue a client to enforce a contract is, of course, a business decision, as well as a legal one, and should be carefully considered). The agreement, thus, helps to prevent misunderstandings and clearly defines the expectations of the parties. But, only if you understand the terms of your own agreement!

Some entrepreneurs choose not to use contracts for fear that a written agreement may be too formal or legal in nature and, thus, may scare a client away. Again, this is a business decision that should be given consideration, and you should determine if this is a real or imagined fear by communicating with your clients to test the waters. You can use a “letter agreement,” which may be less intimidating for clients. A letter agreement is typically a one-page agreement on your company letterhead written in a letter format. Another disadvantage of using a written contract is the cost of creating and advising it if you use an attorney. But do you always need an attorney in order to draft an understandable and concise business contract? Not always. You can use one of the many online, software, or print resources available to draft a simple business contract for your company. But make sure that you understand every term in your own business agreement. Yes, every term. Here’s why.

For a contract to be valid, there must be a “meeting of the minds” between the two parties. If you do not even understand the terms of your own contract, how can there be a meeting of the minds with your client? So, a word of caution: stay away from “legalese.” Use plain English so that the agreement is easy to understand and helps, rather than hinders, the understanding between you and your client.

While there are standardized contract forms available, be careful not to accept such standardized forms as is. I often see small business owners fail to adapt contracts appropriately, which causes embarrassing typos, inappropriate clauses, and general confusion. Not only does this look unprofessional, but in extreme cases it can also result in unenforceability of the contract in court. I can’t tell you how many times I have seen the embarrassing situation where a business owner took a standardized contract and failed to revise it appropriately for his or her own business. This often occurs when people copy agreements off of the Internet and fail to modify the terms. If litigation eventually occurs, the result of this behavior could be very costly indeed.

As a former practicing attorney and now a small business owner, I have been on both sides of the fence when it comes to contracts. So test yourself and make sure you understand your own business agreement. Even if you draft your own business agreement, it may be a good idea to have a business attorney review the agreement to make sure it contains the relevant terms (and to explain the terms to you), and fulfills the goals you want to accomplish. It is an expense worth paying for to secure adequate protection in the long term. Otherwise, your agreement is just a useless piece of paper that you (and most likely your clients) do not understand.

Copyright © 2010 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.

The greatest thing about owning your own business is that you are your own boss. The hardest thing about owning your own business is that you are your own boss! This is known as the Entrepreneurial Curse. And quite honestly, it is both a blessing and a curse. You have complete control over your business, and for many entrepreneurs, this is a great fact. But, it can also cause many entrepreneurs to feel like they are completely alone, with no one to help them along the way.

So what is a lonely entrepreneur to do? Connect!! There are many ways to make connections for your business. You can join a Mastermind group, create a Board of Advisors, join a business networking group, hire a business coach, work with a virtual assistant, get a business mentor, etc. The possibilities are many.

Recently, I attended a one-day retreat of local peer professional organizers. We have had a local group for years that we refer to as a Neighborhood. It is not an official chapter of our professional association, the National Association of Professional Organizers (NAPO), but that does not lessen its impact. In fact, this group has been consistently meeting monthly for years. We have developed a core group of entrepreneurs that attend meetings to share ideas, brainstorm, support, and challenge each other on our entrepreneurial journey. This year was our first retreat, which we hope to make an annual tradition.

At our retreat, we engaged in roundtable discussion of three distinct topics: how our businesses have changed to avoid burnout, what makes us happy individually and professionally, and how to service clients that are on a limited budget in this economy. The discussion was intelligent, insightful, lively, and thought provoking. I left with so many fabulous, new ideas for my business. I also confirmed many other business ideas and beliefs, which is always gratifying. I felt inspired to take action on some personal and professional projects. But most importantly, I felt connected. Yes, there is an instant connection to these particular entrepreneurs that share my industry. But it goes deeper than that. They shared of themselves so freely, and we connected at a deeper level. And I feel changed because of it. I feel inspired to keep doing the work I am doing, and excited to incorporate many of the new ideas we discussed.

And that Entrepreneurial Curse, the one that makes many entrepreneurs feel like they are out there all alone? It seems to have taken a vacation, at least for the time being. That is what connecting can do for an entrepreneur. It keeps that curse at bay.

So next time you are feeling like you are all alone, remember to connect with other like-minded entrepreneurs. They will remind you that you are not really alone, and that you can keep the curse from rearing its ugly head by continuing to connect.

Copyright © 2010 Lisa Montanaro of LM Organizing Solutions, LLC.

Want to Use This Article in Your E-zine or Website?

You can, as long as you use this complete statement:

Copyright 2009. Lisa Montanaro is a Productivity Consultant, Success Coach, Business Strategist, Speaker and Author who helps people live successful and passionate lives, and operate productive and profitable businesses. Lisa publishes the monthly “DECIDE® to be Organized” e-zine for success-minded individuals, and “Next Level Business Success” e-zine for entrepreneurs. Subscribe today at www.LMOrganizingSolutions.com. Lisa is the author of The Ultimate Life Organizer: An Interactive Guide to a Simpler, Less Stressful & More Organized Life, published by Peter Pauper Press. Lisa also publishes the DECIDE® to be Organized blog at www.DecideToBeOrganized.com. Through her work, Lisa helps people deal with the issues that block personal and professional change and growth. To explore how Lisa can help take your business to the next level, contact Lisa at (845) 988-0183 or by e-mail at Lisa@LMOrganizingSolutions.com.