As every new year begins, many small business owners are faced with a couple of very important decisions which will affect them financially throughout the entire year.
We have talked before about the implications of negotiating a favorable lease as those fixed costs will be with you for the life of your business. We have also talked about the importance of controlling variable costs like food and labor as essential to achieving profitability. But at this time of year, many of us are shopping for the renewal of our insurance coverage which will affect us for a full year and evaluating whether our accountants are working aggressively enough on our behalf and providing real value to the business.
Through experience as an entrepreneur I developed a habit to evaluate these two areas each year and review the performance of the providers. Annual renewals enable us to “shop our account” in the insurance markets to save money and improve the quality of coverage. In the early days with my first restaurant, I listened to my Mother in Law and bought insurance coverage from “Aunt Mary’s kid” who was an agent who was getting started in the biz. I figured, why not, what’s the difference? Insurance is insurance and the Agents all go to the same providers and get similar policies. Right? Wrong.
Through a series of mishaps and incidents I found that we were exposed to losses that I believed were covered or at least sufficiently covered with reasonable deductibles and limits. Again, a big mistake. I also found out that having a policy with a large well named insurance company doesn’t mean you have adequate coverage. Insurance companies offer a million options designed to raise or lower exposure and/or cost. Sometimes the agent would play to keep you as a client by reducing your coverage to keep the cost under control. Wow, they saved me 20%!! It all sounds good until you have a claim and find out that you are left high and dry. In our business people slip and fall, claim food poisoning, and make labor claims. After taking a few hits, I realized that I didn’t know enough and that Aunt Mary’s kid didn’t either.
Comprehensive coverage, general liability, liquor liability, workers comp all need specialized knowledge as well as someone who has specialized industry knowledge. Getting the right plan design and carrier can make an enormous difference. The right Agent can save you money and grief. Look for a specialist in your industry.
When I had one restaurant my needs were much different than when I was President of a publically traded multi-unit chain. One of the big challenges was and is attracting and retaining quality staff and management which meant offering a competitive health benefits package. In today’s world if you want grab a top gun management team, you need to treat them and their family well without breaking the bank.
The key again was to have a top-notch benefits agent to hunt and fight for you who knew the business well. I found that guy around 20 years ago. Tom Spreitzer, the owner of Diversified Brokerage in Goshen, New York consistently jumped through hoops of fire for me, my employees and my companies for all those years. I had employees in multiple states and with a wide range of health issues – some even catastrophic. Tom has always been my “body guard” and saved us over a million dollars during his tenure. The secret is his fundamental understanding of the goals and objectives of the business and then the tenacity to go out and fight for you. People like Tom add value that drops to the bottom line every year.
The unsung hero for many businesses is your accountant who can contribute in many ways to your bottom line. This key role should not only be tasked with keeping your general accounting and tax reporting in line, they should be a senior advisor and “personal coach” in establishing good business practices. I have seen many smaller restaurant owners try to avoid the use of a CPA in order to save money. In many cases it ends poorly, particularly if the business is seeking financing or gets into tax trouble.
Sales tax, payroll taxes and annual income tax reporting can be daunting and costly if mistakes are made. Since the majority of small businesses are set up as LLCs, their financial reporting is based on the calendar year and the consequences flow directly to the owners. Many of these business owners wait until the last minute and throw some semblance of their records into a box and hope for the best. The result can be a hit to your bottom line, penalties, additional interest or worse.
I recently spoke to my old friend and accountant, John Moore CPA, the President of Advance Accounting Systems in Rye Brook, NY (jmoore@aas-cpa.com) about choosing the right accountant. We discussed the importance of having an accountant with private industry experience on top of being a certified public accountant who understands the theoretical and practical aspects of your business. All of this results in a better outcome for your bottom line. If they had worked in private companies they will have the skills to understand financial, operational and business strategies and to drill down on industry specific concerns. Not just theoretical accounting.
I have recommended John and his firm to many restaurants and foodservice operators because he fit their criteria. I have been particularly impressed with how they understand that a restaurant owner is focused on operating the business and not the creation of financial statements. They coach their clients into following solid practices and guidelines which will ultimately save them money. He also has stressed the importance of keeping accurate records on a day to day basis by tracking sales, expenses, keeping all invoices and staying on top of inventory management. One big recommendation is for clients to automate their accounting systems either directly or through the accounting firm.
The huge value add is that John and his team will roll up their sleeves and get it done for you as I have experienced first-hand. They listen and respond to your needs and budget and can integrate your POS system and even maintain your books remotely. This reduces the time you need to put in as well as your costs when you have to file tax returns.
There are many dollars to be picked up off the floor at the end of the day. Making good decisions selecting your partner in securing favorable insurance products and comprehensive accounting services can be among the wisest business decisions you make all year.
If you have any questions or just want to discuss your business, please contact me at dsederholt@ragnarpartners.com
